Construction Business Best Practices Series, Step 1: Build an “On-Purpose – On-Target” Business

Editor’s Note: This article is the first in a series describing twelve steps towards entrepreneurial excellence by our regular contributor George Hedley, owner of Hedley Construction and Hardhat Presentations. To read part two, click here.

Imagine you owned or managed the perfect construction business.
What would it be like? In my perfect business, I would come into the office two or three days a week; check-in with my managers; review their projects and progress; give them some encouragement and direction; call a few loyal customers and take them to lunch; check on my real estate developments and investments; and make lots of money. Then, spend my free days golfing, sailing, traveling with my wife and all the other fun stuff I like to do! What do you think? Work a little and make a lot!

This is what I call an “On-Purpose…On-Target” business. Your business and your money works for you. You are an owner, not a hands-on, make-every-decision, over-worked and under-paid supervisor and worker.

What Do Business Owners Want?

I’ll tell you what I want-I want my business to give me what I want! I want my business to be:
 

•     100 percent run by my management team
•     A great place to work that attracts the best employees
•     A company built on long time repeat loyal customers
•     A business that makes double the industry average profit
•     A company that grows my equity and building wealth
•     An environment that creates lots of freedom and fun

What Do You Want?

You don’t want a business that barely makes it-struggles, has cash-flow problems, doesn’t allow you to have any time off and doesn’t build your net worth. It took me nearly twenty years in business to finally understand. My business is a tool to give me what I want-wealth. Wealth is money and what it does for you. Money gives you time, energy, freedom and funds to use as you want-to help others; to use for your family, your employees or your community. As a business owner, to achieve wealth, you have to build a business that works and eventually creates financial independence. Your money must work for you. You should not be working for enough money to stay alive. Wealth is freedom! It gives you choices and allows you to enjoy your business and personal life.

Most business owners never become “wealthy” because they don’t sit down and clearly write out what they want. But they do know they want something different than they are getting now! So, today you have an opportunity to figure out what you want and then build a business to deliver exactly what you desire.

The Purpose of Your Business is to Give You What You Want!

The purpose for your business is not to make you miserable, consume all your time, whine about your employees, hate your customers and have financial stress. Most construction business owners shoot for “MORE”-more sales, jobs, customers, profit or more of the same. “MORE” is what I call the “UN-TARGET”-wanting to be HUGE. The busier you get, the more uncomfortable you are as you get used to being stressed out. This business owner chases bad business, says “yes” too often, is too optimistic about the reality of their situation, and has no clear plan or goals.

Successful business owners know what they want and decide what’s important. Take a few moments to write what you want:
 

•     Personal
•     Business
•     Financial
•     Operational
•     Customers, marketing and sales
•     People and leadership
•     Equity and wealth
•     Freedom and fun

The Entrepreneur’s Journey

After graduating with a degree in engineering, I worked four years as a civil engineer and construction project manager. Like my father, I had the entrepreneurial spirit and wanted to be my own boss, but I had no clue how to run a business. In 1977, I decided that starting a construction company would be easy-bid cheap and stay busy! At twenty-seven years old, I had four years experience, $2,000 in the bank, just bought my first home and construction was in a recession. Perfect timing to start Hedley Construction! Besides, I already owned all the tools required to be a success in construction-a contractor’s license; a used orange Datsun pickup truck with 92,000 miles, a metal tool box and lumber rack; a golden lab retriever; a ten gallon ice chest; a big radio; a new hard hat with my name engraved on it; and a thirty foot contractor’s power lock tape measure.

Most entrepreneurs start their company without a written business plan. They have a dream to be their own boss and make it on their own. With determination and hard work, they hope to build a “perfect” business. But, most don’t have a written plan, management team, the capital or leadership skills to be successful. When I landed my first construction project, it went well because I was small and did everything myself. It is simple when you have no overhead, no employees, only one project to work on; you make all decisions, supervise all the work, make all the purchases, prepare all the bids and estimates and sign all the contracts.

As your business grows, you work more hours. Cash-flow becomes tighter and you have no extra time. You start getting out of control as your business controls you. You finally give in and hire the most “experienced” people you can find-your relatives! Next your finances get out of control, so you hire a bookkeeper. But, since you don’t know anything about accounting, you are at her mercy and hope she doesn’t bother you with the numbers, or find out you aren’t making any money.

The challenges continue to mount-cheap competition, getting paid, unhappy customers, finding trained employees and making a profit. There are too many details, you get bogged down and only have enough time to put out fires. You have to make all the decisions for everyone and keep trying to do it all yourself. You are now officially over-worked and under-paid. If your business goal was to be busy-you’ve made it! It’s amazing how busy you can be, being low bidder and selling price. Everyone likes you when you’re busy-your banker, suppliers, subcontractors and employees. Everyone except your family and friends, and yourself!

You try hiring managers who can run your company for you without problems, stress and you being hands-on. But, you can’t let go. You can’t find any good people who are accountable, responsible or will work as hard and as smart as you. People now become a big problem, not the solution. Your business isn’t working. You’re totally stressed out and frustrated, your life is out of balance, your business is out-of-control and your company controls every waking moment. Your business is now “Off-Purpose and Off-Target!”
 

The Entrepreneurial Decision

At first, it’s just you. It’s simple when you do all the work. You do a great job, so you get some referrals and more work. You hire people to do the work. You’re now in management. Management isn’t fun when you become the complaint department. What should you do next? You have three choices:
 

1.     Go back to doing it all yourself
2.     Sit and wait for “it” to change
3.     Work different!

To build an ‘On-Purpose…On-Target!” business, you can’t shrink your company and you can’t sit and wait for something to happen. Your only choice is to change the way you work. It might seem easier to change your employees, customers, subcontractors or suppliers. But to get what you want, you’ve got to make the big change and change yourself. Change the way you think, do business, manage, prioritize, work, lead and change how you work and live your life.

The year was 1985 when I finally made a decision to get my business to work for me and without me. I would have to change and implement new ways to run my business. I dedicated four hours a week to working “on” my business. You can, too. Commit to get organized, systemized and in-control. Work on setting goals, create budgets and fix things which always go wrong by installing operational systems. Worked with your key managers and delegate nearly everything to them. Set up check and balances for every department and focus on helping your key managers become the best they can be.

If you were to buy another company, what would you want to know about it? You would ask to see their financials, customer logs, receivables, assets and liabilities and study their competition. I have been in business since 1977, and the number one thing I would want to know before considering buying a company is “does the business work?” or “do I have to do the work?” I would only want to buy a company that works without the owner doing the work.

Do You Own a Job?

The problem with most entrepreneurial companies is the owner plays too big a role in every day operations. Without the owner’s constant attention and involvement, the company doesn’t work and wouldn’t exist. Do you own a business that works without you doing all the work? Do you own a job or a company?

Imagine your business is “On- Purpose…On-Target” and meets your personal objectives. To achieve that goal, you’ll have to start working on your business to reap the ultimate benefits of business ownership-time, fun, freedom, equity and wealth.

Your current results in profits, people, stress, time and freedom are the number one indicator of your priorities and your attention to customer service, quality workmanship, financial reporting, operational systems, marketing and sales systems, motivating people and visionary leadership. When you’re not getting what you want from your business, there’s something wrong. It’s not your people, subcontractors, suppliers, competition, or customers. It’s you! Your bottom-line results are the number one indicator of your abilities as the leader of your company.

The Answer is You!

Not enough sales? Perhaps your sales systems stink. Not enough repeat customers? Perhaps your customer service stinks. Selling low price? Perhaps you’re not any better than your competition. Not enough profit? Perhaps your organizational systems stink. Perhaps you don’t know the difference between an income statement and a balance sheet. Perhaps your priorities aren’t on people, finances, overhead controls, cash flow or the bottom-line. Or perhaps you don’t set goals, know how to run a business or think you’re the problem. Only you are responsible for you, are accountable for you, can make you get what you want and can do what’s necessary to meet your goals.

When’s Your Wake-Up Call?

You are accountable for how you spend your time, manage, lead, delegate, trust people and train your employees. I finally realized to get the results I wanted in my company, I would have to make some big changes. But it’s hard to change the way you always works. Eventually you’ve got to stop saying things like “trust me, everything is ok” or “someday soon I’ll finally get is right!” or “I know my company will work when I get that new estimator or project manager or when we get paid on the big job.” When is your wake-up call?

Get In the Opportunity Business

As I looked at my business, I saw that we were commercial general contractors, selling construction services against too many competitors at too low a profit margin. It seemed all my customers were buying low price. Again, what business are you in? Are you in the construction business or are you in the opportunity business-looking for opportunities to be different than your competition, add more value, provide more services, make double the industry average profits, develop strategic alliances, leverage your relationships, joint venture, build a great place to work, grow your equity, build wealth or seek investments that don’t require hands-on management?

To get what you want and be “On-Purpose…On-Target,” you’ll have to change the way you think about your business. The natural tendency is to continue doing things the same way, work hard, stay busy and try to force it to happen. But remember the purpose for your business is to give you what you want-above average profits, increased equity, new opportunities, wealth and freedom as your business works without you!

To make this happen, I changed our business model from a general contractor to a company that seeks wealth building opportunities and investments. We started asking our customers to joint venture with us on their development projects. We began finding equity and financing sources to build real estate projects for our own account. I brought on a partner who was knowledgeable in new markets. I gave up our bad customers who shopped price. We changed our business goals from more sales volume and increasing our profit margin to growing our equity, building wealth and creating more time to enjoy the benefits of our investments.

Take the First Step

What will you do different to get what you want? You can get your business to work. Envision what you want and how you can get your business to work without you. Decide what you’ll have to do with your people, customers, project types, money and time. An “On-Purpose…On-Target” business meets your business and personal goals. Step one is to figure out exactly what you want. Then you can make the changes necessary to make it happen. We will explore Step 2-Build a Profitable Business-in the next article of this series. For now, take the first step and make a detailed list of what a perfect business would be for you.

 

Construction Business Owner, January 2006