Think of all the decisions you made over the last five to ten years that brought you to where you are today. Now think of all the decisions you didn't make but wish you had. Remember when you were busy signing new contracts, getting plenty of business, trying to juggle all your commitments, scheduling crews, putting out fires and doing everything you could to keep everyone happy? During this time, it was hard to do everything you wanted to do.
Many construction business owners have postponed making good critical decisions because of stress and their workload. Some of these might have included:
- Paying a subcontractor for extra work without a signed change order
- Keeping a project manager who was consistently over budget
- Putting up with a project superintendant who was always late finishing jobs
- Overlooking a foreman who didn't do the required paperwork
- Not requiring a relative to follow the same standards as all other employees
- Not replacing an estimator who didn't keep accurate job cost records
- Relying too heavily on the same customers for most of your work
- Relying on being low bidder to win most of your contracts
- Continuing to work for customers who paid slow or shopped your bid
- Allowing your accounting manager to give you reports three to six months late
- Overlooking employees who didn't follow the rules and ethical boundaries
- Not letting go of poor performers fast enough
- Not training your field workers properly
- Not investing in technology soon enough
- Not investing some of your profits into real estate
- Not taking enough time for yourself and your family
Today, my most requested speech topic is "How to get your business to work in a tough economy." During this presentation, I ask everyone to write down what they would have done differently with their business over the last five to ten years. The answers consistently describe many of the problems listed above. I call these "Do-Overs."
In sports, the coach gets to start over every season. Winning coaches look at their past records and make positive decisions about what they need to drastically change to achieve better results. If they continue to play the game the same as they did in previous seasons, they won't continue to build and win. They have to look at how they play the game, players, coaches, offense, defense, training, strategy and tactics.
But business owners don't generally get a second chance to get it right. Your long season never seems to end. Yes, you make adjustments to weather the economic storm by altering your budgets, changing a few players and looking for a few new customers. But most continue to play the game of business doing what they've always done with the same rules, plays and strategy. The only thing that changes is the competition and the level of difficulty.
Imagine it's your turn to start a new season. You are the coach of your business-you want to keep your job and make a lot of money. What should you do differently to win the business game? What tough decisions should you make? What new plays will you call? What players should you replace? Where should you play the game and how? Will you keep doing what you've always done or decide to do whatever it takes to grow your business and make a profit? Below is a list of the top "Do-Overs" I hear from the many business owners I have surveyed.
Do-Over No. 1: Invest Sooner, Not Later
When your business was busy, you didn't have enough time to look for investments. And you were growing, so most of your cash flow funded your company's growth. The snowball effect kept you excited as your business got bigger. It felt like a shot of adrenaline as you did more and more work. The more you grew, the bigger you wanted to get. Volume is addictive, so you would bid work too cheap and never missed an opportunity to grow or gain a customer. Everyone thought this gravy train would never end.
As you look back, did all that effort give you a long-term lasting return? Most businesses grow 50, 100 or 200 percent in volume. But they don't make enough to set aside any real money to invest. They spend their extra cash on more trucks and equipment, bigger homes, faster boats or generous bonuses. Some even lose large amounts of money by making poor decisions.
The best decisions business owners can make is to use their business to create investment opportunities in long-term wealth building assets. Wealth building assets include investment real estate or service businesses that produce passive income over the long haul. If you had invested as little as $10,000 a year over the past five years, you could own property today worth at least $250,000 cash flowing $25,000 to $50,000 annually. A small investment over time returns much-making no investment returns nothing.
The richest construction business owners I know own lots of investment real estate or several service businesses that complement their construction operations. If you were to do it over again, wouldn't you start investing sooner?
Do-Over No. 2: Diversify, Market and Serve Customers Sooner Rather Than Later
When business is steady, with lots of bidding opportunities coming your way, it's easy to keep busy working for a limited number of customers doing the same type of projects. This business model works during a good economy. Once you have established a few repeat customers, they continue feeding you work. You don't have to go out and find new customers. You don't have to market or sell. You don't need an updated brochure or impressive website. And you don't have to create a customer service or follow-up program. Work is easy to get-you wait for the phone to ring, pick up a set of plans and go bid the job. If you bid enough, you'll get your share.
The second most popular "Do-Over" I hear from seasoned business owners is they wish they had built a broader base of customers, worked on many different types of projects and developed a solid marketing and referral program that delivered diversified types of profitable work. I often hear sad stories from underground contractors who kept very busy only doing private housing tracts for a few homebuilders. I also hear similar stories from contractors who didn't want to mess with government jobs because of all the added paperwork. And I hear stories from companies who didn't add extra services like green technology, design-build, post-construction services or maintenance to attract and keep customers. These companies are now left without any customers.
If you were to do it over, what additional customers and project types would you target? Perhaps, you would go after at least three or four different types of projects and add a broader customer list. How would you stay in contact with them? Most business owners say they would have setup an ongoing system to build loyal customer relationships via more lunches, ballgames and simply spending lots of quality time with them. They would have also developed an automated e-mail marketing system tied into an expanded resource website to keep their name in front of potential customers.
Additionally, construction business owners say they would have invested in diversification by adding more in-depth capacity such as in-house engineering, green capabilities and design-build services. This would have expanded their ability to take on more complicated work with higher profit margins. Lastly, they would have added service divisions relying on ongoing maintenance accounts that regularly provide them with steady revenue. If you were to do it over again, wouldn't you start diversifying, marketing and serving customers sooner rather than later?
Do-Over No. 3: Hire Better People Sooner Rather Than Later
A very big mistake business owners make as they grow their business too quickly is not upgrading their management team and key employees fast enough. They get too busy to take enough time to properly search for, research, qualify, interview and train their people. As they continue to win more contracts, filling the spots to get the work done becomes a constant problem. They need people faster than they can fill the slots. So they tend to hire anyone who appears to somewhat fit the bill.
As projects also become larger, managers must take on more responsibility and skills to grow along with the company's needs. But, since bad hiring decisions may have been made, it may become hard to delegate a less competent and untrained staff. It can also be difficult to hire more experienced people than you need, before you need them. To build a winning team, great coaches always want the best players regardless of what they cost. This same attitude is what makes great business teams win on a consistent basis.
One of the first mistakes business owners admit is hiring and promoting the wrong people who are less expensive than fully competent, responsible employees. These people are generally weak and untrained to handle the entire job successfully without ongoing supervision and direction. This prevents companies from making the money they should as problems and errors are repeated. To avoid this situation in the future, business owners agree that an experienced management team is key to the company reaching its financial goals. Investing in the best people possible is far more important than landing the next job at too low a margin. Great people allow companies to expand into more difficult and intense project types that return a higher profit margin.
Additionally, a systemized, ongoing training program for all employees reduces field and management problems, increases customer satisfaction and improves the bottom line. It becomes easier to delegate and make people accountable to achieve the results you want if you have a training program in place. If you were to do it over again, wouldn't you hire better people sooner and implement an ongoing training program?
Do-Over No. 4: Go High-Tech Sooner Rather Than Later
When you are busy, you don't have time to invest in technology either. You are too busy keeping up with the workload, getting bills paid and cranking out estimates and bids. Contractors who have postponed making technology a top priority, let the big business world pass them by. Construction company customers now demand instant communication, project websites, up-to-the-minute schedule updates, online procurement and building information modeling. Contractors are now faced with the choice to catch up with technology to work on many project opportunities or just go after the simple jobs, which have increasing competition and lower margins.
While contractors had no problem hiring another superintendant or buying another truck, they've resisted and postponed adding a technology consultant, information technology manager or the latest integrated construction software package to their business cost. This decision cost them years on the required learning curve and reduced their corporate capability to work on sophisticated projects with the best customers. Now they face an uphill battle to scramble and keep up with customer's requests and requirements.
Even simple home remodel customers now demand online selection of the many choices for finishes and installation options. The old model of a fax/copy/answering machine, cell phone, yellow pad, adding machine and meeting the customer at the hardware store to look at samples are long gone. A priority must be to install a fully integrated accounting, estimating, and project management software system that allows you to make good business decisions. This takes an investment to buy the best software, fund a training program, and hire a competent progressive manager to implement and maintain it to help you build a professional business. If you were to do it over again, wouldn't you start by installing the best software program for your company and hiring a management team member who could maximize it and allow your company to make more money?
Do-Over No. 5: What Will You Do Sooner Rather Than Later!
The last "Do-Over" is your choice. What will you do differently to improve your company, grow and make a profit over the next five years? Don't postpone doing what you know you should do. You face people, challenges and problems everyday that need improvement, change or tough decisions. Sit down and make your list. Don't wait. Start investing, diversifying, marketing, serving customers, hiring better people and becoming a high-tech company.
Construction Business Owner, October 2009