Editor's Note: This is the first in our 2009 series, "Earn More, Work Less." To read the next article in the series, click here.
Business owners want their companies to deliver the results they want. Do you know what you want? I bet at the top of your "want" list is more money, freedom, time off, wealth and fun! You want to build the best company in your marketplace that makes more net profit than your competitors, has excellent managers who run your company, has loyal customers who give you most of their work at your price, allows you to build equity, generates passive income and gives you several months off every year to enjoy your life.
But do your everyday actions, activities and priorities deliver what you want? Probably not. Most continue to do the same destructive things that keep you from ever achieving your dreams and reaching your goals. You continue to hire the wrong people for the wrong reasons and don't have a training program to allow them to perform at their best levels. You try to save as much money as possible by controlling every purchase, delivery and installation instead of focusing and investing in marketing, sales and building customer relationships. You continue to win business by offering the lowest prices instead of providing more value or services than the minimum required to keep your customers somewhat satisfied. You get projects and tasks completed with your constant supervision and micro-managing of managers and employees instead of using written systems and guidelines for your people to follow. You are the business and won't let go, delegate or empower people to make decisions without your input or approval.
Is Your Company Mediocre?
Are you really willing to do what it takes to get your business to work the way you want it to? Or are you stuck, afraid to make a move, unsure what to do, unwilling to try new things, not able to trust your people and comfortable with mediocrity? Mediocrity is owning a company that makes little or no net profit, competes on price, doesn't have a unique differentiating factor from their competition and doesn't deliver what the business owner wants. Are you satisfied with being mediocre, achieving less than your potential and continuing to struggle to keep it afloat?
Or do you want to:
- Be the industry leader in your marketplace?
- Sell more than low price to win customers?
- Make more money than your competition?
- Have the best people run and manage your business?
- Be the owner instead of the overworked boss?
- Generate lots of passive income from your investments?
- Have plenty of free time to enjoy your family friends, and fun?
Where Are You Headed?
Are you really ready to hit your goals, earn more, work less and live the life you want? It would be crazy to board an airplane without a destination or try to swim upstream in a rapid rushing river or drive a car blindfolded. But this is how most business owners run their companies. They don't have a specific destination or road map to get where they want to go. They work as hard and as fast as they can trying to make headway against all odds. And they don't know where they're going. This causes frustration for the owner, managers and employees.
You know what you need? You need something to shoot for. You need a goal. Here's a goal you've probably been striving to reach for years: Keep doing more! But when you keep doing more, you stay busy and never run out of things to do. That's like being capsized in the middle of the ocean aboard a small rescue dinghy and the captain keeps yelling: "Paddle faster!" Never mind where you're going. Never mind if you'll ever reach land. Just paddle faster until you run out of food, water or energy. And then you'll die worn out, tired and broke.
Why do you need specific direction? In order to achieve the results you want, you must know where you are going and why.
"If you don't have specific written targets and goals, you'll never have to admit you're a failure!"
You can continue living the lie, staying busy and offering excuses about your progress. You've heard all the excuses: "It's the economy, bad employees, lousy customers, cheap competition or some other problem out of your control." Or you can decide to stop making excuses and do something about your condition and future priorities and plans. To get your business to work, earn more, work less and live the life you want, what must you do to improve your:
- Sales volume
- Profit margin
- Market Share
- Cashflow
- Wealth
- Effectiveness
To achieve your targets and goals, you will have to make major changes in how you do business and strive to be the best in your market. At FedEx, flawless service is the norm, not the goal or the exception. Walmart expects no mistakes from its suppliers! If their suppliers don't make it easier for Walmart, they go elsewhere! To be the best, you'll have to improve your company operations, systems, management, administration, employees, estimating, pricing, marketing, sales and service. Take a hard look at how your company is doing at your sales, profit margin, market share, cashflow, wealth and effectiveness. Do you, your managers or employees specifically know? What numbers are they aiming for? Numbers tell you how well you're doing. You will need a new set of measurable standards to see if you are on track, improving and headed toward being the best in your class.
Measure What You Want!
Without numbers to track, it's like playing baseball in thick fog. You continue to play ball and try your best. But in the fog, you can't see past first base, where the hits go or read the scoreboard. This lack of information makes the game rather challenging, perplexing and dull because nobody knows how they're doing or who is winning or losing. Without knowing the score, what's the point?
Measure what's important to you. Paying your bills, invoicing customers and keeping your checkbook balanced isn't enough to get ahead or be the best at what you do. In everyday life, you measure your weight, blood pressure, miles per gallon, the Dow Jones average, who won the football game last Sunday or the dollar amount on your paycheck. What measurement indicators will tell you if your business is serving your customers, achieving your goals, building wealth or helping you enjoy your life? Here are some numbers to track and indicators that will tell you if you are building an excellent company:
- Annual taxable business income and profit
- Company net worth and equity
- Personal net worth annual growth
- Annual income from investments
- Annual company profit margin growth
- Sales from new, loyal and repeat customers
- Profit from new, loyal and repeat customers
- Customer complaints and referrals
- Employee turn-over and training
- Personal time off and vacation days
Aim for What You Want!
Start with what you want to accomplish. The No. 1 stress business owners experience is not knowing where they're headed. What do you want and where are you headed? Next, how will you achieve your goals? If you depend on hard work to deliver what you want, you're going to be disappointed every time.
You must set up a measuring system to keep track of your progress toward your targets. For example, if you want to increase your net profit margin, there are many things you can do. You can lower your overall cost of doing business, increase your sales or charge a higher price for the services you offer. At first glance, most business owners focus on cutting costs. This is futile and won't work over the long haul. With lower expenses as your solution, you won't be able to hire better people, add more services for your customers that make them want to give you more work or help you reach your ultimate goal of more time off or freedom.
The second choice is usually to increase your sales volume by proposing and winning more business opportunities. Winning more work should increase your total gross profit but will keep you working at an even faster pace to accomplish the additional projects you have to manage. This won't move you toward your goal of earning more, working less and living the life you want. But it will keep you busier-is busy what you want?
Charge Higher Prices!
The long-term solution to achieving your ultimate goal to earn more and work less is to charge a higher price for your services and products. When you charge higher prices, you will also make higher gross profit margins. This will create more money to spend on an excellent empowered management team and full-charge trained employees. It will give you extra cash to invest in improving your operations, finances, accounting, marketing, sales and customer service. In order to charge more, you must strive to become the leader in your market. Back to FedEx as an example, they are the market leader and get more for the same service as their competitors.
Your customers must be willing to pay your company more for products or services than your competitors. Therefore, you must offer something different than your competition such as more value for the same price, a unique different delivery method or additional value-added services. Take a moment and describe five things you can offer customers that will allow your company to charge a higher price than your competitors:
1. ____________________________
2. ____________________________
3. ____________________________
4. ____________________________
5. ____________________________
As an example, a commercial general building contractor can continue to bid projects to developers per plans and specifications and get awarded the contract if they are the lowest responsible bidder. Or they can negotiate the project at higher prices than their competitors if they offer additional valued or unique services. What can this general contractor offer or provide to encourage potential customers to award them contracts at a higher price?
- Total development management from concept through completion
- Design-build architecture and engineering
- Guarantee no plan omissions, conflicts or mistakes
- Assist in securing project financing
- Find equity investors for the developer
- Prepare overall project budget and investment pro-forma
- Obtain all city approvals and permits required
- Obtain all utility company approvals
- Complete interior design services for tenants
- Guarantee no change orders
- No markup on change orders
- Guarantee faster move-in and occupancy date
- Guarantee no punchlist or defects
- Full-time superintendent with college engineering degree
- Project manager certified in construction management from the Construction Management Association of America (CMAA)
- Project accountant certified from the Construction Financial Management Association (CFMA)
- Monthly service for one year on all building components
- Site and landscape maintenance for one year
I know what you're thinking. "We don't get paid for all of those extra services, so how can we offer them?" You can continue to do business the same way, offer exactly the same as your competitors and continue to struggle to make any real net profit margin. But is the Ritz Carlton cutting back on services or doing whatever it takes to give customers more than they expect?
What Can You Do to Charge More?
Offering additional value-added or different services than your competitors takes more intensive customer or project involvement, strong company management and a better trained staff. But it will set your company apart from your competitors. Ask yourself:
- What five things are most important to our clients?
- How are we doing on each of these?
- What is the evidence of our performance?
- Do any competitors perform better than us?
- What can we learn from them?
- How can we do things better?
- How can we set our company apart?
Are you willing to do what it takes to offer more in-depth, value-added services, which will get your customers to pay more for your company than your competitors?
Develop Loyal Customers Who Will Pay More!
Another way to differentiate your company is to have incredible loyal customers who deeply trust you and your company. And because of this trust, they know you'll do a better job than any other competitor in the marketplace. Quality customer relationships will cause customers to be loyal and only want to do business with your company. This type of relationship takes time to cultivate and a commitment to spend lots of time with valuable customers. Providing good work will not set your company apart from your competitors as they also try to do a good job. Developing and building trust takes a concentrated systemized effort and program. It requires a written plan and includes dedicating regular time to take customers to lunch, sporting events, fishing, golfing, weekend trips and sending thank-you notes and gifts on a regular basis. To carve out the time to build loyal customer relationships requires you to free up 33 percent of your time. To do this, you'll have to improve your company, management team, systems, operations and service. Are you willing to do what it takes to build customer realationships in order to increase your profit margin and get what you want?
When your company works and delivers what you want, you feel great. Your company is running on all cylinders. Building your business and making money is easy. Customers want what you offer. Your company doesn't rely on your constant input and direction to deliver a big net profit margin and sales. Your bank account is growing. Your investments are spitting out lots of monthly cashflow. Your managers and employees are happy and humming. You walk faster and lighter on your feet. You are excited about going to work because you aren't bothered with the little details that bog you down. You have pride in what you do and want to accomplish more. Your family is also happy as they get to spend more quality time with you. And your are living a significant life with extra time to enjoy and money to give back to others. Stop making excuses and settling for less than you can accomplish. Take this challenge to move beyond mediocrity. Do what you must do to earn more, work less and live the life you want.
Construction Business Owner, January 2009
