There are many types of AV companies, in different markets, with different scopes and so on. This means that they are also very different from one another. One AV company might only do dry hires, while another might specialize in audio solutions only.
Due to the collaborative nature of this industry, we can see that most companies are rather smaller, as customers typically inquire services from multiple AV companies to deliver a successful production. This leaves little room to grow, as there are often lots of competitors and lots of small jobs to be fulfilled.
This means that most AV companies are often run by entrepreneurs which are most of the time involved in all processes of their business: prepping the van, sorting items in the warehouse, doing finances, you get it. It’s often a tough job for most AV entrepreneurs to even look further than the tasks that need to be done today.
The real challenge? Lack of financial overview
Inevitably, these entrepreneurs will at one point or another lose sight of their entire cash flows. There are too many small jobs, delays in payments, lack of information of past jobs that have to be invoiced, and significant discrepancies between actual costs and estimated costs. All these lead to loss of profits and irregular cash flows.
Manufacturers in the AV industry have also been struggling lately because of increases in back orders, as delivery times have been at an all-time high. These backorders can result in increased unexpected costs, because at some point, these companies will have to pay for the investments that have been initiated in the past.
Unexpected costs are everywhere and can happen any time. Think of the event you worked on two weeks ago. You probably hired multiple freelancers to do the job and also had to make sure your inventory was safe on the way there and back. It gets worse if you didn’t have time to make notes for exact worked hours for your freelancers because let’s face it, it’s tough to keep track of every little thing while doing two other things at the same time.
By the time you have to sit down and understand the invoices that were received, all these extra details will be lost. It will take you some time to reevaluate how much the hired individuals actually worked, and eventually you’ll see that they worked more than what was initially discussed in work estimates. This leads to more expensive invoices that you have to pay. What if this month you also had to pay for a new equipment delivery? This will make you push the freelancer’s invoice to the next month, which once again will become an unexpected expense and unbalance your cash flows. This can easily turn into a domino effect that can eventually disrupt the business.
The solution? Plan plan plan
There are generally three phases where you can determine project costs: cost estimation (quotation), planning and cost evaluation. Things can go south really quickly if cost estimation is neglected, as that should be the time when you determine if a project will be profitable or not. Everything can be avoided if planning is done correctly and thoroughly, even backorders!
Before accepting any job, it’s important to sit down and list all important aspects of the job. How many freelancers will work on it? How much equipment is needed to finish the work? Are there any special requests from the client?
Lastly, make sure to think about unexpected costs. They are the number one cause for financial disruption. As a rule of thumb, let’s say that unexpected costs will be around 10% of your total estimates in the quote. We recommend adding everything in the quote to ensure that you’ll always have a profit and will never have to push any invoice back.
Unexpected costs can be anything. From more worked hours by freelancers to lost equipment that has to be replaced. You can also count late deliveries or invoices in the form of amortization. Do this, and you will see your cash flows getting back to normal in no time.
Lastly, there is still the case of managing multiple projects at the same time. Unfortunately, besides increasing the size of your team, there are few solutions that could help you better manage your projects. Of course, opting for a resource management software will solve most of your problems.
Implement a resource management software
Having manual overviews over all your business practices is tiring and prone to errors. Ensuring cash flows are optimal on top of that can be an almost impossible task to perfect, especially for AV entrepreneurs that have to keep an eye over everything.
With a resource management software, such as Rentman, not only you’ll have a better overview over your projects, but your financial implications will get healthier as well. With Rentman, you can estimate project costs based on hourly rates, daily rates or fixed rates for your freelancers, to ensure you’ll maximize your profits. As a bonus, you can easily track registered hours to evaluate actual costs at the end of the production.
Looking at registered hours gives a great advantage over receiving invoices a couple of weeks after the event is over, simply because you can see them right after the job ends. This information will be useful for your future projects, as you’ll have better knowledge of the performance of your crew and freelancers, which will make your cost estimations easier.
It’s time to take action and start improving your financial overview over your business. Try Rentman free for 30 days. No credit card required.
