10 Steps To A Profitable Year

The year 2009 will go down as the toughest year in the construction industry in more than three decades. It will be remembered as a time marked by a challenging economy with fewer construction projects and squeezed maintenance budgets. Many owners have restructured their companies to survive during lean months so they can be more profitable during better months. Some have let go of staff and hired commission-driven sales people to help acquire new business.  

While it has been a difficult year for many, the economic projections for 2010 are more promising. Construction spending rose for the second time in three months in June as residential building increased, giving us new evidence that the housing sector may be recovering. Public construction jumped 1 percent-the biggest rise since March, according to the U.S. Commerce Department.  

Now is a great time to get your thinking cap on and review your plans for the coming year. Generating more revenues with stronger margins is probably one of your top business goals for 2010. But, how will you achieve this?

Let's create a working framework for planning and then review ten specific things you can do to focus on improving your business that will work whether times are good or bad.

First, you must be honest with yourself. Face your own reality. Then you must focus on creating clarity of purpose and direction. Understand not only where you are today, but where you want to go and by when. Conduct a SWOT (strengths, weaknesses, opportunities and threats) analysis to develop your plan.

Keeping up with changes in the broader economy, your local economy and your industry is also beneficial. Reading business and industry magazines, participating in trade association events and joining CEO and industry peer groups are good ways to stay informed and receptive to innovation and new approaches. Get clarity and develop a focused action plan. Write it out and use it daily, weekly and monthly! And finally, seek out someone you trust and respect to help provide on-going accountability. It's like going to the gym to work out-you get so much more accomplished when you have someone there to hold you accountable.

It is often impossible to focus when confronted by everyday distractions that prevent you from seeing clearly if your goals and options aren't defined.

Most entrepreneurs get into business ownership for the love of the game-the technical, appealing side of the business-not the organizing, managing and planning functions of the business. As a result, owners get so caught up in day-to-day activities, that procrastination, which is human nature, becomes the norm.

William Arthur Ward said, "If you can imagine it, you can achieve it; if you can dream it, you can become it." So start with developing your vision. Develop you vision in these ten areas within your business:

1. Management Training -
2. Many managers at smaller companies fall into management. They didn't go to school for it. They don't know what it really means to be a manager. They became managers, not by design, but by default. To improve your company, you need to improve your people. To transform your company, get rid of ineffective people and behaviors. Throw the wrong people overboard. Nothing holds back growth more than disengaged employees. If you haven't already, make sure you have the right people steering your ship. We often refer to this as "aces in their places." Once you have the right people in place, get out of their way and let them do their job!
3. Performance Tracking - Most companies don't measure results or the right results. If you want to evaluate your performance then define performance, effectiveness, etc. Activity without measurement is activity without accountability. To ensure results are met, set goals and hold yourself and people accountable to them. Requirements without measurements are nothing more than utterances and lack the conviction that makes entrepreneurs leaders.
4. Estimating and Budgeting - In tough economic times when there are fewer bids (so your win-loss ratio matters more), and requests from customers to reduce your construction or maintenance fees are all too common, you need to "sharpen your pencil" (or get better at estimating). Knowing your actual costs, like overhead, labor burden, etc., are always important, but especially in a tight economy. I like to joke, "there's always someone willing to go out of business faster than you," so make sure you know your projected and actual profit on jobs. What improvements, if any, do you need to make to your estimating or budgeting system?
5. Production Control -You can't ensure profitability if you can't estimate correctly and manage the production of jobs. The goal of production control is to produce an on-time and on-budget end-product as the architect designed it, the estimator estimated it and the owner wanted it. In order to do this you need the right people, right equipment and right systems. People need proper training in all of the above. Top management has the responsibility to create an environment to ensure that budgets and schedules are met.
6. Financing -Does the company have the best tools in place to keep score of the results? Does it have adequate capital to keep the company going? Are the right systems and tools in place to accurately capture job costs and month-end results? What about control over purchasing and cash flow?
7. Marketing -There are a few fundamental ways to grow any business using marketing. Do you know them? Many smaller businesses don't leverage the power of marketing, relying instead upon sales tactics and sales people. This is because they don't understand the difference between selling and marketing. This is the time to understand and analyze what's working and what's not in your marketing.
8. Selling -Is sales the best paid function within most companies because: (a) It's the hardest to do of the jobs in a business? (b) It's a mystery misunderstood by many on how to do it effectively? (c) It's the economic engine that fuels the business? Answer: All three. Selling, like marketing, requires a system of processes that must be followed to be effective. So, are sales processes consistent, repeatable, reproducible and teachable? And, do your people know them?
9. Leadership -Leadership is like management but requires vision and the ability to motivate others. Ross Perot said, "Inventories can be managed. People need to be led." Improving leadership within your organization requires that people learn the soft skills of how to communicate, motivate, create a vision, promote that vision and execute it relentlessly to completion. Is the leadership in your company inspiring or draining?
10. Planning -Strategic planning is not something you do once-or once every ten years. It's something you do regularly and systematically. When I've run companies, we did strategic planning every quarter. To us it was a necessary activity and the growth that came from it was reason enough to keep doing it. We grew much faster and more profitably than our competitors as a direct result of our planning activity.
11. Outside Support -As owners and managers, I'm guessing at times you feel overworked and overwhelmed. Wearing multiple hats and functioning in multiple roles probably makes you feel like quitting, coasting, laying back or going on vacation. But quitting is not part of your DNA. And neither is asking for help. However, given the challenging economy, now is not the time for you to be a super hero or lone ranger. Now is not the time to be isolated, alone and pretending to have all the answers. It's okay to stop the superman/woman charade and get outside help. If Tiger Woods can have several coaches to help him attain and maintain his peak performance, surely you can have one, too. You can't grow yourself or your people if you're not regularly challenging your thinking, behaviors and results.

Whether in good times or bad, you should be receptive to asking for help. But in challenging times, more is at stake. Go ahead and pull the "S" off your chest. You don't need to be super business owner any longer. You simply need to be a more strategic and effective business owner.

 

Construction Business Owner, October 2009