I was a guest on a local internet radio show – Atlanta Business Radio (www.atlantabusinessradio.com) last week.  I was shocked to actually get a call from a prospect a couple of hours after it aired from a representative of a potential client and scheduled to meet with her after her vacation.  I was left in awe at how technology has changed the name of the game and allowed even the smallest or most obscure companies to get some air time that larger stations wouldn’t touch.  I pursued this avenue to possibly generate leads, but also to get more practice at public speaking, which I have never been fond of but find myself more and more required to do.  The format of an internet radio show also allowed me the chance to hear myself speak afterwards and learn what I can improve on and what important points I wanted to touch that missed.  I need to make my pitch more efficient.  Overall, it was a great learning experience.

Not a day goes by that I am not amazed at the advances technology makes – from concept to design, from sale to final walk-thru.  Technology has made our quotes more accurate, our billings more manageable and has helped to connect our people in ways not imagined even just a few years ago.  If we aren’t on board with technology, we are losing efficiency and opportunity.  I would dare say that statement cannot be argued with.

From a marketing perspective, technology allows us to search for and track leads without effort other than lifting a finger.  It allows us to virtually “meet” potential clients without actually meeting them.  Entire pre-engagement conversations can occur without physical contact.  This is great in many perspectives, but what it does is even more so set apart the face to face meetings that are such an important part of the marketing campaign of our companies.  Technology is the great leveler of our generation.  The system that allows small companies to have a larger presence than they could normally.  It also allows larger firms to break into smaller, more manageable customer focused sub groups without actually fracturing into an uncoordinated mess.

But there is still nothing like face time with clients and potential clients to help set your firm apart.  There is still nothing more effective at maintaining good word of mouth than a busy executive reaching out to past clients and discussing the projects that they have done for them.  There is nothing nicer than a handwritten note during the holidays expressing thanks for work past and hope for more in the future.  There is nothing better than getting to know your client a bit deeper than email allows. 

My point is that as technology allows us to become more efficient and capture more market than we thought possible with less effort, it also allows us to hide behind our desks and not build real relationships with our clients and potential clients.  Let’s not forget to network, talk with and shake hands with our clients, lead generators and prospects and rub elbows with them in more relaxed settings.  I say use technology and leverage it as much as possible as the benefits are amazing.  But the fundamentals of our business are relationships built over time and in person.  An internet radio show provided a lead to me at no out of pocket cost other than some gas and and hour and a half away from the office.  But that lead must be met with good personal follow-up in order to amount to an opportunity.  We should use technology for all its worth – but lets not lose the art of shaking hands.

I read recently that in a survey commissioned by Move – 62.5% of Americans think of their home as a place to live rather than an investment.  I have no data to back this next claim up, by my guess is that only a couple of years ago that the results would have been inverted.  The commercial contractors among us deal with recovery periods, payback metrics, etc. on a daily basis.  Many business customers use payback metrics to determine what features they will add in a facility. 

What the results tell me this time is that the expectation for cashing in on one’s home have evaporated.  Springing for a gourmet kitchen is now a luxury and not an investment.  A steam sauna (and the five times a year it is turned on) in the Master Bath might not be worth the extra cost.  Yep, as homebuilders and custom remodelers, we are back to the process of selling basic shelter and not dreams.  Or are we?

It is too easy to dismiss the trends of today as truths of tomorrow.  Look at where believing the axiom that home values never decrease took us!  More than ever, we have to become part psychologist and understand what drives our markets and clientele.  In order to do that, especially in a difficult market, we have to tie the “wants” together with the “shoulds”.  I want a new Master Bath, but I should insulate and put in an on-demand hot water heater first.  I want a new kitchen, but I should upgrade my legacy furnace – and so on.  Do your best to understand your clients “wants” and the rationale behind their “shoulds”  If you can make these two meet in reasonable harmony, you have a potential project. 

I have never approved of the practice of telling a client how much more their house will be worth with a renovation – this is misleading at best and we are making an effort at dispensing knowledge most of us are not expert in – but those projects that add long term value to your client have a better shot at success than vanity projects alone.  Do your best to tie the vanity (want) with long term value (should).  This isn’t groundbreaking or new, but as sales become harder to come by, understanding the psychology of consumerism can be helpful.

While at no point with my feeble intellect do I wish to declare a “bottom” to the national economy in general and our industry in particular, I would like to mention that it may be a good time to create a dream sheet of equipment purchases/staff positions, etc. that you may like to have in the organization you envision your company to become.  The reason I mention this is that, for the few items I have been dreaming of owning in my organization (dump truck & a walk behind concrete saw to name a couple for me) but have been putting off purchasing have become incredibly affordable on both the new and used markets!  I don’t personally intend to make a lot of capital purchases yet, but I have my dream sheet ready.

Maybe there is a position in your company you wish to fill with a seasoned veteran that you don’t have to train extensively, or some capital equipment you would like to own but haven’t pulled the trigger on.  Both are in abundance and, in relative terms, are becoming more affordable. 

Check with your accounting professional, please,  but some tangible equipment purchases are eligible for a 50% bonus depreciation deduction.  This equipment must be original use.  Granted, your company will need to be profitable in order to use the extra depreciation, but those that are both profitable and have cash will find amazing deals on new purchases and may be able to write off 50% of the equipment in the first year!

When and what to purchase is completely your call.  But the stars are lining up to check off some of that wish list you never thought you could afford or were willing to spend any dedicated funds from your budget on.  Don’t forget your business fundamentals – cash only; maintain your rainy day fund; only purchase items that have a short payback period that you can recover in your job costs or charge on a separate basis; make sure the equipment satisfies a functional need and is not strictly a vanity purchase,  etc.  Call this one of the only upsides to this bear economy we have seen in about 1- 1/2 years.

Like many of us that grew up in a rural setting, I have had a fascination with alternative energies for nearly as long as I can remember.  My neighbor had a well with a pump driven by a windmill that worked up until the late 1980′s.  We often lost our electricity service in the winter and used an old generator to run a few lights and the refrigerator.  More often than not our Franklin Stove was supplanting the hot water heat system in the old homestead during the winter months, and our house had a rainwater cistern directly outside.

As a rule, rural folks tend to live “off grid” more than suburban or urban folks. But we were just doing what we were supposed to: conserving, collecting, harvesting and operating as independently from the “city” as we could.  We were probably considered by many to be rural “hicks” back then – but in many cases that very lifestyle would now be considered “Green”, and we would be pretty hip!

Things go in and out of style.  Some of us build our businesses on capturing the “in” thing of the day and make a decent living at it, for a while.  But those businesses must constantly strive to remain on the cutting edge of trends and fashion.  The point of my short post here is that I don’t think the “Green” cause de jour will stick around forever.  But I do think that sound, fundamental building practices that are enhanced by the green movement will remain with us and improve over time.  Air sealing; improved insulation practices; non-toxic paints and coatings; conserving and reusing resources where possible; alternative energy sourcing, etc. - these items will never be a fad.  I firmly believe that energy conservation and materials will be the focus and primary growth trend in our industry for the next few years.

Let’s face it.  Home equity is tapped out and used up.  Easy credit was last year’s method of madness for homeowners to expand their home to luxury status.  All based on the now faulty premise that home values won’t deflate.  If we want to remain successful as viable building entities, we must stay as “trendy” as possible without ever forgetting our primary focus – being known as experts in sound building practices while providing exceptional counsel for our clients. 

Our average job sizes will most likely get smaller and our profit margins will probably take a hit.  But those of us that make a determined effort to stay informed of the latest news in building science while honoring the time honored fundamentals of sound construction and design will find a new market or adapt to an evolving one.  Sound building practices and wise counsel that evolves with the latest advances in science and technology, delivered at a competitive & fair market value and implemented with exceptional customer service will never go out of style.  The job types and size may change year over year, but the fundamentals of excellence will not.  These fundamentals will serve us in the best of times and the worst of times, and are the premise on which our companies must be built.  In order to compete, our marketing must be focused on the green movement and other trends of the day.  That doesn’t mean that time honored fundamentals of excellence are trendy.  We just have to blend the two – style and substance – into something that the average consumer can get their arms around.  My next post will revolve around some ideas that I have seen work.

We are all looking for ways to make our operations more profitable.  In an economy such as ours, we can basically forget about raising fees to cover those inefficiencies inherent in General Contracting.  We can also forget about charging for our pre-bid services.  I am so often amazed at how much time and effort we give away to clients for no cost – only to be told that our proposal for whatever reason did not contain the winning formula.  Ugh!

When we can’t raise rates to cover runaway costs, we’ve got to look somewhere.    As boring as this subject may be, simply streamlining processes and getting more efficient use out of our resources is the most cost effective means of quickly generating dollars to our bottom lines.  Where do your jobs often go over?  If you are like me, estimating portions of general conditions (such as job cleanup) is a disaster.  My trouble is that I understand that at 3:00 during the week for an hour or so and on Friday everyone is cleaning up the site and prepping it for a weekend.  But I also know from experience that the  ”General Conditions” line item is the catch all place to code unaccounted time for the field workers.  The time “Harry” is using to drive between jobs or pick up a tool from another jobsite.  I am afraid to add more time to the job cost but in essence this is job specific overhead that I don’t account for enough.  I  know some would say (myself included) that I need to bring the hammer down on time coding, set these expectations and require follow through.  Fair enough.  But that is only part of the problem. 

I started putting these things together and realized that, while my company is very small, having only one table saw and one miter saw was an absolute crimp on productivity.  Having only one rotary hammer in the company saved me the $500 for the second one, but bred terrible inefficiencies into the workday as carpenters chased them all over town.  Simple items such as this popped up all over the place, when I cared to look.  Of course I worried about the cost of keeping track of and maintaining these extra items and/or loss or theft – but assigning them to a superintendent cleared that hurdle.  This is just one small example of the inefficiencies that I sawbuilt into my tiny organization.  I now see many more built into much larger ones.

We have to think of our organizations as an organism.  One in which several different locations depend on the home office to coordinate logistics.  Make time to ask your staff what inefficiencies they see.  (Remember payday Fridays before direct deposit when staff had to go to the bank??)  Note what things are inefficient in your day, from stopping to pick up coffee with the line around the block at the local coffee shop to answering each and every call as it comes in instead of screening them.  Items such as these affect the small contractor and the large organization tasked with multiple projects in multiple locations.   The list could take up much more time than allotted on a blog.  But remember that efficiency breeds time savings, which begets more profitability without raising costs.  These small items often help us to uncover larger issues, and it is there that real savings can occur.  Sometimes we have to take the “aerial” view of our companies to get a grasp on our major processes.  Other times we need to dig into the minor processes and see where we can become more efficient with our resources.

We belong to an era that has automated nearly every process available to some extent.  Hanging door blanks in a jamb is a lost art in the field and will solicit confused looks from many of our carpenters.  Much of what we do gets pushed off to specialists that do one thing very well.  The jack of all trades is often seen as antiquated or too expensive. This axiom is often also true for our field leadership.  Those that fully understand the technical aspects of the trades are often not taught the intricacies of management and vice versa. In a tough market we normally can’t pad our estimates to include missed items.  We have to get more efficient, and reducing or eliminating end of project completion items is a great place to start.

I think part of our training program should include fundamental skill tasks as well as management tasks.  I don’t think it is necessary to teach a superintendent exactly how to cope/miter crown moulding, but it is important that he/she understands what it should look like at the end of the project.  If we can eliminate or, at the very least, take a big chunk out of the punchlist at the end of the project through improved quality control, we have earned much more than the cost of training in time and production costs.

I have often suggested that a list of Quality control items that often find their ways onto punchlists get put together.  At a monthly meeting, take one or two of the items and explain how this issue made it to the end of the project before being corrected and when/how could it have spotted earlier.  Some punchlist items are difficult to spot until final trades are completed.  Others can and should be caught at the time the subcontractor is on site performing their portion of the project when it can be most efficiently corrected.

We are all getting pushed for tighter margins and tighter times to completion.  Right now, the client holds the upper hand.  Eliminating time and expense from completion items is a great way to increase profit without increasing bids and/or proposed profit margins.  If we think of each item on the punchlist as costing a minimum of $500-$1000 to correct, it easily adds up to a significant dent in our budgets.

In my memory, 2008 will rank among the most vivid.  In 2008, the financial system collapsed; century old Wall Street firms folded;  energy costs skyrocketed and then tumbled; commodity prices mirrored energy; and construction lending came to a near standstill.  We will have a tough time forgetting this year despite our best efforts.  But ever the optimist (I can’t help it – I have Irish roots), 2008 will also be a year from which we learned more about managing our businesses than any other.  What have I learned from 2008?

We have learned that the theory of “De-coupling”, in which global trade would make the global economy less dependent on the American financial system, was incorrect.  In essence, 2008 proved to an even higher degree the importance of the much too villified American consumer.  We were blamed while energy prices were escalating for our excess, and pandered to while the global economy was tanking.  For the forseeable future, the American consumer will continue to drive the global economy.  De-coupling is a clever concept on a doctoral thesis.

We learned that rising energy prices and environmental activism will make building science “cool” again.  Many of us in the industry know that the “Green” term of the day is better known as “sound building practice”.  Our industry has been the advocates for proper (often more expensive) building techniques for decades.  We now have the court of public opinion on our side helping to advocate and willing to pay for the best practices that we have been preaching about for years - something I haven’t seen previously in my career.

We’ve seen untold gobs (scientific terminology) of dollars float to building science. Bill Gates once was asked by an interviewer about how the tech bubble of the 90′s was a disappointment.  In essence, he said that the money invested to develop the network infrastructure is not a waste, despite the crash.  I firmly believe the dollars invested in building science during this boom will reward us with handsome dividends for generations to come.  In a few short years we have gone from holding a candle or smoke stick by a window to show a client an air leak to monitoring it with heat seeking infrared technology, recording it digitally and being able to review our repair afterwards.  This is stuff we could ony dream of a short while ago.  Science such as this will make our built environments and those that create them even better over time.

I have  learned that when banks forget their fundamental, core business - (lending the savings of others to those of an excellent credit risk)  Run, Run, Run away from their chosen darling of the day.

As an extension of the item above, 2008 yet again confirmed that proper business fundamentals are the only way to long term wealth and sustainable growth (had to pitch my theme – please forgive me) .  Chasing the cause of the day might work and fatten our pocket books short term, but it is not nor ever will be a long term strategy. 

I have learned that the Law of Unintended Consequences will always occur.  Think of the corn ethanol bandwagon and the subsequent food prices/shortages.  In our industry, think of the best intentions for providing the American Dream to those of modes means that created high risk lending and subprime loans.  But in keeping with one of the statements above, I believe we are in our alternative energy infancy and must invest and fail in order to succeed at some point down the road.  Now we know what works in the lending arena , and what doesn’t

Most importantly, I have learned that the only constant is the love of our family, the daily work that we do, and the habits of constant improvement have made us great as a nation in the past and will get us past this incredibly rough economic time.  2008 was an incredibly curious year that I will never forget.  I am sure the political/economic landscape of 2009 and beyond will look very much different to what I consider the norm in prior years.  Getting back to basics has been and will be the only consistently successful theme across industries.  Those with proper fundamentals are forecasting what 2009 will be like and are having a tough time doing so with all of the unknowns and variables.  Those that aren’t making this effort will undoubtedly be one of the casualties of the crash of 2008.

What have some of you learned from 2008?  I am most curious to hear from you and learn your stories of lessons learned from the “Crash of 2008″ - I bet this would make for excellent reading a few years from now.  Funny thing is, after all of the difficulties of this year, I still hope I get a new tool for Christmas! Despite the deeply cyclical nature of building, I simply will never be able to get it out of my blood.  I wish all of you a blessed and Merry Christmas and Happy New Year.

Stationed in Germany with the Army over 12 years ago, I remember eagerly placing “x’s” on my short timer’s calendar.  Each day spent was one day closer to “freedom” and, ultimately, home.  While living in Europe was the opportunity of a lifetime that I will forever cherish, I could not wait for the day when the road that got me to the barracks in Schweinfurt converged with the road that was headed back to my home in Michigan so that I could cash in my “mulligan” from round one of my life after high school.

I worked in the construction industry during summers of my high school years and thoroughly enjoyed it, but my big dream was always to become an airline pilot.  I packed away my tool belt after high school graduation and headed for flight school in northwestern Michigan armed with big goals and big ideas, but a very humble pocket book – and a looming recession in the early 1990′s.  After a year and half or so and a private pilot license later, that humble pocket book ultimately became the demise of my professional flying career and the incubator of my immediate future as soldier Mike.  Needless to say, I was devastated at not fulfilling my goal.  I even caught myself languishing in self doubt and doubting the premise of success by working hard and playing by the rules.  I had failed at the first big thing I set out to do as an adult, not for lack of effort, but by circumstances that I felt were beyond my control.  The wisdom that comes with age would ultimately allow me to learn that few situations are beyond one’s control but those that are still must be dealt with - but at the time I hadn’t been acquainted with that concept.  I raised my right hand and signed up for the college fund with Uncle Sam.

That choice, made by a 20 year old during a tough time in my life, in hindsight was one of the best decisions I ever made – and helped to clearly shape not only my future but those of my future wife and children.  I was forced to take an ample dose of humility and become nothing more than a recruit.  I got into great shape, was forced to re-analyze my life goals and get focused on the task at hand.  The goal of basic training is to tear the pseudo confidence down and rebuild it with an iron will.  Life experiences do that to each of us over time, basic training attempts to do it in two months.  The parable to life in general is quite obvious.

Where am I going with all of this?  Many, if not most of us are going through some of the most difficult times in our careers right now.  We doubt the decisions that led us to manage or own a construction business.  We see only the forecast of bad news with very little sunshine on the horizon.  We will make decisions now, under duress that will affect us for the rest of our lives.  Those businesses with systems in place that operate with proper business fundamentals are able to read the tea leaves much better than those that fly by the seat of their pants.  Those that practice forecasting, job costing, keep a work in progress schedule and bill accordingly (not too much ahead or too much behind) manage their precious cash flow and have an edge on the rest of us to capitalize on the next upturn or stabilization in the market.

The key point I want to offer is that now, during a time of stress, take the time to develop your plan of action, your next steps and avoid knee jerk reactions.  Perhaps some benchmarks or milestones could be useful.  Make these decisions with every available resource and planning tool available.  During that year and a half of flight school, the term “Trust your instruments” was pounded into me over and over.  These instruments, with backups, cross references and redundant mechanisms, won’t fail and must be your guide.  Now is not the time to count on false confidence or to close our eyes and hope for the best, but to count on our training and our systems. Sometimes the choice we make might take us down a completely different road than we initially imagined.  Hard times such as now are often credited with building character.  Even more importantly, I believe they reveal it.

I wish those that may read this a pleasant and blessed Thanksgiving holiday. I am thankful for the opportunity to communicate via this blog and welcome any comments or suggestions.  Unfortunately, we are not currently equipped to accept tomato throwing or spitballs.

One sidebar to the recent presidential election that I believe is monumental in importance yet hasn’t garnered much press is the incredibly successful use of the internet in a major national campaign.

President-elect Obama’s online machine was staggering in its size and scope, and clearly demonstrative of the pervasive capabilities that the internet has to offer.  Rather than being told – in one-way fashion – what interests one should have from conventional print, television and radio sources, the internet allows the customer to drive the focus of the campaign.  Now we may not be running for national or local office, but those of us in the construction business have a lot to learn about fully utilizing this vast and economical resource.

If we were told by a marketing expert that for relatively little cost we could understand our clients’ desires better; grasp what is key in their decision making process; pre-filter potential clients and ultimately appear more substantial as an organization, we would ask to whom we write the check.  The funny thing is the web offers these capabilities to us as we speak.  I believe it is time to wholeheartedly embrace the next generation of the web and make your site an interactive business development and management tool.

While having some web presence, it could be argued, is better than none at all, I tend to disagree with this sentiment.  Many of us simply place our hard copy brochures electronically on our site and call it a marketing expense.  Something is better than nothing is about all of the thought that goes into it.  But there is vast potential for learning about your clients without much effort.  Industry specific newsletters (some offered by professional marketing firms or done by yourself with considerable effort) can be sent to those who choose to receive them from your site.  While to the recipient the newsletter is free, to the business owner the information provided is priceless.  Every article that your client navigates to; every supplier site they are sent to; every extra click that a particular link receives is logged and presented to you as useful data.  Which past projects are the most popular and should be used more extensively in your print marketing campaigns?  What “green” or bathroom products receive the most hits?  What demographic actually comprises your online market (or your potential customer market) that you may not even notice from the corner office?  Which services receive the most hits? 

The data from an interactive website can be used to help focus a marketing campaign and to more clearly define where the nuts and bolts of building are intersecting with the customers’ desires.  No information is perfect, and many of the “clients” poking around on your site may be tradesmen, dreamers or competitors simply e-surfing.  In some cases, the data may even be skewed somewhat.  But there is nothing like getting quality information and feedback from potential, current and past clients that are not answering a ho-hum survey, but actually choosing to spend time the way they wish to in the comfort of their own homes or offices.  The strength of this possibility cannot be understated. 

Let’s move our websites from the “old internet” to version 2.0.  You may be surprised at what you will find.  In the case of a campaign, there may be some 40 million or people willing to donate $5 to your cause.  In the case of our businesses, we aren’t asking for donations, we are asking for something even better – real data from real clients about what is important to them.

“When the mice are fighting over the last scrap of cheese – it is time to start thinking like a cat!”

All of the business courses in all the colleges and universities in all of the world could not break business down more simply than this expression.  When you are competing in an environment saturated with competitors of varying ability – the decisions are difficult.  Should I reduce professional fees to compete with the corporate office in a pick up truck set?  Should I go after high end work even though I may not have experience in that marketplace?  Should I try to compete with the mass marketing nationwide firms?  Do I have a choice?

Short and long term strategies are seldom given any thought by contractors.  We tend to plan job to job and put out fires as the need arises.  In a boom market, these “fires” may be the lack of adequate staffing.  In a down market, these fires may be cash flow and the survival of our businesses.  While I strongly suggest against swapping markets in desperation, I understand the desire to do so.  But there is no substitute for defining a market niche, successfully competing in that niche and building your brand.  Sometimes a niche can the be all purpose contractor.

My first job in construction was as an apprentice carpenter with a corporate pickup truck type of contractor.  Fully licensed, fully insured, but a single person entity.  This fella would build a brick fireplace the first week, a soaring room addition the next couple of months, side a home with cedar shakes, and then pour a driveway after that.  His capacity for being well-versed in many phases of construction was a site to behold.  He wasn’t the fastest at the trades, perhaps not the best at a given task, but he did a good  quality job at a reasonable fee and his clients simply adored him.  Many would wait months to have him work on their home.  As one of many opportunities that people have provided me over the course of my life, working with this gentleme  was an excellent entrance into the construction market.

Of course, as a know it all teenager I asked him why he did so many things and didn’t specialize in certain trades.  Why did he not have a brand new truck with the latest gadgets and trick tool boxes?  His answer was simple, and helped to shape my life philosophy.  “…people will always need work done on their homes, and if I can do a majority of it, and they trust that I will not charge too much and will do a good job for them - no matter how bad it gets my kids will always eat.”  Even in the best of times, Larry was preparing for the worst of times.

Business schools will call it diversification; multiple market penetration; or divergent “verticals”.  But the school of hard knocks taught my first construction employer these realities without the need of a professor.  Do as many things as you are able, do them well, and, most importantly, provide the best customer service available.  Even in a tough market, folks will call you if you are the firm with the right answers. 

Times are tough and there are no easy solutions to any of our problems.  It is beyond time to think like a cat.  Better yet, it is well beyond time to think like Larry.