Time to Get IN Business!

Now’s the time to take a hard look at how you do business and if your current business and customer development strategy is viable to keep your company healthy, growing and profitable. I receive lots of emails from construction company owners asking what they can do to win higher margin work. They say that because of market demands, there are too many low-priced competitors, and sometimes as many as 10 or more bidders on each project opportunity. What have you done to change your business strategy to win more work at higher profit margins?

Contractors who don’t know how to build a great business and therefore compete on price are struggling. Top business owners who know how to run a business, are creative, look for innovative solutions to challenges, and are willing to change how they do business are still successful. They know by doing the same things that used to work, won’t work today. When there were lots of jobs to build and less competition, weak business owners could survive without decisive leadership, a strong management team, estimating accuracy, job cost tracking, customer development programs, crew training or financial competency. But now you have to run your business like a professional to make money and grow. In other words, you really have to be better, faster and more powerful than your competition to outrun them. Are you too weak to stay IN business? To stay IN business you’ve got to set your company apart from your competition.

Focus on solving customers’ problems, providing an excellent product with quality, service, pro-active project management, positive communication and delivering what’s best for them versus what’s specified. This involves a customer development program that plants you firmly in front of them, meeting with them often, and asking what it takes to deliver exactly what they want. With an intelligent conservation, you’ll discover there are many alternative ways to work together to reduce scope or costs including materials, deliveries, supervision, coordination, scheduling, meetings, and cooperating to achieve the same goals. Many times, subcontractors and suppliers can also give you tips on how to reduce your own costs by comparing your company operations to competitors. And of course, look at how you manage, schedule, train, track job costs and enforce productivity with your field crews.

In my experience, I found that the lowest bidder strategy only works in two instances:

1. Bidding public works projects—Public projects are almost always awarded to lowest bidder. Therefore, it’s alright to bid using lower margins because public projects will have many chiefs and few Indians. Every chief has different opinions or tastes which result in change orders! Change orders provide for larger markups and potentially allow your overall profit margin to grow.
2. Bidding as a subcontractor to a new general contractor—The construction business is all about building relationships versus selling the lowest price. But, when it comes to working with new general contractors, it’s often challenging to get your foot in the door. Try taking the approach of bidding low initially to buy a job or a chance to prove yourself. Then it’s up to you to impress them enough to continue using your services on future projects.

Unfortunately, there are no easy answers in the construction world as it sits today. There are too many contractors chasing jobs at low prices for anyone to make a lot of money. Following the doom-and-gloom mentality will surely take you down. By continuing to do business the same way you always have, while your profits are slim, is not a winning strategy. If you are serious about getting your company moving at a high rate of speed, it is time to get back to basics and IN business. All it takes is a commitment to invest in your future, stop waiting, and learn how other business owners have made significant changes to grow and profit in any economy. Many business owners have turned their companies around during by changing their business model and finding new ways to deliver products and services to customers. What have you done new or different other than calling on the same customers, competing on price, and hoping things will change?

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. Visit www.hardhatbizschool.com for more information.