If there is one business-related question that I field more than any other, it's this: "How do I make more money?" As it turns out, the answer is often relatively simple. You might want to have a pen and paper ready because here is the advice I almost always give in response: "The easiest way to make more money is to lose less money."
It's a simple answer that usually requires some not-so-simple solutions.
There are few quicker methods of sinking a company financially than through a hemorrhaging of capital. Out of control spending, a track record of poor financial decisions and nonexistent management strategies are pretty good indicators that the business was lucky to even get off the ground in the first place and likely doesn't have long to live.
Although the solutions to the concept of "make more by losing less" can often be quite complex, there is one simple idea to be aware of, and it's a motto that the Boy Scouts have professed for years-"Be Prepared."
The Big Three
Attorney Carol Armstrong with Tanner & Guin-a law firm representing clients throughout the Southeast-is a construction industry veteran and has guided more than her share of clients through the process of setting up, maintaining and expanding their businesses. Through her experiences, she has noticed what she perceives to be the three biggest areas in which construction companies need to improve. Each area could easily be fixed with an ounce of prevention versus the pound of cure that's often necessary to correct the problem after the fact. What follows are Armstrong's top three suggestions for making money by not losing it in the first place:
- Manpower issues- "Construction companies are starting to recruit at the high school level now," Armstrong said, "because filling jobs is becoming tougher and tougher. The industry is expanding faster than it can find people to fill jobs. Obviously, the large influx of immigrant workers is helping to fill this void, but this is putting a lot of companies in trouble for failing to ensure that its workers are legal to work in the United States. The government has recently stepped up its enforcement of laws requiring employers to verify employment eligibility, and violators can wind up paying up to $11,000 fines per violation. Not many companies can afford to lose dozens of workers off of a job because the company failed to ensure that the workers were legal in the first place. A good way to ensure that your hiring practices are in order would be through an internal audit, with outside help, to figure out what you do have as opposed to what you should have. Additionally, if you're going to conduct an audit, you need to remember to audit your files for all of your employees, regardless of nationality-not just a select few."
- Employee handbooks and policies- According to Armstrong, "The construction industry operates in an environment that's often ripe for workplace harassment. The companies that are proactive about implementing employee policies and training their management and employees on those policies are typically the ones who avoid sitting in courtrooms with lawyers and open checkbooks. As most good business owners know, lawsuits can be costly distractions from running the business. Just because you haven't had any conflicts between employees yet doesn't mean that there isn't one waiting around the corner that will end up costing you more money than an employee handbook and a few sets of basic guidelines ever could."
- Multi-state licensing- "This is a process that can take months to complete," Armstrong said. "But, I often get a phone call from a business informing me that they are planning to apply for a multi-state license the following week. Like [the previous two points mentioned], this is obviously not a new issue, but the enforcement is being stepped up, and consumer protection is becoming a bigger issue every day. Also, due to [hurricanes Katrina and Rita], the government is keeping a close watch on construction companies expanding into the storm-affected regions, and to get a contract or even apply for one, you have to have a license. Be prepared for this process, and be ready to pay the necessary fees, and allow your ‘people' ample time to study for the requisite examinations and be able to show that you are financially responsible for whatever contracts you might accept. The more work you do on the front end, the quicker the process will go."
After your spouse or significant other, your lawyer should probably be the next person on your speed dial (right up there with your CPA, banker and bonding agent). And just like with your spouse or significant other, you should have the type of relationship with your lawyer that permits frequent and open contact, which should help you prevent falling into any of the pitfalls that Armstrong mentions-in addition to the thousands of other traps waiting to befall the unprepared business owner.
After all, your lawyer works for you. I'm sure he or she would far prefer handling these matters beforehand, instead of spending an eternity tied up in court.
- "How to Create an Effective Employee Handbook," courtesy of Wachovia
- U.S. Immigrations and Customs Enforcement, http://www.ice.gov/.
- Tanner & Guin, LLC http://www.tannerguin.com/.
Construction Business Owner, July 2007