Look in the mirror. Ask the person staring back at you “Am I controlling my profitability or are my clients and competition controlling it?”

Your answer reveals the likelihood of reaching your desired financial and personal goals. If you approach your business with confidence, commitment, and determination to control the profitability of the projects you choose to work on then you will in all likelihood be successful and profitable. If you believe that you have to take what is given to you, that you have to compete against under-priced competition and work for disorganized clients then you’re going to end up scraping out a living…at best.

Unfortunately, we rarely meet a contractor who believes, truly believes, that he controls his destiny.  Most contractors feel that they have to accept the low-price take-it-or-leave-it offers their clients extend. They feel they have to accept the poor sequencing and never-ending hurry up and wait demands placed on their field crews by the onsite project leadership.

You don’t have to be passive. If you step up, stand your ground, push back, learn to sell, and know when to walk away from poor opportunities you can make a lot of money in the construction industry.  If not, your business’ end is just as certain as death and taxes.

Finally.

It’s been almost two years since I’ve seen any sign of normal construction around my home town. Over the last few weeks, I’ve seen a handful of sites being cleared, pads being prepared, steel going up.

Finally.

Non-residential construction was off by 43% in 2011 in my home town of Kansas City. Total construction spending in 2010 had held fairly well by contract value due to a large federal contract that had been budgeted prior to the 2009 downturn. We also had several highway projects that were continuing to roll along as they were funded as multi-year projects.

What that means is the health of the construction economy was somewhat misleading. Driving around town was  a much better indicator of the implosion of work. Several sites were laying dormant after their initial site work had been completed.

Finally, signs of regular commercial construction have begun to spring up. Let’s hope this is the beginning of a long uptrend.

Thought we’d pass on a few stories that have come our way recently. They really demonstrate the magnitude of the melt down.

The first comes second hand from a local saw mill owner. He opened his mill in the mid-60s. He recently told a mutual friend that he has NEVER seen the economy this dead. That’s saying something considering the number of recessions he has personally survived including the horrible 1982/1983 recession when no one was building anything.

The second story comes from a paving maintenance contractor. He went out to price a simple pot hole repair and was stunned to discover that an asphalt plant offered to fix the pot hole for about half the price. To put that into perspective, asphalt plants usually chase road work and only drop down to installing NEW parking lots when times get tough. Them doing a patch is unheard of. Their overhead alone would be more than the price of the job.

Our third story comes from an electrician I know. He went after a new project very aggressively. The project was prevailing wage so nobody had a wage rate advantage. He assumed his production would be quite a bit higher than normal, and his crews are already incredibly fast. He slashed his margin…and he was more than 10% above the low bid! The winner has NO CHANCE of getting out of the job with his direct costs being below his price.

Our fourth story comes from a large, regional multi-family remodeler. He has built an amazing business over the last two decades but, as he just discovered, no great strategy goes unpunished. He had focused his business on a highly specialized niche and at a size that served large, publically traded property owners. He owned his niche. Unfortunately for him, his clients have cut their spending by 80%. 80%! They have no money so this contractor, who has done everything right for over 20 years, is forced to slash staff and overhead costs just to survive.

Our final story comes from a mechanical service contractor. Here is another contractor who excels at keeping clients happy and loyal. One of his previously SUPER LOYAL clients was planning on expanding part of his mechanical system and had always just handed the job to this contractor because they did his work on a time and material to a GMP basis. This time the work will be bid by eight (8!) other contractors – all at the advice of the design team. Stupid design team.

These stories came from coast to coast, North to South. It’s not just in your area. It’s happening everywhere. Dig in and get everybody inside your company giving their all. Their future depends on it.

While visiting with a contractor the other day, he mentioned sharing one of our recommendations for improving field performance to a friend and fellow contractor.

His friend shook his head and replied “I would never do that. Share the budgeted time with the crews? I’d never do that. If they realize they’re moving faster than the allowed time, they’ll slow down. I want them working as hard as they can.”

Wow.

I had forgotten how common that belief was among owners and project managers.

These people simply do not understand human behavior. A worker is FAR more likely to miss a deadline or budget because he was left in the dark than he is to dial it back when he’s ahead of the budget.

Heck, which hurts worse? Hitting the budget when we MIGHT have beat it by 10% or running 10% over budget?

If you only take one piece of advice from Guy and I make it this:

Tell your employees EXACTLY
what their performance targets are.

That one action alone will reduce costs, improve on-time performance, increase customer satisfaction and – believe it or not – improve employee satisfaction.

Never, ever keep your employees in the dark about the outcomes you need them to deliver.

In a future  newsletter we are going to address three phases of business. Every day tasks, crisis management and strategy. You probably spend most of your time on the first two.  Don’t neglect strategy! It is the important road map of where you want your business to be in the future. It is often underrated. Just ask contractors who have plans for good times and not so good times.

We are interested in hearing from all of you contractors out in there in cyber world about how you use strategy to create advantages in your marketplace. What works best for you? How do you monitor and revise your strategic direction? Share some success stories.

For those of you who have not really done much planning we’d like to hear from you too. Why haven’t you created a strategic plan? What would you need help with if you decided to create one? Let us know so we can help you!

Don’t hold back!!! I expect a lot of feed back over the next few weeks. Let’s hear from everyone!

Guy and Ron

Do Clock Watchers Ever Take Ownership of Their Jobs?

While visiting with a friend over lunch the other day,  we got to talking about a lady we both know and the strange – to us – conflict between her work ethic and her clock watching.

The clock watching in this case wasn’t that she sat around counting down the minutes until she was off. It was the other type of clock watching.

Salaried Clock-Watchers Rarely Stay Past 8 Hours.

She had the mindset of an hourly worker. She wasn’t paid by the hour. She was on salary. But she kept close track of her hours. If she worked late one day, she took off early the next.

What threw us off was that  she made sure her employer got their money’s worth for 40 hours a week. She worked hard and was more productive than several of her peers that put in longer hours for the same pay.

All in all, her employer was getting great bang for the buck – with her. Yet, it brought to mind the three different mindsets workers have.

1. Hourly
2. Salaried
3. Owner

The “hourly” employee figures he is being paid for 40 hours a week. That is true for employees who are LITERALLY hourly. Not so true for salaried employees. Most front line salaried employees think like hourly employees. Some front line supervisors do also.

The “salaried” employee figures he is being paid to do his job, whatever the volume of tasks and the time they take, he has been assigned with.

Employees who think like  “owners” go above and beyond. The only reason they keep an eye on the clock is to meet important deadlines. They strive to make the company successful.

We all thirst for our company to be staffed full of “owner” minded employees.

That’s difficult to pull off – not impossible – but difficult. Naturally, we know how. That’s why our clients hire us.

You need to keep your eye out for  salaried employees who think like hourly employees.

Very, very few of them are like the lady I described. Most are modestly productive at best. Most are true clock watchers. You’ll rarely turn a true clock watcher into a highly productive, owner-minded employee.

Food for thought as you try to grow your business.

If you, or someone in your office, is running QuickBooks and doesn’t know how to get it to produce the reports you need to run your business profitably, boy have I found someone you need to call!

 

Need QuickBooks Help?

Pam Newman – 816-304-4398

 

I visited with Pam Friday and have to tell you, she is ABSOLUTELY AMAZING!

 

If you’ve been following us for very long - reading our frequent complaints about the lack of solid support for contractors from the accounting community – you’ll know how thrilled we are to find someone who:

1. Totally understands contractors (she used to be one).

2. Totally understands the management reports business owners need.

3. Totally understands how to make QuickBooks sing and dance.

 

Pam has a fabulous personality.  A great pleasure to visit with. She’s not one of those dry, boring, accounting types.

 

She is remarkedly well educated (accounting degree and MBA). She is certified. And most importantly, she is down to earth.

 

She knows the type of information business owners should be looking at weekly and monthly.  As she was reciting her recommended list of managerial reports , I was grinning from ear to ear.

 

It was as if she had bugged conversations between Guy and I from weeks and months back. Wow!

 

To get ahold of Pam, you can call her at 816.304.4398; email her at pam@rppc.net; or browser her site at www.rppc.net.

 

Pam provides both consulting and training services. In person or via the telephone and internet (just like we do).

 

We hope Pam becomes a close member of our Contractor’s Business Coach team in the near future but don’t wait for that negotiation to complete. If you need help, call her now before we raise her rates. Seriously, she is WAY too cheap.

 

As always, keep beating the bushes and wishing you the best.

 

Ron & Guy

Just had to share this one with you. It so captures the essence of the people who do your books and calculate your taxes.

My lovely daughter, her husband, her sister and her sister’s date went out to dinner last night to celebrate a friend’s birthday. Dinner party of 12.

When they stopped by the house after dinner, my eldest, a staff accountant with a global manufacturer, started complaining that their dinner party had to split their bill by hand since the restaurant refused to do it for 12 people. She was really annoyed about having to figure their individual bills by hand.

Let’s put this in perspective.

At least four of the 12 in attendance were accountants. And here they were being put out about having to do a little simple math. (Hey, I’m an engineer. Simple math is something I did in my sleep in grade school)

Not willing to miss a grand opportunity to tease my daughter, I offered that after paying for 4 years of accounting school, the least I would expect would be an ability split up a check.

Her reply?

“That’s what Excel is for!”

Couldn’t have said it better myself.

Is Doesn’t Get Much More Fun Than This!

Just got back from a great trip to a client’s office. I LOVE days like we had together.

As we worked through my client’s numbers, explored the way he goes about his business, and tossed around opportunities, it became crystal clear that he had an opportunity to quadruple his net income fairly easily in 2009. He was sitting on so much untapped capacity and potential.

His production numbers, crew and equipment arrangement, competitive position, and staff capabilities all point to an explosive performance in the upcoming year – even using fairly conservative assumptions.

Guy has also run into the very same situation several times when starting with a new client. Guy has helped drive the sudden growth of several companies that were in the described position.

His client would have been doing many things right, would have built a highly capable team, would have had pretty much bought the right equipment, but just wasn’t really tapping it for all it was worth. The ring was there for the taking if only the owner would focus on the right activities, manage his time wisely, and stay committed to a couple of stretch goals.

Is this happening in your construction business? Are you sitting on a massive income potential if only you would focus on the right things and really work hard on them?

Here’s how you can tell.

Determine how much work your crews could perform if you could keep them busy. Now, figure out how much of their time you would sell by blowing off unattractive leads and started pursuing only high quality leads. Then, determine the strength of your competition. Does anyone really own your target clientele?

If you believe your core clientele isn’t really well served by anyone yet and your team has the ability to do so, then you also are sitting on an untapped mountain of opportunity.

Hopefully, that’s what you’ll discover!

Best wishes for your business.

Your friends,

Ron & Guy

The Contractor’s  Business Coach

We hope the new year has brought you new energy and a commitment to get after it.

To someone like me who is little bit of a history buff when it comes to macroeconomic events and our government’s responses to them, the most obvious upcoming opportunity for contractors is federal work.  Have you thought about that and started preparing to take advantage of it?

Ever since the Great Depression, our federal government has used federal construction projects to re-ignite a slumping economy. If my memory servers correct, incoming President Obama has mentioned this as part of his economic plan.

Why focus on federal work?

Because only the federal government  has the ability to create money to inject into the economy.

State’s don’t have that ability, not directly. They have to borrow which isn’t going to be overly viable in the current bond market.

You will note that the money that was injected into the Wall Street hasn’t exactly stimulated the economy. Banks aren’t lending money. Without lending, residential and commercial construction grinds to a halt.

The feds surely haven’t missed that. They’ll go back to their proven remedy: federal construction projects.

So what should you do?

Get your production management systems in order. Get ready for prevailing wage work. Adjust your estimating parameters to account for the higher wage rates.

Start building relationships with General Contractors and primes who have a long history of doing federal projects. Develop design/build relationships. Design / build is a rapidly growing trend for contractor selection on public jobs. Get up to speed on LEED certification.

Basically, get ready to play in the big leagues. That’s where the greatest near term opportunity is going to be.

Wishing you the best.

Your friends,

Ron & Guy