Small firms flush as cloud computing helps clear the pipes

You often learn more about what is going in a community by talking to small entrepreneurs than wading through a meter of economic papers.

I am watching the business of my friend, a plumber, being totally transformed. He is investing in new equipment and adding people to his team to double the size of his business.

And that business revolution I am watching is being duplicated around the nation and extends from plumbing to electricians and carpenters and will affect a wide range of other service providers.

I met my plumber friend over a decade ago when the plumber I was using could not be contacted to fix a broken water pipe on a Sunday afternoon. Over the years I watched his business rise and fall with the economy but, even in good times, it was always limited by his ability to co-ordinate the one, two or three people he had working to help him.

You often learn more about what is going in a community by talking to small entrepreneurs than wading through a meter of economic papers — that’s why Treasury, buried in its Canberra bunkers, is so often wrong.

And, so, I spent time this week with my plumber friend and found him in a state of enthusiasm that I have never previously seen. The economic statistics in Victoria are not all that great, although they are better than many of the other states. So, why is an experienced small business operator doubling the size of his firm?

It’s very simple. The plumber has bought (he maybe renting it) a software operating system that is based on the cloud but is specifically designed for plumbers and electricians. I’m not going to mention the brand because there is more than one and each person must make their own decisions.

I have long understood that cloud computing would enable small operators to compete with larger ones but I never thought it would enable a tiny plumbing business to double in size.

But the system enables my plumber friend to tender quickly and accurately, particularly as he has linked it to his component supplier so he can immediately price pipes and taps etc.

Previously, that took time and there was a lot of guesswork and, while he was good at guessing, it limited his size.

And then there was the issue of co-ordinating even two or three workers, which distracted him from other work. This system changes that completely and the plumbers doing work for him can be assigned jobs more efficiently so he can now manage a bigger team.

Because he is as good a plumbing operator as there is, my friend knows who can be relied on and can judge quickly whether a person is up to scratch.

And real estate agents outside his immediate area have learned through the grapevine that he is good and indeed does come on a Sunday afternoon if there is a crisis.

The real estate agents are now managing large numbers of negatively geared investment dwellings and want a plumbing service that is not too large but is large enough to handle a sudden surge in demand. This is not an area where DIY operates and the number of dwellings being rented is exploding as we price first home buyers out of the market.

The real estate agents find that many larger plumbing firms work on commercial building sites and therefore cost at least 30 per cent more because they have union workers and those plumbers must also pay the unions or they will not be allowed on to building sites.

It’s all added to the costs. Domestic housing plumbers would never go near a big commercial building site.

The real estate agents are looking for people like my friend and, whereas a year ago he would simply say “no,” he now believes he can cover the work.

Clearly there is a limit to how far he can grow without gaining extra administrative support but doubling any long established business is a big deal, particularly as the cloud-based systems that my plumber is using are available around the nation.

I have not discussed with him whether he employs people or contracts them. If he contracts then he will need to make sure the contracts comply with the Howard legislation on independent contracting.

It’s easy to follow and understand but accountants (and the tax people) sometimes get it wrong.

Check your contracts and procedures with the Independent Contractors Australia.

Hear from Alan Kohler, Robert Gottliebsen, Stephen Bartholomeusz & John Durie at a special member Q&A. Find out more or book tickets here.