Construction business owners usually start with a long-term vision of what they want their company to do for them. When I work with contractors, we start by asking them where you want your business to be in five years—your long-term vision.
The exercise looks at:
- What kind of company they want to build
- Growth and revenue goals
- Mark-up and net profit targets
- Management team structure and people
- Systems, processes and technology
- Estimating and project management systems
- Field safety, quality, production and equipment
- Financial management standards
- Customers and markets to attract or attack
- Type of projects they want to specialize in
- The owner’s role and time commitment
- Wealth and investments
To make the business vision become a reality, your company must continue to grow at a steady pace and make a good profit margin. Without growth, overhead expenses and costs eventually eat all your profits and you won’t break even. By watching most construction companies, you’ll learn that they grow quickly for the first four to five years and then flatten out and stop growing.
Why Do Companies Get Stuck?
They reach what I call a growth barrier. At this position, the company owner usually doesn’t want to continue taking on more risk, let go of control, or try new markets or project types. When stuck at the same level year after year, the owner also becomes frustrated while working at maximum capacity and little return for the stress and personal workload they take on. And they’re uncomfortable having to make all the important decisions and be responsible for everything.
What Causes a Growth Barrier?
Business owners want their companies to grow and make lots of money. But as they grow, it becomes harder to do what is necessary to implement positive changes that will guarantee a profitable future. They typically work harder, do more themselves, and actually hold back their company from reaching the long-term goals. In fact, a stuck owner is generally the growth shut-off valve restricting the company from reaching its’ potential. So, what are the reasons for the growth barrier to occur?
#1. Fear.
The stuck business owner is unwilling to do anything different for fear of failure. Therefore, they continue to do business the same way hoping for something good to happen. These owners are afraid of making bad decisions, losing money, hiring the wrong person, trying a new project type, working for new customers, or making people accountable for results.
#2. Afraid to Hire, Delegate and Let Go!
Stuck business owners are afraid to lose control and therefore are unable to delegate people. This fear doesn’t allow owners to hire or build a responsible team of leaders and managers to handle the overall operations, projects, estimating, purchasing, decision making, contract management, sales or managing customer relationships. As a result, the company can’t grow beyond the owner’s capacity to do the work himself.
Most business owners tend to tolerate poor performers, don’t like confrontation and avoid making tough people decisions. They also make exceptions and allow people to not follow company standards and systems. As a result, they avoid hiring and avoid firing at any cost. Therefore, they do too much themselves, don’t delegate and keep tight controls. For them, it is easier to control and micro-manage versus hire, let go and grow the company. Why? Hiring is risky, requires extra work, has potential for failure, is a big hassle and might not work out for the best.
#3. Owners Don’t Like to Market or Sell.
Most stuck construction business owners avoid selling or marketing their company. They’re uncomfortable calling on customers, taking them to lunch and investing in a pro-active customer building marketing program. And in reality, the owner is generally the best salesperson in their company. Rather than spending time and money targeting, acquiring and attacking potential customers, it’s easier to offer low-price bids to win work.
Without a written business development sales plan, and a zero-dollar marketing budget, low-bid companies struggle to win profitable high margin work and develop loyal customers who give contracts to their favorite contractors. Rather than spending time selling, it is easier to continue seeking bid opportunities with low margin potential. The typical no-cost marketing plan for these fearful companies is to do good work, and then wait and hope potential customers call them to get on a bid list with too many competitors.
#4. No Written Systems and Organizational Structure.
Without written, implemented and tracked business systems and processes, companies have a hard time growing. The owner can’t delegate to good people without good systems, a detailed organizational structure and a clear chain of command. Each person needs a clear position description including the expected results, a scorecard tracking system updated weekly or monthly, and a management enforcement system to make sure things are completed effectively and timely. Without these standards in place, the owner spends far too much time verifying things get done versus growing the company. Plus, this ongoing verification and review won’t allow the company to grow.
What’s Holding You Back From Reaching Your Vision?
When fear holds you back, you won’t reach your vision or potential. When you do too much yourself, your company will stay stuck at the same level with less than great results. With you responsible for everything, your people won’t take on more responsibility. When you are constantly afraid of what might happen if you make a decision to hire, you stay stuck. When your only sales program is to offer the minimum at the lowest price, you can’t make enough money to hire great people or go out and find loyal customers who’ll give you high margin work. And without systems in place, it’s impossible to delegate responsibilities to others. Don’t forget the old saying: no risk, no reward!
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.
