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8 best practices to help your construction firm beat the competition

I have observed thousands of different leaders and business managers—and the varying leadership and business management techniques that they possess—over the last 20 years as a business coach and speaker.

Via coaching, peer groups, interviews and surveys, financial reviews and studying systems and processes, I’ve been able to identify the most common factors surrounding the industry’s biggest winners (and its biggest losers).

A great depth of information can be revealed through one-on-one conversations with contractors, including discussing the key practices that set them apart from their competition and the shrewd business strategies that make them extremely profitable.


 

Based on my experience and observations, the industry’s top construction business owners share the following key business practices. As a business owner looking to break free of the restraints of your current business processes, you must build a definitive to-do list and make progress every day to get those tasks done.

1. Maintain an Updated Strategic Business Plan 

  • Create a 5-year vision, company mission and core values
  • Set clearly defined goals, including revenue, gross profit, net profit, markup, margin, equity and return
  • Build specific action plans for improvements, including systems, workforce management, organizational structure, customer development, sales, estimating, project management, field operations, production, job-cost tracking, equipment, customers, marketing and sales
  • Have a clearly defined business strategy with “must-do” processes to ensure success and achieve consistent results
  • Host strategic planning sessions to develop updated business plans and implementation strategies to build and improve, innovate, monitor results and achieve goals

2. Achieve Best-in-Class Results

  • Maintain a net profit margin, return on equity and return on overhead that are in the top 5% of all contractors in your class, trade, company size or market
  • Work toward continuous growth with high-margin sales
  • Achieve job profits without margin fade
  • Generate and build increasing equity allowing them to acquire long-term investments and develop passive income for the future
  • Produce accurate estimates with no missed items
  • Hold weekly reviews and updates based on project results
  • Maintain an updated estimating template with a detailed list of project requirements and a cost history library of past completed projects
  • Track bid-hit-win ratio sorted by job type and size, customers, location and competitors to determine the right jobs to bid
  • Implement fully integrated estimating and job-cost tracking software

3. Develop & Maintain High-Margin Work & Loyal Customers

  • Develop, attack, track and maintain high-margin customers and contracts
  • Seek projects with a high barrier to entry, high qualifications, niche expertise and low competition
  • Develop strong customer relationships to generate ongoing work
  • Implement a complete proactive business development, marketing and sales plan to develop and maintain loyal customers who provide a steady flow of profitable work

4. Know & Track Numbers & Utilize Job-Cost Production Scorecards

  • Know, review and track financials on a weekly basis
  • Produce and review weekly job-cost tracking scorecards with accurate budgets and cost to completes
  • Maintain a strong line of credit and bonding capacity

5. Maintain & Enforce Systems, Organizational Structure & Meetings

  • Design and develop companywide systems, policies, standards and processes to deliver expected results on a consistent basis
  • Update and review company structure and organizational chart for all functions and positions with a clear chain of command
  • Update and enforce written job descriptions for all employees with clear responsibilities and levels of authority
  • Hold regular meetings to keep people accountable, monitor results, communicate and encourage teams to reach their goals
  • Maintain a proactive safety program that includes training, inspection, review and enforcement

6. Build a Strong Management Team 

  • Hire a strong accountable management team that can be held accountable to achieve overall expected results
  • Provide leadership and vision, mentor talent, develop systems and structure and maintain customer relationships

7. Recruit, Mentor, Promote & Retain Talent

  • Develop an effective employee development program to attract, recruit, develop, compensate and retain great people
  • Develop and maintain the company culture and core values

8. Employ Leading-Edge Technology & Equipment

  • Foster a culture of innovation
  • Encourage employees to focus on continuous improvement and disruption of the status quo
  • Challenge employees to learn, take charge and seek new ideas

So, what do you think? It’s possible to implement all of these processes in your company, right? Your current business results are a direct reflection of how you are managing your business. To complete more projects and make more money, you have to do things differently.