Financing your growth: How builders can scale without losing control

Hosted by Amy Voce | Guests: Aidan Cropper (Ipsum UK), David Gutierrez (Nest Building Group), Robin Hayhurst (construction business coach)

Introduction and meet the guests

Amy Voce: Hi, I'm Amy Voce and you're listening to the Buildup Podcast, brought to you by the Federation of Master Builders. I'm joined as always by my co-hosts Aidan Cropper, Managing Director of Ipsum UK Limited in Nottinghamshire, and David Gutierrez, Director of Nest Building Group in Surrey - both proud FMB member companies.

Today we're covering finances - and more importantly, how you can finance your growth. We're thrilled to have Robin Hayhurst, construction industry coach and mentor, on the show. Robin works with builders and developers to help them grow and succeed.

Amy: Robin, welcome. Can you tell us what you do?

Robin Hayhurst: I work with construction business owners to help them scale their businesses, put processes in place, and become more successful. I run peer groups around the country - Manchester, Birmingham, Bristol, London, and Hitchin. It's a powerful way to learn: sitting in a room with people who have the same problems, and finding out how they've overcome them.

How to finance business growth

Amy: Say a builder is doing all right but wants to grow - what financial help can they look into?

Robin: It covers loads of different aspects of the business - it's not just about getting a loan. You can get a loan, but you've got to understand what you need, how to get it, and you've got to plan it. A lot of people panic and just get a loan.

It's a bit like ordering bricks at the last minute - you might get them, but you'll pay through the nose. Same with money. If you've got three months to plan ahead, you're going to get a better price and a better deal. It's not just about someone saying yes - it's about getting the right deal for your company.

Amy: Can you share a success story?

Robin: We've had clients come to us owing HMRC and big builders' merchants. We get them talking to everybody. People are flexible - merchants will give you more time if you just let them know what's happening, rather than burying your head in the sand hoping it'll go away. It won't.

David Gutierrez: It really resonates. If you're good at what you do, you're going to grow. But a lot of builders have stumbled when it comes to managing their finances.

All of a sudden you've done a large job, you've gone over the VAT threshold, you don't know because you haven't caught up with your accountant - and you're already onto the next job. You could get a nasty surprise. You're not charging the client VAT, it gets backdated - there are loads of things that can bite you if you don't keep your eye on the ball.

As directors, you sometimes take a hit - you don't get paid for a while to make sure the company can grow and everyone else gets paid first. A lot of people don't think that way, but it's often necessary.

Aidan Cropper: Cash flow is key. If you haven't got that, you start to fail quite quickly. You've got corporation tax, pension contributions, all your costs to cover.

The best bit of advice I ever got - from a friend, not even a business person - was to keep around two months' worth of cash flow in the business at all times. Now I'd probably say three to six months. That really helped focus me.

The bit I struggle with is future cash flow planning - especially when you're looking to bring on new staff. You can get carried away, and all of a sudden you've got this big machine to feed. All these people have got families and homes depending on you. It's quite scary.

Recruiting the right people in a tight market

Robin: Recruitment is a big area, and a lot of people are scared of growth because of it. But the market has changed - you're not finding people sitting at home without a job. You're attracting them away from somewhere else.

I advise clients to lead any job advert with what the candidate wants. Things like: Are you happy where you are? Do you feel valued? Do you want to join a team that will support you to be the very best you can be? Are you willing to be mentored - and in time, mentor someone else?

That kind of wording dramatically increases the number of applications, compared to just posting "wanted: skilled carpenter, five days a week." You're drawing people in - but you have to deliver on it.

We also get all our clients to build mentoring into their business. By talking about mentoring, you're telling people there's progression in the company without saying it directly.

David: There are great people in the industry. I don't think there's a shortage - you can attract them if you have the right approach. There are a lot of unhappy people working for companies where they don't feel valued. You're after those people.

The financial knowledge gap in construction

Amy: Do you think there's enough training around finance when people are learning a trade?

Robin: Absolutely not. It's a big barrier. I come across a lot of companies that have grown and either gone bust or had to shrink, because they haven't got control of their finances.

They don't understand simple things like how to calculate costs properly. If you've based your hourly rate on copying the bloke down the road rather than working it out yourself, you could be losing money on your labour every single hour and not even know it.

Take vans - they're a site cost, not an overhead. You've got to include them in your hourly rate. If they become an overhead, they come straight out of your profit.

Amy: What's the difference between an overhead and a site cost?

Robin: An overhead is something that doesn't directly produce anything on site - like a prelim. You don't gain profit on an overhead. But if you put a cost onto site, you add profit on top of it.

So a carpenter's van and tools should be a site cost, built into the hourly rate. It might only add five or six pounds per hour, but that makes a real difference - because you're then adding profit and overheads on top of actual costs.

Amy: What's the one piece of advice you'd give a builder who's ready to grow but unsure where to start?

Robin: Get help. There are some really good people in the industry now who specialise in helping construction businesses.

And systemise your business. When you have a flow and a template for everything, you speed up what you do and you're able to take on more work. Some people have systems but don't follow them - and the biggest reason a process fails is simply that it isn't used.

Aidan: I totally agree. When you're starting out, you're learning on the job. We're tradespeople - good at what we do - but we haven't necessarily had experience running a business. Getting advice early on fast-tracks you and gets the right processes in place from the start.

The FMB also offers great guidance online - cashflow forecasts, how to set up a business, step-by-step guides. And find a good accountant early. That's key.

Client journey and transparency in pricing

Robin: We help our clients build a client journey process. Before starting a job, they hold a pre-start meeting where they give the client all the "bad news" upfront - highlighting areas that could go over budget, explaining what a variation is, what the process looks like, what extension of time means, what prelims are.

So when things happen later, they can go back to the client and say: "we warned you about this." It's transparency, and it makes a huge difference.

There are still contractors who underprice deliberately to get money back on variations. That's not good practice, and it's not how I'd advise anyone to work.

David: Losing a job to a cowboy builder who prices low and then hits the client with extras is probably the most frustrating thing in our industry. It's been happening for decades. Until we become licensed, it'll continue.

Robin: Testimonials matter too. Focus on the three things clients are most worried about: budget, time, and quality. Ask your clients specifically to give feedback on those three areas. They're far more powerful than just "he was a great bloke."

If you consistently come in on budget, that's a powerful selling point even if you're not the cheapest option.

Profit first and cash flow tools for builders

Robin: There's a great system called Profit First. There's a book specifically for contractors by Shawn Van Dyke - it's about putting your profit aside first, before anything else.

You might start at just 1% of every invoice, then build to 2%, 3% as you get more confident. It means profit is set aside and protected. And if you can't take 5% out of your business, it's an early warning sign something's going wrong.

Amy: Should small building companies consider financial training as they scale up?

Robin: I think they should invest in overall business coaching. A lot of people see cash come in and immediately think about buying a new machine or a Range Rover - without realising that cash flow goes up and down. Just because you've got a spare thousand pounds in the bank at the end of the month doesn't mean you can afford that purchase.

It's also about understanding what's happening at project level. Most companies I work with know the overall position of the business, but have no idea what individual jobs are costing. If your first fix carpentry is always over budget, you don't know - so you can't adjust next time you're pricing.

Robin: Consistency is the biggest habit. People start doing the right things and don't keep it up - same as going to the gym. If you're consistent, you'll get results. If you're not, you'll end up in overwhelm, and then you're not running your business - you're firefighting.

You've got to have processes in place so that even on your worst days, you can just follow them.

Building financial foundations from scratch

Amy: David and Aidan - how did you handle finance when your businesses first started to grow?

Aidan: Going right back to the beginning - I kept things tight. I had a car with a roof rack. I made small investments as I went along, building up cash flow. Eventually that led me to investing in staff, getting vans, and taking on bigger jobs.

Being tight on invoicing was key. I used 14-day valuations, and most clients who were happy with the work paid within a few days.

I used to avoid accounts software because I liked to know exactly where my money was. But when digital accounting came in - I use Xero now - it gave me a much clearer, up-to-date picture of my bank balance, which helped me make better decisions on investment and growth.

The key was never overstretching. Baby steps. When I invested in better ladders, it meant I could reach higher and take on roofing jobs - and charge more for it. Eventually we bought a unit rather than renting, and sectioned part of it off to sublet. Little steps, but each one built on the last.

I wish I'd had more business support at the start. Not just people around me, but a peer group - other builders who'd been there and done it. It would have fast-tracked a lot of things.

David: Keep things as tight as possible. Pay yourself the bare minimum. Grow the business, grow the funds. Don't be shy of work - put the hours in. What you're doing in those early years is building your name.

You've got to persevere even when you see the money starting to grow. It's tempting to start paying yourself more or make a big purchase. Don't. Baby steps is the key. Live like that for three years, build the business, and all of a sudden you'll have tens of thousands in the account - and you really will.

Planning growth and avoiding common pitfalls

Robin: Plan your growth. People do grow organically and it can work, but if you plan it, you start thinking ahead - when do I need the next person? What role will they do? Whereas people tend to hire in panic: "I need admin, I'm desperate, I'll get Fred's wife to do it." And it all goes pear-shaped from there.

The more time you spend working on your business rather than just in it, the better your chances of success.

Amy: Is there anything you look back on and wish you'd done sooner?

Aidan: More business support earlier. I didn't really know anyone in business - I was going solo, going out to clients without much experience. Just having a network around you makes a massive difference. And back then there wasn't anywhere near the support that exists now - no podcasts, no peer groups, nothing like this.

The FMB has been pivotal in changing that. If you join and get involved, you'll get a lot back. Put stuff in, you'll get it out.

David: Go with your gut instinct. And if you've got a supportive partner at home - don't underestimate that. I wouldn't be where I am without my wife. When you're starting out, it's scary. You're one job away from it all going. You need that support.

Robin: When you have sleepless nights - and you will - don't hide from the problem. Get up, work out the scale of it, and you'll sleep better. People avoid looking at their bank account because it scares them. But face it, because then you can do something about it.