We are no longer able to sell our services as an investment adviser. The axiom that states that real estate never decreases in value has been turned completely on its ear.

Sad to say, one of our biggest marketing weapons, that of real estate as investment alone, should be put back into the quiver to be used another day. Certainly property can be considered an “investment”, but a client is just in asking what exactly will this new building do for me?
Better yet, what will you, Mr./Mrs. Contractor, do for me?

As part of the team of people that assemble raw materials into a facility, we have to be able to answer this question. More often than not, an architect will speak to the program, aesthetics, function, form and capabilities of their design. An engineer will speak to the soundess of structure and the lasting value inherent in a given building that they have helped design. It is up to us, the contractor, to shape the message effectively and communicate to the client what the building will cost, an estimated time line to completion and any inherent issues that need to be addressed as early in the project as possible.

While we all would love to receive 100% correct and complete design documents, we all know that is more of a target than a reality. We have to wear more hats than contractor alone, and be willing to bring in experts where our own expertise is lacking. As the general contractor we will have ultimate responsibility for the construction quality and fit and finish of the facility. The answer to the question – What has this building done for me lately? – will ultimately determine if you are on the bid list or in the negotiating room for the next project. If the answers are not exactly what the client had hoped for in the design program, it is pretty much a certainty that they won’t call you back.

As professional builders, we can no longer wear one hat as the contractor of record. We have to be able to guide the client each and every step of the way and have either expert knowledge or access to expert knowledge with every phase. If we wish to be considered part of the professional trifecta (Design/Engineering/Construction) instead of the guys that simply build the building – we have to start acting the part. Ask yourself often – What have I, as a professional contractor, done for my client lately? If you can’t answer the unique experience and service that you provide quickly and with resounding authority, then the likelihood of repeat work and word of mouth will dim considerably.

We’ve got to be our own best cheerleaders – but in the process we also need to work diligently to give ourselves something to cheer about. Let’s not be afraid to be exceptional. The competition is much thinner in the rarified air of building companies that provide an exemplary experience, 100% of the time (even on difficult projects), to their clients.

I just finished reading Steven Rattner’s book, Overhaul – An insider’s account of the emergency rescue of the automakers. While I found parts of it a bit elongated, it was a fascinating story that showed the inner workings of the group charged with reorganizing an industry that is near to me having been a born and raised Michigander.

It got me to thinking not only about how poorly managed large companies within an industry of that size and importance must be in order to collapse like it did, but also what makes something “Too big to fail”? Perhaps the real reason is what is politically too painful to allow to fail?

Mr. Rattner discussed the stress tests given by the Treasury Department to large banks that were receiving TARP funds. It got me to thinking – I need to develop a (much simpler) stress test model for my own company.

I would challenge each of you to examine the basic assumptions that you make about your businesses. I would challenge you to create simple models that allow you to give your own organization random “stress” tests. Where will you be financially if your revenue dropped 10 percent, 20 percent or 30% percent? What would you do next week if you lost that job you had been banking on? Better yet, what would you do if you suddenly found more work than you planned on?

Going through these motions may seem like nothing more than a trivial exercise. To the contrary, planning such as this allows you a dashboard into your business that your competitors that don’t do this type of testing won’t have. The results will allow you to determine in advance what staffing levels you will need to have at a particular revenue stream. Rather than making the choice from the rearview mirror, you will be running your business looking out the windshield.

I learned something from reading this book. Not only is corporate culture incredibly important to the long-term viability of a project, but modeling and testing should be an equally important part of the budgeting and yearly planning cycle.

We can never know too much about our business. After the April consulting rush, I am going to put together a rough model and see if I can’t make this happen for my own company. Let me know if any of you have done this before or have any ideas for putting together a stress test model for the construction industry.

Ahh the New Year! There is nothing like the trashing of a calendar (Unless you are using a Mayan version) to make one resolve to make a few improvements in our daily work. I love this time of year. Especially this one. Things seem to be stabilizing a bit on a macro-economic scale. Hopefully, jobs will start reappearing and folks will be more willing to spend money on their homes and expand their businesses.

Points to Ponder:
I am writing this blog entry from a Delta 757 enroute from Atlanta to West Palm Beach for a meeting in the morning. At 38 years old I am in that comfortable middle – lots of folks are younger than me but lots of folks are older, too. In the span of my lifetime, I am still amazed at the rapid revolution of technology and how it impacts our work and lives. Technology provides us a platform to be more efficient and more on top of things. It provides us clarity where pen and paper couldn’t. It allows us to connect with team members and the blogosphere at dizzying heights from remote locations. All of this was unheard of 20-25 years ago. When I started working in the industry we still used payphones to call the office from the “field”.  We used paper estimates, a calculator and copy machines.  Field changes and conditions were scribbled on note pads. In that relatively short time frame I am able to draft an email from 30,000 feet and send it into the ether to any number of project team members. The power of technology is awesome, and we should all resolve to leverage it as much as possible.

One thing that the great recession has taught me is that even the fundamentals that I preach so much about can be affected by situations outside of our control. Some well managed businesses took some overly aggressive risks and are no longer with us. Most poorly managed businesses aren’t with us, either. But from these ruins will come opportunity.   (Unpopular comment alert)  I still feel wholeheartedly that we needed this recession.  We needed this recession to help reset wages and prices back to a more normalized (thus sustainable) rate.  We needed this recession to help determine just what the demand competition from China, India and other developing nations, such as Brazil, might do to us in terms of energy and commodity prices.  We needed this recession to bring us back to basics and, believe it or not, create more opportunity for existing and future businesses.  We needed it to promote the science of building and thinking of buildings as a complex organism, not just a few pieces stuck together.  If there is one thing that I have learned, it is that if wages, prices and sales prices rise faster in a particular industry moreso than the general rate of inflation, something is amiss. 

We needed this wake up call.  I honestly think we are on the downslope to stability now.  Not to double digit profit growth and sales increases, but to a more sustainable, long term path.  My sons are 4 and 7 years old.  Thanks to this market change and severe economic correction, opportunity will exist for them as they grow into college educated adults.  But without this reset the future capacity for growth was actually looking quite bleak.  I always tell my clients that I work very diligently to manage my business as if it belongs to my boys.  No long term stability will be forsaken for short term gain using that as a yardstick. They may not want my practice.  They may have other interests and chosen desires.  But if we each ran our companies like they will someday belong to a currently 4 year old, we will make sound long term choices.

As 2011 gets into full gear, let’s resolve to maintain our fundamentals yet grasp for new opportunities.  Change can be a good thing – especially when the change comes from within and is not thrust upon us.  Let’s not forget the joy of constructing things that got us all into this business in the first place.  Things are starting to stabilize in 2011!

I have been kicking around an idea for years that seems to be gaining traction in my internal “go-no go” decision process. I am contemplating accepting credit cards as payment in my small construction company. Granted, this may not work for every situation, but for small projects it may work well. Here are my off-the-cuff thoughts.

The reasons for:
• While I may take a 2 to 4 percent hit (+/- from the research I’ve done) from the credit card processor, payment to my company’s account can be cut down to hours rather than weeks. It also eliminates the drudgery of mailing an invoice and the follow-up that often remains.
• Dealing with banks and home equity lines of credit are becoming more and more burdensome from a time perspective.
• Convenience is important. I am working on leaning and streamlining as much as possible, and this seems like it may be a partial solution.
• I can begin generating electronic invoices and accept payment via a secure website. Again, less paper waste, more audit trail and convenience for the customer (and me).
• Technology seems to be expanding in this area. A web connection allows it to be processed in the field, if the customer wishes.

The reasons against:
• I will take a potential 2 to 4 percent hit when I can afford it least.
• In these days of ever increasing fees and cost pressure, how do I make that up?
• Is there a perceived status difference in accepting credit cards? Will my firm become a “Buy here, pay here” kind of place? You know – $99 down and only $99 per month!!
• Will my clients find this useful or a nuisance?

I would love to here if any other firms have found accepting credit cards to be useful or a nuisance. At this point I could be talked into either direction. Even on larger projects, milestone payments may be small enough to make this work and allow the customer some options for improving cash flow. Very curious to find out more.

Become the expert on topics, like green building, that are important to your customers.

I gave a presentation to a graduate accounting class at a local university near my home a couple of days ago. It was a basic primer on how the real property consulting business I work in integrates with what these future CPA’s, CFO’s and Controllers will work into their daily work. The presentation went fine, and there was some interest here and there, but the interest spiked when I got to the part about green energy tax credits. Many hands went up, questions were asked and opinions presented when the topic turned to a shade of “green.”

As a general contractor, we are often inundated with the new gadget of the day. Suppliers try to sell us on the latest and greatest and work to have us market these systems to our clients. In the case of green products, the list of products ranges from vacuum cleaners to roofing materials. Everyone wants to catch up on the green trend of the day.

I have no doubt that this greenwashing we now see will someday come to an end. What I hope is left in its place is a thorough understanding of our responsibility to reduce and eliminate waste, make our building tighter (yet introduce fresh air) and generally understand even better our responsibility to use resources wisely.

At the end of the day, regardless of what your opinion may be on green products and systems, this is what our clients are interested in. It is well worth gaining as much knowledge as you can in the various topics so that you can become or remain the trusted advisor to them as they navigate the various green landscapes. Don’t be afraid to have an opinion as to the merits of certain products, but remain informed and become the expert on the topic for the sake of your client.

It always comes back to the basics of business: Provide a service that your competitors can’t or won’t commit themselves to. You don’t have to sell green in order to be an expert. Explaining the benefits versus the cost is equally as valuable.

What do you do to set your construction company apart from your competitors when viewed from a marketing perspective? How do your clients perceive your firm vs. how you and your employees perceive your firm? What is your competitive advantage, and how do you exploit it? Better yet, how do you go about simply getting people to put your firm’s magnet on their refrigerator and call you first?

Developing a marketing plan for your company does not have to be expensive. It doesn’t have to be overly high tech or include a “wow” factor. It doesn’t have to have a stamp from an MBA or include tens of thousands of dollars in the budget to be successful. At the end of the day, a marketing plan doesn’t mean just advertising, it means conveying the “sum of the experience” that your firm offers. We can all place an ad in the paper. But can you pen articles for a local newsletter, or handwrite thank you notes to past clients and clients that you have met with? Where are you when it comes to thought leadership? Are you seen as an expert businessperson or an expert craftsman – or both? It isn’t just about placing an ad, it is about the venerable 4 P’s of marketing: Product, Price, Place and Promotion. Notice that advertising (promotion) is only one aspect of the program.

Product:
What is it that you are selling? We sell a service that is dependent upon numerous products. Become as expert in your products as possible, but tout service if you are a high service provider. Service is the difference in most cases. It is important to actually back up your service claims with actual action or this will backfire in short order

Price:
Are you selling on price? Service? Believe it or not, I believe there is a market for firms in each category. But you must understand your target market and build your strategy accordingly. Very seldom will the markets mesh – you can’t be a low price volume firm marketing to demanding service oriented customers. No one will win in that arrangement.

Place:
Define your region that you have the most clear cut advantage in and exploit it for all it is worth. If you narrow your focus to those areas that have provided you with work in the past, your marketing dollars will go further and your success rate will climb. Blind marketing may yield results, but the yield will be much less efficient than defining the geographic areas where you have an advantage. Expand your regions of focus slowly and with thought, not just haphazardly.

Promotion:
Advertise; provide thought leadership (articles, lunch and learns); develop how-to videos; tighten up your website; get interviewed on the radio, etc. Pick a firm color and roll with it. Pass out shirts with your logo on them. Sponsor a lunch for past clients, such as an annual “Friends and Family” type of event. Bring in your subs. Bring on a forum of experts to discuss issues of the day. “Green” topics work well for a discussion (at least until the tax credits run out at the end of the year!) Sponsor a good deed – it is amazing what a team building exercise this can be.

I’ve seen so many great ideas. One firm I know hands out excellent quality brooms with their logo emblazoned on them to homes near where they are working, extolling the level of “care” that they provide to their clients. Another pays an artist to draw a pencil rendering of their home or office, frames it and presents it to the client after the final punchlist. We have used a “Good Neighbor” letter for years with great effect. We’ve also been diligent in handwriting thank you notes to people who have honored us by working with us or allowing us the opportunity to legitimately compete for their work, even if we were unsuccessful. We ask when we don’t get the job what we could have done better and learn from the responses, unless the client was driven only by cost. If that is the case, we learn that we didn’t screen them well enough and learn from it.

Developing a marketing package should not be an expensive proposition. In fact, many times marketing can cost a postage stamp. The key point that I am trying to make is that it is critically important to develop your own marketing plan and stick with it. Develop your own “stamp” to imprint on clients. I would love to be the company that “Dropped that darn broom on my porch” the other day when that client is thinking about building an addition. I would love to be the company that brought thinking capital into the workplace and discussed aging in place to a group of baby boomers or green technology to young families. We have the knowledge to market effectively, yet many (if not most) of us don’t do it and depend solely on word of mouth. Word of mouth is great – but that is only one P of the 4 P’s – don’t neglect the other three. And have some fun while you are doing it.

I would love to hear some low cost methods of marketing you have used successfully in the past.

I am not an actuary or a statistician, but my guess is that overall morale in our industry is quite low.  Employees who once worried about climbing the ladder of responsibility now feel that they are fortunate to have a rung to hold onto.  Business owners fear making payroll.  Production managers who used to fear they wouldn’t get all of the work on the board completed and on time may now struggle to keep people busy.  Even if your company is maintaining performance metrics, the evening news is filled with down notes.

I often discuss corporate culture in this blog and the vast impact that a sound culture has on a company’s bottom line.  If employees “buy in” to the program that the company promotes, everyone benefits.  Folks get to work on time.  Jobs can be finished quicker.  Pride in ownership displays itself.  But I believe a part of this equation is employee morale.  This is a tough time for all of us, and many construction business owners who are struggling to fill job boards and make payroll don’t have much sympathy for staff.  But your staff, even if they aren’t directly feeling the heat from reduced hours, pay or benefits may still be struggling.

I recall a time in my life when interesting projects that involved the use of my seldomly used timber framing tools was all that was needed to keep me motivated.  Working on many of the house museums in Savannah, GA, also helped me get excited to work each day.  But then marriage and family came, and my focus changed with their arrival.  Setting a timber truss wasn’t the only thing I needed to stay motivated.  I needed other things - job security, insurance and a check each week.  Our staffs are feeling these same pressures coupled with a deep uneasy feeling that something in our economy just isn’t right.  They may not be able to address it in scientific terms, but they know that something just isn’t right.

Now is not the time to withdraw to the daily struggles of the corner office and wall yourself off from staff.  To the contrary, now is the time to interact with them, and get a solid feeling of your construction company’s working pulse.  Meet with carpenters, team leads, superintendents and project managers. Most of all, communicate to your employees every bit of information that you are willing to divulge.  Empowering staffs with information won’t make them cut and run – instead, it will help them to better understand fundamental economics that are impacting their career and employer.  Ignoring questions of staff morale will surely lower it.

The gulf oil spill has given those of us in the construction industry a valuable lesson.  My guess is that if I took a straw poll of contractors, 99% of them would submit that they never cut a corner to reduce costs and speed up a project.  While the vast majority of them would be telling the pollster the truth, I would estimate that quite a few would be lying to both the poll taker and themselves.

I am certainly no expert in prospecting for oil, drilling wells or collecting crude.  In fact, I know very little on the subject.  But I do understand intimately well the pressures that we all face to keep our projects on time, on budget, faithful to the drawings and specifications and accident free.  Most of the time these goals are mutually inclusive and fit hand in hand with one another.  Sometimes, though –extraordinary time or financial pressure exists to subordinate one of these fundamental goals to the others. 

Don’t do it.

One of the great things about our industry is that much of what we are supposed to do is scoped out, drawn and specified for us beforehand.  The better the bid package, the less confusion and opportunity to skimp on details exists.  While this may sound like an advertisement for the American Institute of Architects, make no mistake that many important details are left out and remain up to the general contractor to faithfully execute.  Most of these issues have industry standards as a guide, but again some are open to interpretation.  When we sign a contract, our companies are given the fundamental trust by our clients to faithfully execute the bid documents and to perform all phases of the project to or above industry standards.

What the gulf oil crisis teaches us is that no time constraints or financial pressures are great enough to cause us to not perform our work to acceptable standards.  Checks and balances must remain in place at all times and not ignored.  Warnings from subcontractors must not go unnoticed.  Problems cannot be simply buried under stories of earthen backfill, hidden behind a layer of ½” drywall or sunk below a mile of ocean water.  These checks and balances exist to mitigate future damage or, especially sad in this case, eliminate the loss of life and property and the destruction of precious ecosystems.

Ours is an inherently dangerous endeavor.  Powerful equipment, falls, etc. are all part of our chosen profession.  Entire industries have sprung up to help make construction less dangerous and safer for our employees and clients.  By making our projects safer, we save lives and property and build our reputation.  But no industry exists to check and double check each and every phase of our work.  That alone is up to us and our project teams.  Each person must be empowered to have input.  Each issue must be addressed.  And above all, we cannot allow any of our fundamental goals to exclude the others.  Doing so may cost us a bit more at the time, but the cost of skimping on quality and not constructing to  or beyond acceptable industry standards will be paid for generations.  

At the end of the day, we have a solemn duty to do what is right, not just what we can get by with.  The scary thing is I understand where the pressure comes from.  We are all under it nearly every day.  I can put myself in the position of the project manager who is told it “should be good enough” by a subcontractor and struggles to balance costs, time and safety.  Some instances in life are the kick in the mouth we need to avoid complacency and acceptance of anything less than our best.  The photos of shrimp boats skimming for oil rather than shrimp is an image that should convince us that “sort of ok” is just not good enough. 

As an industry, we simply cannot tolerate “good enough” or assume that problems, once buried, won’t have catastrophic consequences down the road.

I don’t know about the rest of you, but I’ve noticed something very positive that has occurred in this recession and for the past few years.  Nearly every where I look, from the Discovery Channel to PBS, I see a movement that embraces blue collar work.  It doesn’t take much effort to find sites such as MikeRoweWorks.com that celebrates “…all aspects of hard work”.  It takes even less effort to sense that our manufacturing base – long forsaken to cheaper currencies and labor, is beginning to understand the virtues of building things at home.  In my home state, the Construction Education Foundation of Georgia (www.CEFGA.org) is developing curriculum to help teach our future builders outside of a standard apprenticeship program.  Indeed, building things is becoming cool again.

What does this mean for the construction industry?  It means that our craft is slowly, perhaps painfully, becoming a hip place for people to work.  We may be on the precipice of a movement that embraces Builders and Tradespeople as those who have sought meaningful work – not those left out of the movement towards professional services.  It wasn’t long ago I cringed in reading that America would become the accountants of the world.  That may yet indeed be the case, indeed I hope it does.  But that doesn’t mean we also shouldn’t make it a goal to become the designers, builders and tradespeople of the world, either.

But with this sea change must come the understanding of responsibility that we share as business owners and managers.  In order to capitalize on this movement we must provide opportunity for people to grow and prosper, not just earn a paycheck.  We must develop and promote our industry as a viable alternative to professional services and white collar work.  We need to accentuate the positive and fix the negative connotations that our industry has long been saddled with.  We need to reach those kids who want to become the Green technology innovators; the building scientists and the affordable housing problem-solvers of their generation.  I have written about this on several occasions and will say it again here – Ours is an industry that can know no limit for a bright, ambitious, imaginative mind.  But we have a long way to go for the hype of the moment to match the reality.  We don’t have to be the job of last resort for the broken set – but our tent should be large enough to provide anyone with ambition and talent an opportunity to grow. 

In this era of 40% revenue reduction and staff cuts it may be difficult to project out 3-5 years and see this coming.  But there will be more work someday.  And we have every opportunity to get quality people that we never thought would choose our industry, and allow our current crop of over-achievers to light the way and provide guidance.  Hard work has always been rewarding  and, in many case, enjoyable.  It is about darn time that the conventional wisdom of the era is catching up with what we already know – building things is just plain cool. 

I have to travel often for work, so I am a frequent flier on a large carrier located here in Atlanta.  I am fairly comfortable with the service they offer.  I feel that the airplane is airworthy and relatively clean; the crew is well trained; the staff members are reasonably courteous.  Aside from the baggage fees  that I don’t use because I  carry on luggage only and the fares that continually inch upward, I don’t feel that I have too much to complain about.

The other day I was in Dallas and flew on Southwest airlines for the first time.  I wasn’t too crazy about the method of boarding, but was pleasantly surprised by how efficient the boarding process was. The gate agents were courteous and the flight service crew seemed comfortable and excited to be at work.  The over-riding theme of the day for me was “Happy”.  Everyone associated with that flight in a Southwest uniform projected happiness and a fun atmosphere shrouded in excellent professional etiquette.  The standard FAA required pre-flight briefing was fun and even, dare I say, entertaining.  I didn’t feel cheated because it wasn’t delivered in a dour monotone.  I didn’t feel less safe because the attendant made a few wisecracks in the middle of it.  In fact, for the first time in a long time, I actually listened to the briefing!

The culture at Southwest has been written about ad nauseum.  Staff are empowered, executives are humble and focused; flight crews are excited to be at work; customer service agents seem to actually like serving customers.  How did they do it?  How did they create this culture that can only breed self fulfilling prosperity?  What can we do at our own organizations to make life more tolerable for our employees who then project that image to our clients?

Culture change doesn’t happen over night.  It doesn’t happen in a month, either.  Culture modification is a profession in and of itself.  But in our construction organizations, I feel it doesn’t have to be.  As we continue to step through the worst economic downturn in decades, take a moment to analyze the culture of your firm.  Are the employees genuinely happy to be there?  Do they have a stake in the outcome of your organization aside from the proverbial pay check?  Are they empowered to offer ideas, point out problems and own the solution?  The first step to modifying culture is defining what you want your culture to be.  Too often we allow someone else to define who we are rather than defining our own companies.   Too often culture shifts from one crew to the next without displaying a focused message.  Too often we retain the rotten eggs with the understanding that all the eggs must be rotten, so let’s just stick with those  we currently  have.  Are your jobsites clean and well marked?  Do your superintendents own the project that they lead or simply act as a conduit to someone else?  Is every member of your staff asked to bring ideas and solutions to the table, or told to sit tight and watch the pros work?

Culture may be the one item that can’t be quantified in any legitimate manner, yet has an enormous impact on your company and client service.  Not all service companies can project fun in their marketplace like Southwest does.  But that doesn’t mean that we don’t define our culture and surround ourselves with staff and managers that support that effort.  A little bit of effort at making your company a rewarding place to work will pay off in spades in customer relations.  One short flight on an airline made all the difference in the world to me.  I will now actively pursue that company to pay my travel dollars to when the situation arises when I can use them.  Imagine that each interaction with a potential client does the same for your business. 

How do you want to be perceived?  As the company that is just going through the motions, however rote they may be, or the company that is focused like a laser on projecting the best customer experience possible from initial contact to signed punchlist?  As a customer, we may go back to the former out of necessity and convenience, but we patronize the latter out of choice.  The difference is subtle when written in words, monumental in scope.