Starting the year off right for your construction company without a written list of improvement areas, a specific business plan, measurable goals or a budget isn’t a good idea if you want to grow, improve, make more money or get to the next level.
To improve your bottom-line profit margin takes a plan to make it happen. You can’t just hope by working harder, you will make more money. Making 1% or 2% more net profit starts by identifying things you can change, improve or fix. You might need to hire stronger managers, standardize your change order rates, implement a monthly project management review process, develop a job checklist for areas that continually cause mistakes, or upgrade estimating software programs.
What Do You Do to Fix Your Company?
So, what are you doing about making this upcoming year better than last? What changes are you going to make to improve your projects, people, productivity, profits, systems or results? What are you doing about training your future workers, foreman or project managers to become the company leaders you need? What are you going to stop doing and/or start doing different to improve the value of your business, secure better customers, make higher margins or get a higher return on your investment?
Spend Money to Make More Money!
Successful companies invest time to get their management team together to stop and look at what’s working and what’s not. After reviewing their results, they analyze what they need to do to improve over the upcoming year. And then to make sure they achieve results they want to hit, they meet monthly to update their progress and make the adjustments to keep on track, and continue heading towards meeting their annual goals.
As a contractor business coach, I often facilitate these annual company management meetings for clients. As a team, we work together to draft a FIX-IT LIST of the things they want to fix and improve over the next year. Some contractors are able to organize and create successful management teams and business plans by investing in workshops or books to learn how to develop their own business plans or blueprints. And others have better luck hiring a professional consultant or coach to assist with the process. Whatever your method is, it still takes time, money and dedication to build a better company.
What Do You Need to FIX?
Twelve months from now, what accomplishments, changes and improvements do you want to achieve? Where do you want your company to be? What will make your next year results better than the past year? What problems do you want to go away and never happen again? What people, processes, procedures and systems do you need to add, implement, reinstate, eliminate or improve? What problems regularly occur in your company that need to be fixed or eliminated? Start by making a list of things that went wrong, cost you money, shouldn’t have happened or other areas to improve.
My observation is that the same problems and challenges keep ending up on FIX-IT LISTS for construction companies large and small. Take a look at these common FIX-IT LIST items many construction companies have on their list. First, check off each area you would like to fix or improve over the next year. Next rank each area as a top priority to improve (A), medium (B), low (C), or not an area that needs improvement (0).
FIX-IT LIST PRIORITY CHECKLIST
- Set regular meeting schedules
- Develop a management team
- Delegate responsibilities to team
- Develop and track company goals
- Review financial results monthly
- Develop accurate estimates
- Upgrade estimating software
- Maintain job cost history
- Standardize burden rates
- Standardize change order T&M rates
- Eliminate missed items
- Improve subcontractor and supplier coverage
Business Development and Sales
- Improve bid-hit win ratio
- Seek higher margin work
- Bid against less competition
- Manage customer relationship program
- Manage referral program
- Improve proposal and presentations
- Eliminate profit margin shrinkage
- Develop PM standards and systems
- Improve turnover from estimating
- Create contract writing standards
- Improve scheduling system
- Improve change order management
- Develop job close-out system
Field Management and Production
- Manage weekly job cost tracking system
- Update scorecards for foreman and supervisors
- Upgrade scheduling and logistics
- Eliminate call-backs and punch-list
- Standardize field meeting agendas
- Set standard job and crew rules
- Systemize equipment management
People and Organizational Chart
- Clear chain of command
- Eliminate poor performers
- Hire positions needed
- Develop better hiring system
- Manage training program
- Employee review system
- Results-based incentive program
Accounting and Administration
- Upgrade software
- Provide timely financial results
- Improve collections system
Now that you have created a working list of your highest priorities to improve over the next year, get your management team together and whittle the list down to a short list of your top five must-do priorities. Start with only five priorities to fix first to keep it simple and achievable. Too many companies try to fix 30 things at once and fail, instead of creating victories by fixing their main problem areas first. Assign team captains to work on each of your top five improvement areas. Ask them to gather a team to help them create a standard or system to fix their assigned problem. Also, develop a deadline for each area of improvement. When a standard or program has been created for the different areas, you can then move on to the next top priority to start working on next.
Take Time Now to Fix Your Company!
I get calls all the time from contractors wanting to make more money, get their companies organized and systemized, and do what they need to do to build a better business. The process always starts with identifying what they want and where they want to be in one, three, or five years. Get your team together and take the time to list out what you want and what changes are needed to achieve your goals.
George Hedley, CSP, CPBC, helps contractors grow and profit as a professional business coach, popular speaker and peer group leader. He is the author of “Get Your Construction Business to Always Make a Profit!” and “Hardhat BIZSCHOOL Online University” available—on his website. To help get the improvement process started, email email@example.com to get a copy of George’s BIZ-BUILDER BLUEPRINT worksheets. Visit www.hardhatbizschool.com for more information.