The way contractors prepare and react to differing economic environments determines whether they thrive or fail.
To prosper, contractors must be proactive and take control of critical business issues. Use this top 10 list of business management tips to improve your business for a successful year.
- Change your attitude. If you think this will be a good year for business, then it will be. But if you think it will be a bad year, then it will be bad. Zig Ziglar said, “People often say that motivation doesn't last. Well, neither does bathing—that's why we recommend it daily.” Attitude becomes a self-fulfilling prophecy. As the leader of your business, your attitude and beliefs will filter throughout your company. If you always have a positive attitude, your company will reflect this, and success will be much easier to achieve.
- Hire good salespeople. I once went on a sales call with a salesman who obviously did not know all the steps in the sales process. He made a great presentation, but he failed to ask open or closed questions in a systematic manner. Even worse, he answered a probing question that I had directed to the prospect—instead of allowing the prospect to answer. And then he failed to ask for the sale. Does your sales staff make the same mistakes?
- Train your sales staff on prospecting. In business-to-business sales, the telephone should be your sales staff’s best friend. Many salespeople have a fear of the phone, rejection and those in authority. You will have more than enough prospects to turn into sales if you teach your salespeople how to find prospects in their everyday activities.
- Obtain more referrals. Teach your staff how to get referrals to keep them from chasing cold calls.
- Teach all staff good customer service. More than one sale has been landed by a personable and well-trained receptionist after the official salesman had failed to close the deal. A sale starts when anyone enters your establishment.
- Market your company aggressively. Become the king of marketing in your area, and quickly stand out from your competitors. Sponsor seminars with your local chamber of commerce, write articles, speak to the local service club, redesign your website, sponsor golf outings, and frequently stay in contact with prospects and customers.
- Increase your cash flow. Teach your sales and estimating staff that not all sales are good sales. Unprofitable projects and jobs steal much needed time and money and could be avoided if your staff analyzed jobs more thoroughly before taking them.
- Control overhead. Identify what can be reduced and what can be eliminated to improve cash flow. Scrutinize every expense including additional offices, gas cards, trucks, travel expenses, cell phones, service contracts, insurance policies, etc., and cut unnecessary costs.
- Improve job costing. For certain contracts—especially government contracts—cash flow can be accelerated by instituting more accurate and consistent job costing, resulting in larger immediate billings. If overhead is a billable expense, have someone accurately quantify and document the expenses that qualify as reimbursable according to the contract. The business owner cannot be the master of everything—know when to get help.
- Increase worker productivity. Morale is a lost science in America. I know of a company that recently told their employees, “Compared to your peers in the industry, you were all over-paid.” After the meeting, one employee had to return $0.12/hour he or she had been over-paid. What do you think happened to that department’s productivity? Always praise in public, and criticize in private. Think about what you can do to improve productivity, which will increase profitability in return.
- Be pro-active about A/R collections. Due to the recession, many companies’ receivables have increased to greater than 90 days. This delay in collecting can cause companies to use their line of credit and pay for the privilege. Instead of being able to bank the money and earn interest, many companies borrow extravagant amounts just to stay afloat.
- Use managerial accounting. Managerial accounting helps managers within the company make decisions, while financial accounting only provides information to parties outside the company. By changing from financial accounting (that does little more than tell you how much tax to pay) to managerial accounting, you can improve job profitability, reduce gross margin shrinkage and greatly increase cash flow. This takes work, but the pay back is incredible.
Questions to Consider
Take a hard look at the current state of your business. How would you respond to these important questions?
- What are my financial goals—revenue, operations and capital for this year?
- Do I have a business plan to achieve these goals?
- What markets will achieve my sales goals?
- What is my most competitive offering? How can I use unique selling propositions?
- Do I sell features or benefits?
- Is my estimating, accounting and project management software up for the challenge?
- Can my employees deliver? Do we have a training schedule in place?
- What can I invest in now that will give me the largest ROI?
- How can I increase staff productivity?