Building a business takes a lot of work, and ideally, you build a business that you can be proud of.  As a construction business owner, you want customers (both current and potential) to see your business in a specific way.  So what do you do?

Sure, you work hard and get the job done right.  You conduct business fairly and treat people with respect.  But you also have to actively create your company’s corporate image.

While some of your company’s corporate image will come about naturally based on the work that you do and the manner in which you do it, companies that have a specific plan in place to create a corporate image have much more control over how they are perceived.  They also have more opportunities to highlight the strengths of their business and their culture.

Once you build your corporate image, you can showcase it.  For instance, my company has a very strong culture and we’ve been operating on the same values since our inception in 1985.  So this year, we are running ad campaigns that highlight these strengths.  The one below features my father and me, and definitely represents our corporate image.

So think about how you want the world to see your business, and then make the most of it.  Use it in marketing, in sales, and in conversation.  You’ll be surprised what a pride in your company and a strong image will do for your business.

Mid-January is a time of reflection for many contractors.  They’re starting a fresh new year, and wrapping up their year-end which is a task in itself:

• Preparing W2s & 1099s
• Creating year-end financial reports
• Closing your general ledger
• Rushing to get that last payroll out in December because you are unable to work between two fiscal years
• Looking at Over/Under Billing and posting the adjustment to the year-end financials
• Preparing Sales & Use tax reports for sales tax authorities
• Querying different type of jobs in job costing to look at profitability by type

If you have had trouble with any of these items in past year-ends, ask yourself, “Am I willing to go through that again next year?”

If the answer is no, then now may be the time to start looking into new tools and software programs that can make your job—and your life—easier.  There are plenty of construction-specific accounting packages that work the way construction does and can efficiently prepare W2s and 1099s and year-end financial reports.  Some systems are even date-sensitive and allow you process payroll over different periods, and even years, so you don’t have to rush to get that last payroll done.

What I’m getting at is this—year-end doesn’t have to be this painful.  Do some research and check out some of the resources, tools, and software programs available to you.  It can make your next year-end, your job, and your life easier.

Happy New Year!

As you know, I’ve been reading Steve Jobs’ biography.  I think there are some pretty good lessons in there, particularly for the start of a new year.  While I was reading, I came across Jobs’ explanation for why he wore a black mock turtleneck and a pair of blue jeans almost every single day:  because it was one less decision that he had to make.

Photo via Farhad Manjoo on www.fastcompany.com: Clay McLachlan/Reuters ('98); Getty Images ('99); Gabe Palacio/Getty Images ('01); Justin Sullivan/Getty Images ('04, '05); Peer Grimm/dpa/Landov ('07); Paul Sakuma/AP Images ('08); Robert Galbraith/Reuters/Corbis ('09); AFP/Getty Images ('10)

Now I’m not telling you that you should wear the exact same thing every day for the rest of your life, but why not make your life easier by minimizing the amount of decisions you have to make?  As a construction business owner, you put a lot of time and effort into making critical decisions.  Additionally you sometimes get drawn into trivial matters that should really be handled by others in the company.  To get to the point, you have to simplify by getting two things in place:  people and processes.

First, get the right people in place.  This is easier said than done, and comes in two parts.  Invest the time in finding people with the aptitude to do the job, and the right attitude to fit into your company.  The second part means getting rid of people who do not fit these requirements.  As hard as that may be, having the right people in place will increase simplification.

Second, get your processes in order.  Create a plan that makes sense.  In the mid 1990’s when my company was growing, I hired a president.  As fortune would have it, this person was an incredibly good manager and truly organized our daily processes.  This created new opportunities for the business and for our vision because I was able to focus on the big picture.

Getting people and processes in place is like Jobs’ wearing the same basic outfit—it eliminates minor decisions and troubleshooting so that you can focus on bigger decisions, ideas, and growing your business.

There’s a lot I could say here, but mostly, I just want to wish everyone a very Merry Christmas and a Happy New Year from everyone at Foundation Software.

See you in 2012!

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Steve Jobs was no doubt a great businessman with many valuable lessons to teach.  In his commencement speech to Stanford University graduates in 2005, he references The Whole Earth Catalog from the mid-1970’s:

On the back cover of their final issue was a photograph of an early morning country road, the kind you might find yourself hitchhiking on if you were so adventurous. Beneath it were the words: “‘Stay Hungry. Stay Foolish.’  It was their farewell message as they signed off. Stay Hungry. Stay Foolish. And I have always wished that for myself. And now, as you graduate to begin anew, I wish that for you.

Stay Hungry.  Stay Foolish.  My take on this idea is very simple:

Stay Hungry. As a business owner, you can never be satisfied. Even if sales are booming and you’re doing better than you ever have before, you can never be satisfied.  You must maintain a hunger to be better, to keep moving forward, and to grow your business.  In order for your business to survive and thrive, you must maintain that hunger.  Because as soon as you’re satisfied, you become too comfortable and stop evolving.

Stay Foolish. This leads right into what it means to stay foolish.  In running a business, there must always be a certain amount of risk that you’re willing to take.  Risk is healthy; it keeps things fresh and gives you the opportunity to evolve.  Take marketing for example.  I  took a risk in 2005 and dressed up as Superman for a marketing campaign.  It could have been a horrible flop, but almost seven years later, people still remember it and bring it up at conferences and tradeshows.  Or you could take a risk in offering a new product.  In 2006, we started our sister company Payroll4Construction.com as one of the few, if not the only, national payroll services just for construction.  At the time, we weren’t sure what was going to happen, but it ended up being a great risk to take, and the company is growing every day.

Never settle and take some measured risks.  You’ll be surprised what it does for your business.  Stay Hungry.  Stay Foolish.

Last week, I talked about Jim Collins’ book Good to Great, and the common characteristics of great companies.  I’ve listed them below so you can have them in front of you again:

1. “Level 5” leadership at the top
2. First people, then processes
3. Confronting the brutal facts of your business and industry
4. Do only what you can be the best at doing
5. Maintain a culture of discipline
6. 6. Leverage technology to enhance what you already do well
7. Generate momentum that accelerates your growth over time

Last week, I focused on what it means to do only what you can be the best at doing.  Today, I want to talk about #6—“Leveraging technology to enhance what you already do well.”

We live in a technological world, so much so that if business owners don’t embrace technology, they may be doing themselves a disservice.  Many contractors go into business because they’re great at what they do.

I know a successful excavating contractor that took over his father’s grave digging business when he was younger.  This is a true story—his father refused to use anything but shovels and picks to dig the graves, but once the son took over, he purchased a backhoe.  Sure, there was a learning curve, but taking the time to learn how to use the backhoe (the current technology) made him substantially more productive.  In fact, he turned his father’s small grave-digging business into a large union excavation business.

This young man took the time to think about what would ensure the long-term success of his business.  Leveraging technology is not limited to heavy equipment, though.  There is wonderful technology available for the field and for back office operations.  Take some time and look at what you could be doing better, then see if there are any technologies that could help you enhance what you already do well.

When clients ask me about change orders, I’m reminded of a well-circulated photo. It shows a small dinghy named “Job” tethered to a yacht. The yacht is named “Change Order.”

The interesting thing is that this image does not represent my change order conversations lately. In many of them, to keep the nautical metaphor going, the change order is less yacht and more torpedo.

Discussion about change order difficulties tends to be one of two types. It’s either about the change orders that didn’t happen, or all the ones that did. This seems to present a “darned-if-you-do-darned-if-you-don’t” situation. But let’s investigate a little closer and see if there is a third side to the coin…

Counting with imaginary numbers

It’s not news that competition for work in most parts of the industry has increased or that margins have decreased. But I have been surprised at the number of contractors who tell me that they have bid for jobs at break-even or at a loss.

There are times when this might make sense – times when having some work is better than none or when winning one job is likely to help win others down the road. Yet it’s a surprisingly common practice for business owners to bid at losses, and when I ask them how they plan to come out in the black on the other side of these projects, the nearly universal answer is “We’ll make it up in change orders.”

Every construction project is a gamble – you’re betting that your estimate is accurate, that labor and material prices don’t go through the roof, etc. But most of the risks are either things within your control, or are at least calculated on likely outcomes. Yes, change orders are nearly inevitable. But to count on them as the source of profit is to bank on an unpredictable variable that is not under your control, that is hard to manage, and that you may wish to use for a completely different purpose – business development (more on this in a moment).

Too much of a good thing

So on one hand, change orders can be troublesome when we expect them, and they do not occur. The flip side is that when they do occur, they can generate more pain than gain. Change orders can be harder to manage – and present more of a profitability challenge – than pre-planned project work.

By definition, the work associated with a change order is work you did not initially plan for. It may mean shuffling resources, making quick material purchases, or incurring overtime labor expenses. The best project managers may be able to roll with these changes, but even the best have trouble ensuring that all costs have been covered when billing the client, that the cost estimates are accurate, and that billing occurs in a timely fashion.

Change orders cost a company more than labor and materials. All of a company’s overhead – office, management, and other costs – need to be rolled into the pricing. But the biggest exposure a contractor faces is rejection. I’ve heard too many stories of contractors who delayed submitting their change requests to the client until near the end of the project only to have requests rejected after work has already been started or even completed.

The edge of the coin

When gathering my thoughts for this blog entry, I called a local GC friend and asked him if he considered change orders a significant source of profit. He was silent a moment and then asked me, “John, do you consider your customer support team a source of profit?” My reaction was “No, they’re a cost center but an important one. They keep our clients happy, and a strong support team helps with new business.” “Exactly,” said my friend. “That’s how we train our PMs to think about change orders. They are our opportunity to show off our flexibility and execution. In fact, we often make a command decision not to charge for some if the costs can be easily absorbed, particularly for strategic clients.”

“So you don’t make money on change orders,” I asked? “They’re a cost center to you?” “No,” he chuckled. “We make a lot of money on them. But it’s not easy money, and it’s certainly not money we plan for.”

When I hung up, I realized that I had that “third side of the coin.” Change orders can be good or bad to your bottom line. It is a toss of the dice, but having top-notch project management and cost estimating will weigh the dice in your favor. What change orders always represent is another opportunity to satisfy a client.

So when it comes to change orders, I suggest you plan for them, but don’t count on them. Make money when you execute them, but execute with care. And like everything else you do for clients, use them as an opportunity to build long term relationships. After all, change orders come and go, but in our business, lasting relationships are the key to lasting and profitable business.

How do you handle your change order requests? Are they a dinghy or a yacht?

When I moved into my new home, I made all the calls to ensure that my utilities were on prior to my move-in date.  When I tried to get my internet service working, it took me days and lots of phone calls, automated loops, etc. to get it running.  It was absolutely frustrating!

The point is that when dealing with a service or purchasing software, it’s important to have a Support department you can rely on.  Usually the first department you talk to when dealing with a new company is Sales.  Evaluate their competency and knowledge level. Do they know the software inside and out?  Have they ever worked in support? Do they understand your industry and how you will use the software?  You can also talk to existing customers about their experiences and trade groups or associations that the company is connected with.  Here are a few other things to consider:

• When calling, are you greeted by a live receptionist, or funneled into a voicemail loop?  (While not absolutely necessary, it sure is a nice touch to deal with a real person.)
• Where is the support department located?  Are they direct employees of the company?
• How are the company’s support reps trained?
• What is the average tenure of the group?  A longer time in a support position equals knowledge and indicates that the company knows how to treat its employees.
• Are there resources like eletters, tips, fax solutions, etc. that clients have access to?
• Does the company have an area dedicated exclusively for clients on their website?
• Are there multiple methods to contact Support, like phone, fax, email, and web?

The best Support offers multiple means of communication, timely responses, and thorough information.  You deserve a great support system, so make sure you do your research when looking into new construction accounting software, or any software for that matter!

One of my favorite parts of this job is getting to talk with professionals in the industry who work with contractors for a living. No matter if we are discussing something as specific as power tilt attachments or exclusions in general liability policies or even funny stories about workers’ comp fraud (there’s a good one about a worker named Billy who once won a rodeo after being “bedridden” for months), one constant always unites my conversations.

            Every CPA, insurance broker, consultant, and equipment manufacturer eventually make the same observation: Most contractors are amazingly adept at building a structure and running field operations, but when it comes to the running a business—the discipline it takes to crunch every number, the financial savvy, the ability to use insight from reports—many are lacking the information they need.

Most are just too busy chasing new jobs. Then there’s long hours and reams of paperwork and difficult employees to deal with. And, let’s face it: the kind of individual driven to be a general contractor is often not the kind that relishes tedious office work and long hours spent analyzing numbers. These are risk takers, men and women who are driven to hustle and make a profit—not the sitting still type. Sometimes it’s hard to get a contractor to slow down long enough to think about business fundamentals—it’s hard to get them to slow down at all.

            With work still scarce and construction growth frustratingly slow and spotty, many companies are still under-capitalized. Those that find success will be the ones that improve their processes and adapt to capture opportunities. While finding more work may be priority number one, the most successful contractors understand that “the devil is in the details.”

That’s why this September’s issue is CBO’s first-ever “How-To Issue,” chock full of helpful information focused on how to improve specific processes. It’s this kind of business management advice that separates CBO from other construction publications that solely evaluate and discuss equipment. Inside these pages you’ll learn how to better manage the submittal process; make the most of field, logistics and maintenance report; examine if it’s smart to restructure debt, reinforce training so that it sticks, and more.

Here is a sneak peek of the September cover. Hope you enjoy it! Please write in and let us know how we are doing.

Imagine if your son or daughter brought home a report card without a score above D. Did you know that the American Society of Civil Engineers (ASCE) has graded our infrastructure sectors with mostly Ds? According to experts at Onvia, Inc., a Seattle-based company that tracks and reports government spending, the report card reads like this: Aviation, D; Drinking Water, D-minus; Energy, D-plus; Roads, D-minus; Transit, D; and Wastewater, D-minus.
The Association of Equipment Manufacturers (AEM) reports that “across all sources, we (the U.S.) invest only $85 billion annually in our transportation infrastructure. However, estimates show in order to properly maintain the current system and expand it to meet future needs, we need to invest $225 to $340 billion annually.”
On September 30, 2011, the surface transportation reauthorization update (the highway bill legislation) will be up for a long-awaited vote. The outcome of this vote could have serious implications for the construction industry. AEM estimates that 35,000 jobs—many of which are in construction— are created every time $1 billion is invested in our infrastructure. Though there is much debate about how to fund the bill, most agree it would help stimulate construction growth.

Where do you stand on this issue? Let us know!