The 8 Traits of Great Construction Companies

Good news! Now is the time to take a hard look at how your company does business. Why wait? When you start a company, you’re happy getting some work and making a little money. Then it grows into the company it is today by doing what it does relatively well for the few customers it has acquired. As an expert on entrepreneurial companies, I can tell you this is not the right way to design and build a great company that maximizes its potential market share, resources, people and bottom-line profits.

Make a list of top companies who are leaders in their marketplace. Your list might include: Apple, Caterpillar, Walmart, Microsoft, McDonalds, Ritz Carlton, BMW, FedEx, Forbes, Starbucks or Google. What sets them apart from the rest of their competitors and allows them to continually maintain market share, growth and profitability?

Owning a company that offers the same basic services or products as most of your direct competitors will keep you busy during good economic times. But as the economy struggles or shrinks, business becomes more difficult, harder to grow and make a profit-especially when you offer almost exactly the same thing as most every other company you compete against. 

In order for your company to become the leader in your marketplace, you have to offer something different than your competitors. You also have to be passionate about your vision and where you want your company to go. You need organized systems and a professional management team that consistently delivers the same results for your customers. And you must be clearly focused on hitting your targets, goals and financial numbers. With these characteristics, your company will make an above average profit margin and have extra funds leftover to invest in wealth building opportunities.

Is Your Company Great?

When studying market-leading companies, you’ll find they have eight traits that make them stand out and stay at the top of their field. Take this True/False Test to determine if your company has these traits.

1. Our company has a written passionate vision that is prominently displayed for all of our customers and employees to see. Every manager and employee knows exactly what the company stands for, its values and where it’s going.
2. Our company has written targets and goals for the overall operations, each department and every project. These goals are tracked every month so adjustments can be made quickly.
3. Our company has a structured organizational chart clearly describing the accountabilities and responsibilities for each position in the company. Every employee knows exactly what they’re responsible for and is fully accountable to make it happen.
4. Our company owners and managers are focused on achieving the numbers required for the company to hit its financial targets and goals. Our company makes a very large profit compared to the industry average and our competitors.
5. Our company has a unique delivery system, product or service that attracts customers who will pay more to buy from our company than our competitors.
6. Our company has an ongoing, systemized and pro-active sales and marketing program to find, contact, attract, retain and service our customers. Our sales and marketing system has allowed our company to grow at least 15 to 20 percent or more per year.
7. Our company has written operational systems and procedures for all employees to follow that ensure all workflow is completed in a similar standardized manner by all employees without exception.
8. Our company’s bottom line delivers significant excess profits that allow us to seek investments and find opportunities to grow and build our equity and wealth.

Did You Score More Than Four?

Great companies have at least seven of the eight traits. Companies that are less than great tend to only possess four traits or less. As entrepreneurs grow from one employee to five or twenty, they are often too busy to stop and write down their vision, goals, organizational chart, job descriptions, employee accountabilities, operational systems and sales and marketing implementation plans. They get too busy doing everything themselves and don’t have enough time to focus on their numbers or seek investments. And because their service, product or delivery system originally was entirely dependent on themselves to produce the work, they never developed a differentiating factor that set them apart from their competition. 

Over time, most average companies eventually outgrow the entrepreneur’s ability to hold it all together without written goals, plans and systems in place. And they don’t provide something different from their competition except the owner’s personal attention to detail, which is not enough to stand out as their company grows.

Trait 1-Start with an Exciting Vision

What do you want to happen with your company and where do you want it to go? Leading companies start with an exciting, focused and passionate vision connected to the specific results they want. Some companies have a vision to be the best company in their marketplace with the biggest market share. Others want to be known as the best service provider, provide the best quality or offer the lowest price. Great companies ramp up their visions with more excitement. Exciting visions of great companies read like these:

•     Be recognized as the leader in customer service.
•     Be No. 1 in building difficult technical projects.
•     Finish jobs 10 percent faster than our competition.
•     Be known for helping customers make a profit.

Remember, Bill Gates of Microsoft had a big vision to put a computer in every home. Ask your employees and a few customers, “What’s the vision of our company, and what are we trying to accomplish?” If they don’t know, you’ll never become a great company. What is your passionate vision that will excite your customers and employees?

Trait 2-Write & Track Your Targets & Goals

After defining your exciting vision, specific results must be written down and targeted to quantify exactly what’s expected for your company, departments, people and projects. For example, if your vision is to be the best service provider, determine what specific measurable results would enhance your bottom line. Some targets you can track include: obtaining a referral from every customer, receiving only 5 percent callbacks, having no installation errors or maintaining 98 percent on-time completion. Without specific, clear targets, your people really don’t know what “make 10 percent gross profit,” “do quality work” or “be the best” really means.

What are your top priorities and specific targets your company is shooting for? You need to monitor and track the progress if you want to achieve your company, department and project goals. Ask your people what results are important. You’ll probably get seventeen different answers if you have seventeen people working for you. To get the results you want, write down and track your targets to get everyone on the same page from top to bottom.

Trait 3-Draft Your Structured Organizational Chart

Company managers and employees without written, detailed job descriptions don’t know what they’re 100 percent accountable for, don’t have authority to make decisions and don’t have an understanding of the clear lines of communication in your company and can’t be held responsible for producing the results you want. Without a structured organizational chart and a list of accountabilities for every position in your company, your people will wait for their boss to tell them what to do next. This limits employee growth, enthusiasm, production and efficiency. Plus, it stalls the company so it can’t grow beyond the owner’s ability to make every major decision for everyone.

It doesn’t take a lot of time to lay out your perfect organizational chart. Each position’s duties and responsibilities must be considered, detailed, described, outlined and assigned. List the accountabilities and expected results desired and required. Only with these clear descriptions can people help the company grow and become great.

Trait 4-Know Your Numbers & Make Big Profits

Many business owners are too busy to be bothered with watching and tracking their numbers. Can you imagine the CEO of a major company not knowing his/her company’s revenue, direct costs, fixed costs and profit? You can’t make a profit if you don’t know what to charge and how much you need to bring in. Many companies shoot for moving targets by attempting to make as much money as possible or more than they are currently making. These are not clear targets or goals – 5 percent, 10 percent or 15 percent are not clear targets either. As your sales and job costs vary each month, your total markup earned changes, while your fixed cost of doing business remains the same. This causes your net profit to move up and down like a roller coaster.

The owners of great companies spend a lot of time making people accountable to achieve the numbers. They set specific targets and keep track of the progress toward them. Annual sales of $5 million, overhead target of $600,000, and a net profit goal of $200,000 are specific fixed targets you can shoot for and hit. With specific targets for sales, costs, overhead, accounts receivables, cash flow and net profit, you stay focused on the lifeblood of your company.

Trait 5-Set Your Company Apart from Your Competition

When I drive down the freeway and see contractors’ trucks, they often have signs on them like: “Joe’s Electric-Commercial, Industrial & Residential.”  I chuckle and ask myself: “What do they excel at, what kind of jobs are they the expert in, and why should I hire them?” Based on my experience from working with thousands of contractors, my best guess is they chase any kind of work they can get and don’t make a lot of money doing it.

Are you in the “yes” business, taking any kind of job or project thrown your way? Experience shows that companies who specialize in a specific type of project or service do better work, are more competitive, have more loyal customers and make a lot more money than their “jack of all trades” competitors. Perceived experts are the first called when a customer needs a professional to complete a tough or special project. Experts get the first chance to propose on jobs that require complex engineering or technical knowledge.

To set your company apart from your competition and get hired at higher prices, you must be the perceived expert in your market and offer more than your competitors. According to a survey from the Society of Marketing Professional Services (a national association of construction sales and marketing professionals), the top two reasons construction companies don’t get awarded projects are:

1. Their inability to market and properly present the differences between themselves and their competition
2. Their lack of expertise in a particular project or service niche. When you continue to be and do everything for everyone, you won’t have enough time to satisfy your customers and you can’t make enough money for all the different types of work you attempt to complete.

Trait 6-Install a Proactive Sales & Marketing Program

There are many ways to improve your profit margin. These include cutting costs, reducing overhead, improving field productivity, conducting accurate estimating, making no field mistakes and having an excellent training program. All of these will give you small improvements in your bottom line, but not enough collectively to make a significant difference.

The easiest way to make more money is to create it! Profit starts with revenue. The more profitable revenue, the more bottom-line profit. Revenue comes from customers. To make more profit, develop more profitable customers. Are customers your No. 1 priority? Do you have a written sales and marketing plan that delivers a consistent flow of loyal customers, profitable revenue and new customers? While doing good work is important, it will not deliver the revenue you need to become a great company. You also need a proactive sales and marketing program that constantly attacks customers, generates inquiries, gathers referrals, seeks new business opportunities and gets potential customers to only call your company when they need your product or service.

Trait 7-Replace Yourself with Operational Systems

A systemized business produces consistent performance and the same results every time. How much money are you losing by relying on your people to do their best without standardized written operational systems and ongoing training? When your employees and customers rely on you to make sure everything is done right, you get stuck at the level of what you can control.

Great companies have and maintain written systems and procedures for all employees to follow. Organizing and systemizing your company requires time to get everyone doing business the same way. But the end result is worth it. Systems will allow your company to be the best in what you do and allow your company to grow. To make it happen, you’ll have to dedicate the resources to put all of your important work processes in writing and create a “Do” manual of pictures, checklists and guidelines for your employees to follow.

Trait 8-Seek Investments to Build Equity & Wealth

The outward indicator of a great company is steady growth and profitability year after year. Every new entrepreneurial company that becomes great should create enough significant excess profits within the first five to seven years to start seeking wealth building investments. Wealth building investments deliver positive cash flow without much effort or attention, like real estate properties, joint ventures or stock ownership.

If you can’t find enough annual profit left over to invest, perhaps you need to change how you do business. Companies that continually struggle generating profits and never seem to get ahead can’t become great. For whatever reason, these owners have decided to shortcut most of the traits required to be great. These companies struggle for decades, run by owners who shoot from the hip and manage by the seat of their pants. These poorly run companies ruin it for the great companies by charging too little, doing the minimum to get by, providing no training for their employees and delivering less than expected by their customers.

Be Great!

It’s not too late to be great. The choice is yours. What you do and the decisions you make deliver the results you get and determine your future. Not making enough profit? Not growing 15 to 20 percent per year? No money left over to invest? Take a look in the mirror. Take a hard look at how you do business. Look at your people and organizational chart. Look at your company systems. Look at what sets you apart from your competition. Look at your profitability and focus on finances. Do whatever it takes to figure it out. Hire a business coach or a new general manager, controller or business development director. Stop postponing your potential, install all of the eight great traits, and your company will become great.


Construction Business Owner, June 2009