This is the twelth in our 2010 series, "Win in 2010."
A winning business will work regardless of the economy or market. It must work well, be extremely efficient, operate very lean and produce a profitable bottom-line. If your company does not work or achieve goals, it is not the economy or marketplace; something is wrong with the business model, operations or company leadership. To develop a winning game plan, you eventually have to face reality. If your competitors are still in business and continue to take jobs away from you at lower prices, the problem is not the competition; the problem is how you play the game. Old methods of playing the game of business, former customer pipelines and outdated management techniques will not deliver what company owners need and want.
Often older, slower or established businesses sit and watch their competitors be the first to implement new ideas, technology, training, management techniques, operational systems or equipment. Some also resist making tough decisions about their future and do not change until it is too late. Some hope that everything will work out as it always has before. This type of leadership will only do one thing in today's exponentially pressured business climate-fail. It takes real strength and confidence to win beyond 2010.
Start With a Blank Playbook
To build a "Beyond 2010" business, start with a new outlook and a fresh piece of drafting paper. Ask the question: "If we could start over, how could we design this company to be a cutting-edge industry leader?" Forget about your current people, positions, procedures, rules or customers. Think new markets. Think real customer needs. Think creative approaches. Think beyond the same old box. 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 with less control. Think about rewarding and compensating results in new ways.
Today's customers want it all. Design your product or service for the demanding customer who expects perfect quality and perfect service at a great price.
Define the Purpose of Your Construction Business
A business owner that wins beyond 2010 knows what his or her company does best. He or she has a clear vision of purpose of the business, why it exists and what measurable results are expected. In many cases, business owners work too many hours for the return he or she receives. This is common in small- and medium-size entrepreneurial companies where the owner and business are one in the same. In those cases, the owner does not own a business; he owns a job that does not pay very much.
The purpose of a business is to give the owner what he or she wants. In publicly traded companies, stockholders want two things: quarterly earnings or profits, and increasing stock values.
In private companies, the owner may want a variety of things. The purpose for your business might be to generate ongoing profits, create equity and wealth and give you freedom from day-to-day operations so you can focus on your priorities that will give you the highest return. You can use your company to also create business opportunities that allow you to achieve these goals. In order to do this, one approach can be to put heavy focus on retaining loyal customers and maintaining a great place to work that attracts and keeps the best people in the industry. To reach this objective, one tactic is to design an incentive program to share your profits with your key leaders and management team. This would make it a win-win-win for you, your people and your customers.
Expect "Beyond 2010" Results!
For a business to work, expected results must be written down, measurable and clear. Some examples of results you can shoot for include the following:
- Return On Equity - Minimum 15% to 25% pre-tax
- Return On Overhead - Minimum 20% to 50% pre-tax
- Net Profit On Sales - Minimum 2% to 10% pre-tax
- Loyal Customers - Minimum 25% to 50%
- Repeat Customers - Minimum 33% to 66%
- New Customers - 12 per year
- # Customer Referrals - 24 per year
- Number of Contracts - 24 per year
- Minimum Contract - $1,000,000
- Employee Retention - 90%
- Employee Training - 40 hours per year each
Construction Business Owner, December 2010