Page 94 - Paulisms: Gold Nuggets for Small Business

cyclical. It often happens in buoyant times. The businesses are not managed well or they don’t face up to reality and think it will come right. Not many are able to trade out of it. Often poor quoting and lack of P&G allowance and recovery causes this issue initially.
Although this example is from the building industry, it is no different to quoting for making an App or developing software, relocating furniture for a building, and so on – the principles are the same.
It took me a long time to discover P&G, as I was too busy working in the business. When I finally did work it out, made allowances for it and applied other principles in this book, we went to a higher profitability level.
Paulism: When contracting, you need to ensure you allow for P&G to cover the true costs and ensure you make a fair margin.
3.3.7 Liquidated damages
Then there is what we call ‘liquidated damages’. Liquidated damages are common in construction projects and can end up costing tens of thousands of dollars a day due to a clause that if you don’t meet a deadline, you start incurring costs from your client. This can end up being quite substantial. Although you may not have control over delays on the job through ‘acts of God’ or supplier and other contractor issues in not meeting deadlines which are out of your control, if you go over your date you still incur liquidated damages. Never in any of my contracts over 30