Construction Business Owner, March 2008

Editor’s Note: This is the third  in our 2008 series of “Get Your Business to Work,” written by our regular columnist George Hedley.

The “good old days” when you could win work based on your reputation, a wink, a smile and a handshake are gone. Old methods of finding and doing business won't deliver even average results now. Old customer pipelines won't work. Trying to make a profit by being the low bidder won’t get you enough jobs to cover your overhead. Old project management techniques and lack of proper documentation will cost you even more money than ever before. Non-existent employee training programs won’t get it done. A yellow pad and a pencil won’t work anymore. An unqualified accounting staff that delivers bad results six months after jobs are closed is a recipe for disaster. And inadequate job costing systems, which allow you to spend money like water, will keep you poor.

Only the Strong Will Survive

A booming economy has allowed unprofessional, unqualified and lousy business owners and managers to grow their companies and make a decent amount of money over the past ten years. But the “gravy train” has or is about to end. Only the strong will survive.

The strong run their companies like pros: no work without a signed contract, no extras without a signed change order, accurate job cost data, cutting-edge integrated estimating and accounting software, field start-up meetings, weekly employee training, bonus systems based on achieving specific goals, ongoing target marketing programs, pro-active customer relationship tracking systems, strategic business plans, clear targets and goals, field operational systems in place and a strong management team.  

The robust economy has allowed business owners to continue doing business the same way they have done for years without making any major improvements, trying innovative ideas or implementing new project delivery methods. These business owners have stayed in their outdated ways. These business owners will now try to compete on reputation and past accomplishments. As the economy slows down, more competitors enter themarket and customers are willing to try new delivery systems and products that use new, high-tech approaches to business.

Established businesses sit and wait, while cutting-edge companies try new technologies or try to be the first with a new type of leadership style, project management system or field productivity reporting method. Many owners resist making tough decisions about their future and don't change until it is too late. Some people hope that everything will work out as it always has before. This type of leadership will only do one thing in today's extremely tight, challenging and pressured business climate: die a slow death!  

Today, it takes a creative strategy, decisiveness and a new vision to be successful. It takes strength and confidence to make tough decisions that will keep you in business and allow you to emerge as an industry leader in any economy.

Start with a Blank Page

Now is a great time to step back and start over with a new outlook. Think of a fresh piece of drafting paper. Ask the question:

"If we could start over, how could we design our company to be a cutting-edge industry leader not dependent on customers who hire companies based on low price?"

Forget about your current people, positions, procedures, systems, specialties or customers. Think new. Think new customers, project types and sizes. Think real opportunities. Think about making a lot more money with less work. Think creative approaches. Think expertise or specialty markets. Think beyond what you’ve been doing for the last several years. Think different and new delivery systems, pricing structures, chain of command, rewards and incentives, management reporting, productivity programs, customer relationships, sales and marketing approaches and profit goals. Think younger management team with fresh ideas, no micro-management and less controls. Think about rewarding and compensating results in new ways for all key managers based on company performance. Think about giving up some ownership to your future company leaders.

Develop a Customer Focus

Think faster and better than ever before. Customers today are demanding and want more value-added services than in the past. They expect perfect quality and service at a great price. How can you design your company to make a profit twice the industry average?

Here is an e-mail I received from a typical mid-size electrical contractor who grew his company by hard work, providing a good service and being low bidder on many different types of jobs: office interiors, home remodels, manufacturing buildings, small jobs, big jobs and factory machine wiring. He was so busy doing anything for anyone who asked for a bid that he had lost his focus and wasn’t making much profit for all the running around. He was frustrated. He knew if he stayed on the same path for another ten years, it wouldn’t get any better. Look at what he did to change how he’ll do business in the future:

“I want to give you an update. I was really motivated by your two-day boot camp, and I’m starting to put my new action plans into action. Last Friday, I pulled a list of 300 manufacturers in our area, and Tuesday (tomorrow) I will begin calling them to set up meetings. I’ve got a goal for how many new clients I want this year. Like you suggested, we’re going to focus on just two types of projects and customers. We’re now going to be the electrical experts in servicing manufacturing plants and facilities, as well as the electrical high-tech specialist for expensive custom homes.”

 – Brian, owner of BC Electrical  

 

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