Owning and managing a busy construction business is overwhelming and demanding. There are lots of moving parts, processes and requirements that are sometimes difficult to control, and numerous decisions to make every day that determine how you do business.
The pressure to get it all done is a constant stress, which will take its toll on your attitude, outlook and energy level. So what’s the secret to building a successful construction company that delivers quality workmanship, on-time completion, safe jobsites and high margins without sacrificing your sanity?
Focus on Results
As a construction business owner, there are dozens of things you must do well to build a profitable business and achieve your goals. The problem is that there are way too many daily accountabilities, responsibilities, tasks, systems and processes required to ensure your company is working like a well-oiled machine. The key is to focus on the top five must-do strategies and actions that will make your business successful 90% of the time.
Start by defining the specific results you wish to achieve. From there, determine the top five strategies that can produce these desired results. These desired results will determine how you must conduct business to achieve your vision for the company and the growth you want. And the resulting strategies define what is required to become a top contractor in your marketplace.
Remember: These strategies should include your employees, processes, policies, tactics, projects, clients, contracts, locations and how you will win work. Following are specific results and clear strategies to produce those results. Review these to develop and/or select the top five that will guarantee success.
Define Your Goal
- Produce a minimum 6% net profit with 15% annual growth.
- Have management hold their workers accountable for results.
- Shift your sole focus to company leadership and business development.
- Use the latest technologies to organize and systemize the company.
- Make your business a great place to work, with opportunities for training, growth and promotion.
- Produce accurate estimates and maintain updated job-cost and field-production tracking.
- Make sure all projects meet job-cost budgets and schedule specs without profit fade.
- Maintain a safety program and an experience modification rate (EMR) of less than 90%.
- Procure loyal, high-margin clients.
- Achieve a bid-hit-win ratio that is greater than 33%.
- Maintain a profitable, well-managed and well-utilized fleet with a return on investment (ROI) of more than 15%.
- Make two income-producing investments per year.
Specify your Strategy
- Only seek work with high margin and high barriers to entry.
- Seek negotiated contracts with
- loyal clients within 50 miles of your main office.
- Invest in building relationships with your top 20 clients quarterly.
- Never bid on projects with more than three competitors.
- Have a job size target of $200,000 to $800,000, with a 15% markup minimum.
- Demand quality work from your teams, with little to no call-backs or rework.
- Produce and complete a weekly punch list and safety inspection report for every job.
- Track, update and review job-cost production scorecards weekly with project managers, superintendents and foremen.
- Update and complete job-cost budgets and estimated costs monthly.
- Produce accurate estimates with up-to-date production rates and no missed items.
- Review project results and adjust estimating rates monthly.
- Consistently schedule and conduct mandatory team meetings to review results.
- Enforce core values and maintain team players with positive attitudes.
- Hold employees accountable and don’t tolerate poor performers.
- Pay top dollar salaries and provide full benefits to employees.
- Maintain a work environment in which your employees believe they can advance and succeed.
- Provide all employees with written and enforced job descriptions, with expectations of accountability, responsibility, tasks and deadlines.
- Have managers meet weekly with employees to review tasks and results.
- Maintain an ongoing employee hiring, recruitment and training program.
- Provide ongoing training for all management and field employees.
- Provide regular feedback and reviews for all levels of managers and employees.
- Provide incentive-based compensation plans that require results and are paid out quarterly.
- Consistently enforce company systems, processes and standards.
- Make project close-out a top priority, regardless of workload.
- Do not allow change orders to be performed without prior written authorization.
- Always put safety first, and provide safety programs, weekly jobsite inspections and regular safety training.
- Only hire professional, qualified subcontractors and suppliers.
- Demand strong performance and treat subcontractors, suppliers and customers firmly, but fairly.
- Follow and enforce all contracts, requirements and terms, and accurately document every step.
- Manage and maintain company equipment and usage to make a minimum 15% ROI.
- Promote innovation with the latest technologies and integrated software systems.
- Have your accounting department deliver accurate, timely accounting reports.
- Reinvest 25% of your profits back into income-producing investments.
You may want to implement all of these strategies, but that is not feasible. To maintain your focus, start with five. Then, get to work making the improvements necessary to build a better business. Once those strategies are in place, reset and begin the process again with five new priorities. Keep in mind that strategy development is not a one-time meeting; it’s an ongoing process.