How Entrepreneurs Profit During Slower Times

Editor’s Note: This is the twelfth and final installment of our 2008 series of “Get Your Business to Work,” written by our regular columnist George Hedley. To read the previous article, click here.

True or False: The recent elections will not help your business in the near future. The slower economy is here to stay for at least one or two years. Your business must change or die a slow death.

So, how are you doing? How’s your business, cash flow, stress level and peronal life? Has the economy got you down? Do you feel slightly out of control or wish things would get better sooner than later? Are you working harder than ever but can’t get ahead? Do you think there must be a better way but don’t know what to do next? Do you feel like you are treading water just waiting for something to happen?

In a slower market, when you continue to do what you’ve always done, you’ll find it eventually  won’t deliver the same results you have previously achieved. It’s time to let go of the past and decide that the future will be different. Only the nimble and strong will be successful. Look at the car manufacturers-they’re trying to change their business plan, but it’s too late.

Survival Is bad

I have a real estate broker who has a sign on his desk that reads: “Survival = Success!” Is survival your goal? Are you in business to survive? Are you in business to make little or no money, not grow, just keep the doors open, keep your crews busy and spend all of your savings waiting for the economy to turn around?

You must change how you do business to thrive in the years ahead. If you’re a golfer, you’re familiar with the term “mulligan,” which gives a golfer a second chance to re-hit his shot. But in the real world, you don’t get a second shot. Every day you face the reality of a slow economy and tough business climate. Either improve your swing and try something new, or continue to hit your shots into the rough, and your score won’t improve. The booming economy handed out lots of mulligans when many companies delivered average performance and poor results. It gave them a second chance with their customers and contractual requirements. But now companies won’t get any mulligans for a long time. This is the real deal, no “take-overs!” You must get it right the first time every time. Welcome to the PGA tour where you can’t rest on your past performances to pay your bills today and keep you at the top of the money list.

To thrive, will you work harder, work smarter, work more, get organized, get in control, try new ideas or work differently?  To do business differently, you must improve how you do business, change how you work with your customers, implement your marketing plan, deliver your projects and elevate your level of quality and service.

Change = Growth = Improvement

Remember when you learned something new like riding a bike or using a computer? It was hard and caused you some pain, but with training and diligence, you succeeded. Now these tasks are easy and second nature. Change is good and allows for growth and improvement. Without change, nothing new happens, and you often go backward.

Does the old way still work? Do you have to change? Yes! I know you may not like to change and want the economy to go back to its old steady ways. But I’m sure your goal is not to strive for stability. Today, change is the norm. Change is not something that happens to you. Change is what you must do to continue to make a profit, grow your business and expand your customer base.

In the old days, you only had to make one or two changes every few years-such as buying a new adding machine, upgrading your typewriter to an electric model, buying a fax machine, changing from a yellow pad and pencil to a computer spreadsheet, changing from a dot matrix to laser printer, moving from Lotus 123 to Excel, buying a new pickup truck, adding a laser screed to your concrete tools or communicating via email.

As a part of your ongoing business management role, how do you plan for change and make change happen? The companies who wait for something to happen die off. Look at Sears-these leaders never thought their business model would ever need to change. They hoped Wal-Mart would never catch on. To date, they still struggle to get back the market share and attract customers they lost while waiting and doing nothing new or in a different way.

To change how you do business, you must create a proactive plan to stay ahead of your competition and abandon your old ways of doing business. Ask yourself: “What leadership decisions should I make but won’t? Why not? What am I waiting for?” You have some tough questions to consider:

– Do you have a customer you should fire?

– Where do you waste money?

            – How can you be more efficient?

            – Are any staff improvements needed?

            – Is there a faster way to complete your projects?

– What can you delegate?

– What should you stop doing?

– What should you start doing differently?

– Which areas should you improve or change now?

___ Customers                         ___ Personnel        

___ Management team             ___ Training

___ Quality workmanship        ___ Service               

___ Scheduling                        ___ Sales and marketing          

___ Estimating                          ___ Technology

 ___ Subcontractors                ___ Suppliers            

___ Productivity                        ___ Financial systems

___ Operational systems          ___ Field systems       

___ Project management           ___ Equipment

___ Banking                               ___ Bonding               

___ Insurance                            ___ Your paycheck

Change Your View

You can’t get better and improve by spending time talking to the same five to ten people for five to ten years in a row. You must change your view. Get out to see new people, markets, cities, customers and companies. Your goal is to learn and experience new ideas and ways of doing business. Read new books and different magazines, and hang out with different people. A new outlook will get you moving.

When you are stuck in the same place, it’s hard to get unstuck. In fact, most people don’t realize they are stuck. Are you stuck? You might be stuck if you do the following year after year:
 

•      Call on the same ten customers
•     Bid the same project types
•     Use the same proposal format
•     Use the same subcontractors and suppliers
•     Use the same software
•     Make the same excuses for the same employees
•     Use the same tools and equipment
•     Use the same bonus and pay system
•     Use the same marketing program.
•     Use the same sales system
•     See the same people in the same places
•     Drive to and from work the same way
•     Try to make a profit by selling low price
•     Listen to the same complaints all day, every day, over and over.

Treading Water?

Most people don’t know where to start when they’re stuck. They continue to tread water, stay frustrated and paralyzed and don’t make decisions about what to do first for their sinking situation. I played water polo in high school and college. Like most team sports, the team that wins in water polo usually takes the most shots, has the most unique plays and uses different plays often, has the best players and changes them often when they aren’t performing, has the best strategy and changes it often, outplays their opponents with different techniques and always keeps moving. Winning teams don’t tread water and wait for something to happen.

As long as I can remember, I wanted to be an entrepreneur. I always wanted to start my own company, be my own boss and make it on my own. Entrepreneurs are different than most people-they are builders and risk takers. Entrepreneurs are creators, always growing and looking for new opportunities. They are always on the move, trying new things and refusing to get stuck in the same place doing the same things. Entrepreneurs never tread water waiting for something to happen. They make things happen.

Entrepreneurs know what they want and have a clear picture of how to make it happen. They have written plans to achieve their goals. And they always track and make progress toward their goals. To build and grow your business over the next several years, what do you want and need to do to make it happen?

Why Do Companies Fail?

The No. 1 cause of small business failure is owners who don’t make the necessary changes required to build and sustain a successful company. What do entrepreneurs do when they face tough times and need to make some big changes? They do something! Anything! They try new systems and work differently. They start moving and call the necessary plays to win in any environment.

You must make tough decisions. When one of your subcontractors asks to get paid for the twenty-seventh time without a signed change order, give him the right answer: “No!” When your project manager is over budget again, replace him with the right person. When one of your twenty-year superintendents doesn’t fill out his timecard correctly for the eighth year in row, give him one last warning to do it right or don’t come back. When a family member employee isn’t cutting it, let him go.

When your estimator makes another mistake on the bid, replace him with the right person and the right software. When one of your long-time customers doesn’t pay you on time again, tell him never again and start looking for the right customers. When your accounting manager gives you the monthly financial statements four months late again, find the controller who will do the job properly. When you catch one of your employees lying to you or stealing time or money, eliminate him and find the right person.

You have some choices to make. You can ignore reality and continue to tread water by sitting and waiting for “things” to change and hope it will get better. Or you can make a decision to work differently.  In other words, be an entrepreneur and get back to building, or do nothing and hope for change. Here is a list of fifteen changes you can make to”re-entrepreneur” your company:

1. Preserve cash now
Postpone purchases except those that will make you money. Invest in marketing, your website, sales and customers.

 2. Cut overhead now
Hold a contest for your employees to find ways to cut your overhead by 25 percent.

3. Keep the best and fire the rest
Now is a good time to get rid of your poor-performing employees or those with bad attitudes. You can easily find great replacement people who want to do an excellent job.

3. Control job costs now  
Hold an all-field meeting to ask for money-saving ideas. Reward the best ideas with an incentive. Have employees consider your general conditions, labor costs, productivity, safety and schedule.

4. Get out of debt now
Meet with your banker and work out a plan to pay off all of your high-ticket loans. Since interest rates are lower, consider consolidating all of your loans into one low-cost payment plan.

5. Cut equipment costs now
Get rid of every piece of equipment you own that doesn’t make you a profit every month. If you haven’t used it in weeks, sell it now. You can always rent equipment when you need it.

6. Subcontract more now
Why keep extra crews sitting around waiting for the next job? Make a deal with another competitor to share your crews to keep your costs lower.

7. Add profit centers now      
What can you do to expand your business? A roofing contractor started a pallet company and now does more than $1 million in pallet sales.

8. Add new project types now
To grow, you must expand your project types. Go out and land some new work in new territories and project types.

9. Buy real estate now
Seek opportunities to turn your built-up cash reserves into wealth-building investments. Buy a small rental property you can fix up with your expertise and crews.

10. Seek better subcontractors and suppliers now
The slowdown gives you the time to find better subcontractors and suppliers who will give you better service and lower prices. Do it!

11. Get close to customers now
Visit your top twenty customers this month. Take them to lunch or to a ballgame. Get to know them better. Ask them how your company can offer more services to get more of their work.

12. Find new customers now
Make it your urgent goal to find at least ten new customers in the next three months.

13. Offer more services now
What else can you offer your customers to get more of their work? Consider design-build, pre-construction services, total team approach, partnering, maintenance, build-to-suit, joint ventures and/or asset management.

14. Bid more work now
You will need more work to keep your total profit margin at the same level. Gear up to bid at least 33 percent more projects.

15. Have more fun
Make a decision to stop whining and complaining about the economy, the market, your competitors, your customers, the president or your current situation. Be positive. Look for the good in everything. You attitude is your choice. Choose to be happy.

Are You Acting Like an Entrepreneur?

When you look at successful businesses and how they succeed in good times and bad, you’ll notice they are focused on building their business. They focus on hitting their numbers, making a profit, increasing their stock price, purchasing or investing in new markets, seeking joint ventures, growing their revenue, finding new customers, buying new businesses, developing strategic alliances with other companies and/or finding new business ventures.

Today is a great time to approach struggling competitors and ask if they would consider joining their company with yours. The strong will survive. The weak shall perish. Why not take advantage of the opportunities right in front of you and do something to be successful?

George Hedley is the author of “Get Your Business To Work” and the “The Business Success Blueprint Series” available on his website at www.hardhatpresentations.com. He is available to speak on his system to earn more, work less, build profits, lead people and generate customers. Company owners are invited to attend his two-day “Profit-Builder Circle” boot camps. To receive a free newsletter, free profit report or to hire Hedley to speak at your next event, e-mail [email protected].