Construction business owners usually begin their industry venture with a long-term vision of what they want their company to do for them. For example, when you buy stock in a public company, you want the stock to earn dividends and increase in value over time. When I coach contractors, I begin by asking, “What is your long-term vision? Can you define where you want your business to be in 5 years? To help find the answer to this complex question, my clients complete an exercise that explores:
- The type of company they want to build
- Growth and revenue goals
- Mark-up and net profit targets
- Management team structure
- Estimating and project management systems
- Systems, processes and technology
- Field safety, quality, production and equipment
- Customers and markets to attract
- The type of projects in which they prefer to specialize
- The owner’s role and time commitment
- Wealth and investments
- Financial management standards
Once you have answered this question, your company must continue to grow at a steady pace and make a good profit margin to bring the vision to fruition. Without growth, overhead expenses and costs eventually erode your profits. In observing other new construction businesses, you might notice that some grow quickly for the first 4 to 5 years, flatten out and eventually stop growing. Others stop at two, three or four crews, while some grow to a higher level and then stop.
Why Do Companies Get Stuck?
Most firms eventually reach a roadblock, or what I call a growth barrier. At this point, the business owner typically doesn’t want to take on more risk, let go of control or try new markets and project types. Stuck at the same level of performance year after year, the business owner can become frustrated, working at maximum capacity and getting little in return for the stress and workload they assume. They are left in the uncomfortable position of having sole responsibility for making all of the company’s important decisions, being responsible for every aspect of operations and struggling to enjoy the benefits of business ownership.
What Causes a Growth Barrier?
Business owners want their companies to grow and make money, but as they grow, it becomes harder to do what is necessary to implement positive changes that will guarantee a bright, profitable future. They typically increase their workloads, taking on more duties themselves, which actually holds back the company from reaching its long-term vision and goals. In fact, a stuck business owner is generally the growth shut-off valve that restricts the company from reaching its full potential. So, what are the reasons a growth barrier occurs?
A stuck business owner is afraid and unwilling to do anything differently for fear of failure. They continue to conduct business the same way, waiting for something good to happen. These owners are afraid to make bad decisions, make mistakes, lose money, hire the wrong people, try a new project type, work for new customers and hold people accountable for results. They are stuck in their own comfort zones, without even truly being comfortable, a place from which no good things come.
Stuck business owners are afraid of losing control, and are, therefore, unable to delegate, let go or trust people. They don’t think it is possible to find people as smart, responsible, caring or hardworking as they are. This fear prevents owners from hiring or building an accountable, responsible team of leaders and managers to handle the overall operations, projects, estimating, purchasing, decision making, contract management, sales and management of customer relationships. These duties are far too much for one person to handle successfully. As a result, the company cannot grow beyond the owner’s capacity to do the work alone.
Similarly, because they are so busy carrying the company alone, many owners tend to tolerate poor performers and avoid confrontation with those who should be held accountable. They make exceptions and allow people to neglect company standards and systems while refusing to hire or fire. For them, it seems easier to control and micromanage, fearing the risk is greater than the potential reward.
2. Little to No Marketing
Most stuck construction business owners avoid selling or marketing their company. They are uncomfortable calling on customers and investing in a proactive customer-building program. In reality, the owner is generally the best salesperson in the company. They know the company best and have the most invested. Rather than spending time and money targeting and acquiring potential customers, stuck business owners take the easy route of offering low-price bids to win work. With a zero-dollar marketing budget and no written sales development plan, low-bid companies struggle to win profitable, high-margin work or develop loyal customers. The typical no-cost marketing plan for these fearful companies is to do good work and hope potential customers call them, only to end up on a bid list with too many competitors.
3. Lack of Structure
Without written, implemented and tracked business systems and processes, companies have a difficult time growing. The owner can’t delegate to good people without good systems, a detailed organizational structure, a clear chain of command and a detailed level of authority. To make sure things are completed effectively, each worker needs a clear position description, including the expected results, a scorecard tracking system and a management enforcement system. In the absence of these standards, an owner will spend far too much time verifying that tasks are being completed the way he/she wants them completed, rather than using that time to grow the company. This constant verification will keep the company stuck in place.
What Are You Afraid of?
When fear holds you back, you cannot reach your full potential. When you hold too many of the company’s responsibilities, your business will remain stuck at the same level earning mediocre results.
With you responsible for everything, your people will not take on more responsibility. When you are constantly afraid of what might happen if you make a decision to hire or fire, you remain stuck. When your only sales development plan is to offer the minimum at the lowest price, you cannot make enough money to hire great people or find loyal customers who will award you high-margin work. Without the right systems in place, it is impossible to delegate responsibilities to others. Without risk, there is no reward.