Thrive Rather Than Survive in Construction

Many of my construction coaching clients are experiencing a tightening and reduction of new projects to bid on or build. Many projects have been delayed or put on hold due to financing, budgets, or market demand. The headlines say that housing has slowed, homes aren’t selling as lenders have tightened the borrowing requirements, consumers are tightening their belts and not shopping like they used to, and consumer confidence is dwindling as credit card debt is at an all-time high. This causes retail businesses to suffer, and new shopping centers are being put on hold. Companies are not expanding or moving into new space. Governments are also running out of money and cutting their capital budgets. This has put a crunch on contractor’s pricing as more competitors seeking work are increasing the number of bidders on each project.

I am still confident about the future of the construction business and the overall economy. But some things have and will change over the next few years. Many of my clients are asking for simple answers to the question: “What will the future be like?” What people really want is a guaranteed answer to these challenges and solutions for what to do now and in the future. Most company owners want to keep doing business the same old way, hoping to get positive results while the world and economy change around them. Even if survival is your goal, it will not be business as usual. Doing the same things today will result in less. Thriving will take determination, a decision to change, realistic leadership, and decisive choices. Don’t just survive. Make it your goal to thrive!

Take These Actions Now

    1. Visit Your Top 10 Customers

Most general contractors and subcontractors live and rely on their best 10 customers. These customers generally provide 75% of their revenue and profit every year. Go visit them. Ask about their needs, problems, and future plans. Ask how your company can continue to be part of their future, big or small. How can you provide cutting-edge solutions to help them prosper? What can you do to improve your business relationship and give them exactly what they want for the price they can afford to pay?

    2. Cut Your Fixed Cost of Doing Business

Determine what your business really needs to survive and thrive. Eliminate all unnecessary expenditures including extra travel, gifts, donations, office supplies, subscriptions, equipment, and personnel. Lower your overhead budget by 10% with no raises, bonuses, hiring, or distributions. No new long-term commitments such as construction equipment or trucks. Challenge everyone in your office to see who can cut the most out of the budget.

    3. Increase Spending on Technology

In the past, General Electric cut 20% of its overhead costs in one year through technology. What can you eliminate by using more technology? How about making it your goal to eliminate all paper for contracts, checks, bids, proposals, memos, project correspondence, files, records, change orders, contracts, job meeting minutes, schedules, timecards, or daily reports? Never stop upgrading the technology you use!

    4. Preserve Cash

In times like these, cash is king and queen! Delay any major purchases. Lease vs. own if you really need something to survive. Rent equipment on an ‘as-needed’ basis for projects. Sell equipment you seldom use. Outsource as many things as possible including janitorial, job clean-up, payroll services, equipment maintenance, safety training, scheduling preparation, shop drawings, drafting, engineering, and permit processing. The more services you outsource, the longer you hold on to your cash and reduce your fixed cost of doing business.

    5. Subcontract More

For some contractors, try subcontracting more portions of your work including self-performed labor. Our company subcontracts 100% of its work. Work to cultivate a strong group of quality subcontractors who you trust and rely on to meet your schedule and provide quality workmanship. Good subcontractors are much easier to find and manage than the number of people it takes to self-perform work. Plus, when the job is complete, your payroll stops! What part of your work can you subcontract?

    6. Cut Your “C” Players

Eliminate employees who are not excelling and don’t fit into your long-range plans. In busy times, you can’t find enough good help. Today, you have a choice. Rate your team on an “A – B – C” scale. Keep the As, train and challenge the Bs, and replace the Cs with potential As.

    7. Increase Your Marketing Budget

Now, more than ever, you must market and sell your services! Tell your loyal, repeat, and potential customers what value-added services you provide. Spend time enhancing your customer relationships via meals, sporting events, and relationship-building activities. Build true friendships that will benefit your business. Send informational mailings to your entire target customer list every month. Send thank-you cards and notes to everyone you talk to and see. Let everyone know you appreciate their business and want to do more for them. Show you truly care about their future.

    8. Bid More Work

As competition increases while contract opportunities decrease, you must bid on and propose more work to land the same amount. Profit margins also decrease in tighter times, so more work will be required to just stay even. Track your estimating, bid volume, and bid-hit win ratio. Lower your markup to increase the number of bids and proposals to win more work.

    9. Seek New Customers and Markets

Look for more complicated jobs, difficult projects, and new markets to enter. Most of your competitors won’t try new ideas during a slowdown, so real opportunities will emerge. Often the best jobs are the ones that nobody wants. Spend more time seeking out these hidden and profitable projects.

    10. Share Your Profits

Open the books to your management team and share the financial rewards of your company’s success. A unified team focused on survival, thriving, customers, profitable sales, and working together to make a profit has a much better chance of success than trying to push harder. Two heads are better than one. Five to 10 heads make a winner. What have you got to lose, except your company, unless you try it?

Bonus – Seek New Business Opportunities

Keep on the lookout for business ventures available at a reduced entry cost. For example, a competitor or supplier may want to sell his company, need an infusion of cash, or consider merging with your business. Also look for distressed real estate to purchase, develop, and upgrade. The best investments I’ve made were buying older, beat-up properties that needed upgrading and good management. Get out of your comfort zone and look for new opportunities with steady cash flow and income.

You can sit and complain and worry about the economy, or you can decide to seek new ways of doing business. My goal is to thrive in both good times and bad. The only way to succeed is to make tough decisions, be first, take a leadership role, face reality, and change the way you do business. Do more than survive. Thrive by implementing new ideas now.