The economy is changing faster than most businesses can adjust to. Successful companies now need to work harder and more efficient than ever to break even. They need to be focused, nimble, faster, and leaner and to produce profitable results. The companies who'll emerge as leaders in the roller coaster economy will be different, innovative, creative, cutting edge, and always achieve exceptional bottom-line results. They won't be afraid to quickly abandoning old customers, slow markets, poor employees, and under utilized equipment.
The good old days are gone when you could win work based on your reputation, a wink, a smile, and a handshake. Old methods of finding and doing business won't deliver even average results now. Old customer pipelines won't work. Trying to make a profit by being the low bidder won't get you enough jobs to cover your overhead. Old project management techniques and lack of proper documentation will cost you even more money than ever before. Non-existent employee training programs won't get it done. A yellow pad and a pencil won't work anymore. Unqualified accounting staff who deliver bad results 6 months after jobs are closed are recipes for disaster. Inadequate job costing systems which allow you to spend money like water will keep you poor.
Only the strong will survive!
A booming economy has allowed unprofessional, unqualified, and lousy business owners and managers to grow their companies and make a decent amount of money over the past ten years. But the gravy train has or is about to end. Only the strong will survive. The strong run their companies like pros: no work without a signed contract, no extras without a signed change order, accurate job cost data, cutting-edge integrated estimating and accounting software, field start-up meetings, weekly employee training, bonus systems based on achieving specific goals, ongoing target marketing program, pro-active customer relationship tracking systems, strategic business plans, clear targets and goals, field operational systems in place, and a strong management team.
The robust economy has allowed business owners to continue doing business the same way they have done for years without major improvements, trying any innovative ideas, or new project delivery methods. These business owners have stayed stuck in their old outdated ways. They will now try to compete on their reputation and past accomplishments as the economy slows down, many more new competitors come into their market, and customers are willing to try new cheaper delivery systems and companies who use new and high tech approaches to business.
Established businesses sit and wait while newer cutting-edge companies to try the new technologies or be first with a new type of leadership style, project management system, or field productivity reporting method. Many resist making tough decisions about their future and don't change until it is too late. Some people hope that everything will work out as it always has before. This type of leadership will only do one thing in today's extremely tight, challenging, and pressured business climate:
- DIE A SLOW DEATH!
Today, it takes innovative strategy, decisiveness, and a new vision to be successful. It takes guts to make tough decisions that will keep you in business and allow you to emerge as an industry leader in any economy. It takes real strength and confidence to do what it takes.
Start With A Blank Page!
Now is a great time to step back and start over with a new outlook. Think of a fresh piece of drafting paper. Ask the question:
"If we could start over, how could we design our company to be a cutting-edge industry leader not dependent on customers who hire companies based on low price?"
Forget about your current people, positions, procedures, systems, specialties, or customers. Think new. Think new customers, project types and sizes. Think real opportunities. Think about making a lot more money with less work. Think creative approaches. Think expertise or specialty markets. Think beyond the same old box or what you've been doing for the last several years. Think different and NEW delivery systems, pricing structures, chain of command, rewards and incentives, management reporting, productivity programs, customer relationships, sales and marketing approaches, and profit goals. Think younger management team with fresh ideas, no micro-management, and less controls. Think about rewarding and compensating results in new ways for all key managers based on company performance. Think about giving up some ownership to your future company leaders.
Develop Customer FOCUS!
Think FASTER. Think BETTER than ever before. Think BEYOND what you can imagine if you continue to do business the same old way. Customers today are demanding and want more value-added services than in the past. They expect perfect quality and service at a great price. How can you design your company to make a profit twice the industry average?
Here is an email I received from a typical mid-size electrical contractor who grew his company by hard work, providing a good service, and being low bidder on many different types of jobs: office interiors, home remodels, manufacturing buildings, small jobs, big jobs, and factory machine wiring. He was so busy doing anything for anyone who called and asked for a bid, he had lost his focus and wasn't making much profit for all the running around he was doing. He was frustrated and came to my 2 'Profit Builder Circle' looking for answers. He knew if he stayed on the same beaten path for another 10 years it wouldn't get any better. Look at what he did to change how he'll do business in the future:
"George. Good afternoon. I want to give you an update. I was really motivated by your 2 day boot camp and I'm starting to put my new action plans into action. Last Friday I pulled a list of 300 manufacturers in our area and Tuesday (tomorrow) I will begin calling them to set up meetings. I've got a goal for how many new clients I want this year. Like you suggested, we're going to focus on just 2 types of projects and customers. We're now going to be the electrical experts in servicing manufacturing plants and facilities, as well as the electrical high-tech specialist for expensive custom homes. I want to thank you for the personalized time that you spent with me (at lunch and in class). I really got a lot of great ideas and information that I know will help us succeed. I'll be in touch." - Brian, Owner, BC Electrical
Customer focus and project and market expertise must be the central theme and the top priority of your business operation. You can't try to do all things for all customers and expect to make a profit. At Hedley Construction, we experienced a constant struggle between what we sell and what our customers buy. Customers demanded first class quality and top service, but often made their buying decisions based on price. The challenge was how to deliver on all 3 (schedule, quality & price) and still make a profit. It's difficult to be the low bid provider while delivering the best quality and superior service. Our company's bottom line success dramatically improved when we got our FOCUS on target as follows:
- Our #1 priority - Repeat loyal customers
- What we do best - Provide personal service
- What project types we do - Office & industrial business parks
- What size projects we do - Over 50,000 square feet
- Over $2,500,000
- Where we do business - Within 60 miles from our office
- Who we do business with - Developers & business owners
- How we do business - Full service & full value
- Total construction management
- Overall development services
- Negotiated open book contracts
We learned that you can not be all things to all people. It doesn't work. A real benefit of getting focused was the ability to know when to say "no". When you decide who and what you are, the opportunity to excel increases dramatically. You become laser beam focused and you don't get off track. These improve customer loyalty and bottom line profit.
To achieve our #1 priority of loyal repeat customers at a profit, we rewrote everyone's job description. Our goal was to create clear expectations in the area of customer loyalty and profit. We also changed our incentive plans based on keeping customers and making a profit. This resulted in productive and focused people, lifetime customers and above average profits. With continuous loyal customers, finding new opportunities became an easy task for our business development department.
Define What You WANT!
An 'On-Purpose - On-Target!' business knows the real purpose for owning a business is to enjoy the benefits and rewards of business ownership. A great business is built to deliver what the owner wants. In a tough economy, it becomes very evident that a poorly designed business won't ever deliver what the owner wants: freedom, profits and wealth. Competing on price against 10 to 15 other competitors won't get it done as the economy slows. You can't make any money, you can't get rich, and you'll have to work twice as many hours to stay even. The strong economy has kept mediocre business owners partially funded and extremely busy. Not what I call good reasons to own a company.
Now you have a chance to start over. What can your company do to become what you want it to be and deliver? Its' purpose: a clear vision of why the business exists and what measurable results are expected to give you what you want. In most cases, the business owner has worked far too many hours for the financial return he or she receives. This is common in small and medium size entrepreneurial companies where the owner and business are one in the same. The owner doesn't own a company, he owns a job that doesn't pay very much. But he is busy doing what he knows best. With a clear purpose, the owner can stay focused on specific reasons, targets, and the results he wants.
The purpose of a business is to give the owner what he or she wants. In publicly traded companies, stockholders want two things: quarterly earnings or profits and increasing stock values. In private companies, the owner can want a variety of things. The purpose for my business is to accomplish three things: make a large profit, create wealth building assets, and give me freedom from day-to-day operations. I use my company to create opportunities that can reap fantastic returns. In order to do this, we strive to be the recognized expert in only a few project types, put heavy focus on loyal customers, offer more services than required by the contract minimum, maintain a great place to work that attracts and retains the best people in our industry, and stand for impeccable integrity.
What's your business purpose and focus? The purpose for your company can be whatever the owner wants it to be: freedom, finances, fun, family, faith, image, prestige, community involvement, helping others, providing services, or anything else you can think of or want. The purpose of a business is NOT to be low bidder, keep your crews busy, create stress, work hard, get out of the house, keep your kids working, or barely break-even.
For a business to work, expected measurable results must be clear. Some of the results we shoot for in our commercial construction business include the following:
Return On Equity - Minimum 30% pre-tax
Return On Overhead - Minimum 50% pre-tax
Net Profit On Sales - Minimum 4% pre-tax
Negotiated Contracts - Minimum 75% of all contracts
Loyal Customers - Minimum 50% of all customers
Repeat Customers - Minimum 75% of all customers
New Customers - 6 per year
# Customer Referrals - 12 per year
Employee Retention - 90% per year
Employee Training - 40 hours per year each
Profit Sharing - 45% of net profit
Wealth Building - Develop 100,000 s.f. projects per year
- Buy, build & keep 20,000 s.f. buildings / year
Freedom - Take Friday afternoons & weekends off
- Take minimum 4 weeks vacation annually
The key to making it happen is to know what you're striving for. Set clear measurable targets and then make people accountable and responsible to make them a reality.
Your leadership decisions determine your everyday results. Weak and meandering actions will not get the results you want. Where are you now? Where do you wish you were? What do you want in the future? How can you make it happen? Be bold. Be brave. Be radical. Try something new. Set clear measurable goals and targets. Write out exactly what you want . To build a great business takes hard work, positive decisions and visionary determination. Don't and you won't. Do and you will. The choice is your: DO or die a slow death.
Entrepreneur, best selling author, and professional speaker George Hedley helps business owners and contractors build businesses that work. He is the author of the "The Business Success Blueprint Series" available in 8-workbook & audio CD sets. Contact him to present to your organization on his proven system to build profits, people, customers and wealth. Construction company owners are invited to attend his 2-day 'Profit-Builder Circle' boot camps. E-mail George at email@example.com to receive a free copy of his book "Everything Contractors Know About Making A Profit" or signup for his free monthly e-newsletter. For more information call 800-851-8553 or visit his website and bookstore at www.hardhatpresentations.com.
3300 Irvine Avenue #135
Newport Beach, CA 92660
Phone (949) 852-2005
Fax (949) 852-3002
Email: firstname.lastname@example.org website: www.hardhatpresentations.com