Are you still waiting for the economy to turn around? Get over it! Don’t expect boom times to rescue you from the current lackluster business environment. Over the last decade, the construction industry grew ten years straight. The last two years have been up, down, rocky, and sporadic. While there is still some positive growth, the construction business will not reach previous levels for many years to come.
With the positive growth came too much expansion and increases in construction capacity. This resulted in too much competition and shrinking profit margins. Suppliers, manufacturers, and distributors were driven by Wall Street to grow revenues and expand beyond market demands. Contractors, architects, and engineers who got used to growing 15 to 25% per year, took on more overhead, raised salaries, gave bonuses, and became complacent as they spent at a higher level.
Got that shrinking feeling?
To make matters worse, everyone got into the act. Architects became consultants, real estate brokers became construction managers, engineers got into design-build, banks became investors, Home Depot got into the construction business, and people without any money called themselves developers. Now there are too many competitors seeking too few opportunities.
Your total market share is less while the number of competitors have risen. This leaves a shrinking pie that is smaller and more competitive. Continuing to do business the same way as before will get you less than you need over the next five years. Contracts will be tougher to get as bid lists grow. Profits will shrink as construction businesses buy work to keep their people and equipment busy.
Working harder will only make you tired. Working smarter is the only answer. But, what should you work smarter on? Sales? Quality? Productivity? People? Whatever you choose, you must do something DIFFERENT to get better results than your competitors will allow you, or the economy will give you. Nine different ideas to add to your arsenal include:
1. Add new markets – Seek one new project type to pursue. For example, home remodeling will soon surpass the new home construction market. In some areas school and healthcare construction are up 200%.
2. Add new customers – If you can’t beat Home Depot, join them! Home improvement stores need lots of contractors to do all their work. Somebody is getting lots of repeat work. Are you?
3. Add new risk – The home market continues to stay strong. By joint venturing speculative homes with custom homebuilders, you can add to your workload and boost your bottom-line. Builders need equity and financing. Invest some of your working capital, savings, or labor and materials in your customer’s projects.
4. Add profit centers – Open your books to key employees and share the profit with them. Give each team member an area of responsibility and make them accountable for their own bottom-line. No profit = no profit sharing or salary increases.
5. Add overhead targets – Make everyone aware of your fixed cost of doing business. Make a goal to reduce overhead by 15%. Ask for suggestions to reduce overhead costs and reward those who’s ideas are implemented.
6. Add field input – Hold quarterly meetings with your entire field team. Ask for input to lower your job costs, improve productivity, and speed-up your job schedules. Use a written suggestion box and reward good ideas.
7. Add good people – Now is the perfect time to eliminate your poor employees and replace them with top players at a reduced price. Good people are easier to find now. Face reality, some of your people won’t help you get to the next level in slow times.
8. Add more bids – To bid more jobs, go out and see more people. Ask each key person to make it a part of their job to be on the sales, marketing, and estimating team. Everyone must pitch in to make more proposals and get more work.
9. Add more networks – Get out in your community and see lots of different people. Seek input from your existing customers, bankers, competitors, suppliers, subcontractors, architects, and engineers. More importantly, make a commitment to seek leaders who are not in your industry. Ask them for ideas and suggestions how to change the way you do business.
Don’t expect things to get better without you doing your part. Stay put and go nowhere. Sit and wait for something to change and it won’t. Try one of these nine ideas to get your bottom-line aiming upward.
George Hedley owns a $75 million construction and development company and Hardhat Presentations. He speaks to companies on building profitable businesses, leadership, and loyal customers. He holds 3-day in-depth “Profit-Builder Circles” open to construction company owners in an interactive roundtable format every 3 months. His “Profit-Builder System” includes proven tools to always make a profit, build equity, create wealth, win profitable jobs, motivate your people, and enjoy the benefits of owning a profitable company.