Tips on making a success of a contracting business

Jack and Bay Watson, now aged 24, embarked on their contracting career at the tender age of 17. We ask them how they made a success of it.

How did you get into contracting?

Jack: When we were 15 years old we moved to a small grassland farm near Studley, Warwickshire, where our dad planned to retire with a few sheep. At the time he was making a small quantity of round bale silage for a few local farmers and wanted to keep it that way.

But in 2006 dad passed away while I was half way through my A-levels and Bay was doing a National Diploma at Moreton Morrell. It was a seriously tough time, but we didn’t want to let any of his customers down. So we made the decision to carry on.

Bay: Between us we decided that Jack would leave school to look after the business. That meant I could finish my machinery maintenance course at Moreton, which would be key to keeping the business going.

What machinery did you start with?

The only tractors we had were an old H-reg Case 956 and a McCormick. The baler was an ancient Claas Rollant and we had a worn-out Rolland muckspreader too. Looking back, these machines started us in business, but after 18 months using them they just about finished us.

Jack and Bay’s top tips

  • Have a clear plan of what you want to achieve before approaching the bank.
  • Focus on doing a few operations well, rather than being a jack of all trades..
  • Make sure you know exactly how much it costs you to carry out each job, including labour and depreciation.
  • Only invest in the equipment you need to get the job done.
  • Do every job to the best of your ability and never let a customer down.

How did you get bigger?

Jack: Once Bay and I had finished education, we decided that we would push our contracting business and not go down the conventional route of university and then finding a ‘proper job’.

Initially, we stuck with operations that were in our comfort zone – we were only 17 at the time. But we didn’t have the quantity of work, nor the machinery reliability to be able to do any quantity.

We kept doing the best job we could, though, and gradually more work came in. That gave us the confidence to invest in new machines and then really push those machines.

Since then growth has largely been organic through word of mouth and good references. We visit our customers at least once a year, which often leads to more work. We’ve managed to pick up new business through our website, too.

Did you write a business plan?

Jack: To start with our plans were drawn up on scraps of paper, looking at what costs we had and seeing what figures came out on the bottom. If a job or a machine looked like it would make money on paper we’d give it a go.

Bay: A few locals used to ask if we were mad or if we were able to sleep at night. But on the flip side, we had a family that trusted us to secure funding on assets, suppliers that have been patient and a good working relationship with another local contractor that has given us some invaluable advice.

What has been your biggest challenge?

Jack: Definitely it’s been our age. In the early days it was real a challenge to get anyone to take us seriously and trust the quality of our work.

Luckily, we have had a great agricultural accountant on our side who has always understood what we have wanted to achieve. This has been particularly useful when we’ve had difficult meetings with the bank manager.

Do you buy new or second-hand machinery?

The first machines we bought were second-hand, but after a series of breakdowns and hefty repair bills we decided we had to change our approach. Now we try to buy ex-demo or new and take advantage of subsidised manufacturer’s finance schemes where possible.

Bay: The way we see it, you either pay repair bills or finance bills. Finance bills might have a tendency to come at a bad time, but they’re a lot less stressful than a broken machine mid-harvest.

We’re also fastidious about maintenance. This keeps the machines reliable and gives them a higher resale value when we trade them in.

Do you employ anyone?

Jack: From the day we started we have had two key lads that have worked for us. They know all of our customers, all of their farms and play a huge part in our business. They are self-employed, which at first may not sound ideal, but it works out much cheaper than employing them, particularly if they’re not being kept busy in the winter.

We make sure everyone that works for us is properly trained, though, and we have a tie-up with a local training school to run courses in our yard.

How do you stay competitive?

Bay: Good logistics and man management are key to keeping operational costs low and the business competitive. First thing in the morning or at night we discuss all the jobs lined up for the day and work out the most efficient way of tackling them. With our fuel bill accounting for about 15% of our yearly expenses, it’s crucial to keep travelling times to a minimum.

In 2010 we purchased an artic lorry to run alongside our contracting services and this was a big learning curve for us. It highlighted how good logistics or bad logistics can make the difference between turning a profit and making a loss.

We are in close contact with suppliers to make sure we buy fuel and consumables such as bale wrap at the best time. If costs look like they are going to increase we’re not afraid to buy in bulk and store them.

What are your plans for the next few years?

Jack: We hope to increase our customer base and further expand our trading of forage. A number of other exciting projects are also on the cards, one of which is partnering with another local contractor.

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