Your Own Construction Business – Winning Strategies for Success

Have you ever played on a sports team with a losing record? As the season comes closer to the end, a losing coach must make one of two choices: panic in desperation and call some bad plays or sacrifice short-term gains to build for the future. Desperate coaches who fear for their future often call “Hail-Mary” plays, hope for a miracle or make some bad decisions. Solid and confident coaches will stick to basic principles and do what they know will build a better team over the long haul.

Build a Lasting Team for Your Construction Company

Desperate people make desperate decisions. In your business struggles, have you called any risky plays hoping that a miracle will salvage your future and keep you afloat? Often, desperate business owners call the wrong plays to keep surviving even while they are barely able to play the game. I have witnessed many poor decisions construction business owners have made to keep their companies alive and remain in the game:

• Bidding contracts at cost to keep crews and equipment working
• Eliminating employee training to cut costs
• Postponing technology upgrades to save money
• Selling equipment at a huge discount to generate cash
• Laying off key managers to reduce overhead expenses
• Trying to generate more sales without a marketing budget or salesperson
• Offering large discounts to get paid faster

A winning coach must always put long-term success ahead of short-term victories to build a team that will remain victorious and gain momentum over the long run. Just like winning coaches, successful construction business owners have goals, targets and plans built on sound principles for success. Here are some examples of sound principles:

• A strong management team
• Systematic operations
• Financial management
• Ongoing sales and marketing
• Employee training
• Administrative excellence
• Cutting-edge technology
• Innovation and creativity

Get Your Construction Business Strategy Back to the Basics

As the climate changes and business gets tougher, you must still run on all four cylinders. Work well, work fast, work lean and produce results. You still need 11 players on your football field, backed by coaches, management, sales, marketing, accounting, trainers, administration and leadership. Without all the players operating efficiently, you may eventually lose your business to the banker, suppliers, competitors, bonding company or the creditors.

Desperate moves-eliminating parts, people, managers and systems required to manage a successful business-will not deliver the results you need to sustain a viable business. To make it worse, in today’s competitive environment, your normal customer pipelines won’t feed the machine, and your old-school management techniques will not work

I just attended a four-day convention on how to grow my business in the new economy. It became obvious that I will either have to make significant changes and investments in how I do business- starting today-or my business will not succeed over the next few years. It will eventually become impossible to make a profit doing business the same way I have for the last 10 years.

Established businesses typically wait for some other company to try new ideas or to be first with new types of leadership, systems, technology, delivery methods, employee incentives or company operations. Many resist making tough decisions about their future and don’t change until it’s too late. Some people hope that everything will work out, as it always has during a growing economy. This type of leadership will only fail in today’s pressured business climate.

Today, it takes innovative strategy, decisiveness and a new vision to be successful. It takes guts to make tough decisions that will keep your business growing and profitable, allowing you to emerge as an industry leader. Just like a winning coach, you’ll need real strength and confidence.

Define Your Vision for Your Construction Company

A successful business operates by knowing what it does best, why it does what it does and what it needs to do to stay focused and gain market share. It has a clear vision of why the business exists and what measurable results are expected to keep it winning for a long time. The purpose of a business is to give the owner what he or she wants. In publicly traded companies, stockholders want three things: quarterly earnings or profits, increasing stock values and revenue growth.

Small business owners also want to create wealth, build equity and gain freedom from handling the day-to-day operations. Some also use their companies to create investment opportunities that reap fantastic returns. Others focus on loyal customers. Still, others seek to maintain a great place to work that attracts and retains the best people in their industry.

To reach your objectives, start by deciding what you need to do to be successful over the long-term. The purpose for your construction company can be whatever you define: freedom, finances, fun, family, faith, image, prestige or community involvement.  

In many cases, the business owner works too many hours for the return he or she receives. This is common in small- and medium-sized entrepreneurial companies where the owner and business are the same. In those cases, the owner does not own a business but instead has a job that does not pay very much. The purpose of a business is not to keep busy, create stress, work hard, survive or break-even.

Expect Results

For a business to work, measurable results must be clear, precise and written. For example, a commercial construction company might shoot for the following targets:

Return on equity – Minimum 15 to 20 percent pre-tax

Return on overhead – Minimum 20 to 50 percent pre-tax

Net profit on sales – Minimum 1.5 to 3 percent pre-tax

Total revenue  – $12 million

Maximum overhead – $800,000

Loyal customers – Minimum 25 percent

Repeat customers – Minimum 50 percent

New customers – 1 per month

Customer referrals – 12 per year

Number of contracts – 24 per year

Minimum contract – $500,000

Employee retention – 90 percent

Employee training – 40 hours per year per employee

Develop a Winning Focus

A winning business finds and keeps customers at a profit. This must be the central theme and priority of all business operations at every level in your organization. An average construction company typically experiences a constant struggle between what they sell and what their customers buy. Customers demand first-class quality and top-notch service but often make their buying decisions based on price. Companies that deliver on all three (service, quality and price) and still make a profit will win in the end.

Improve the Bottom Line

To improve your winning strategy, and focus on defining your targets. For example:

Your No. 1 Priority   

• Repeat loyal customers
• Make 20 percent minimum return on equity

What We Do Best   

• Provide personal service
• Integrity and trust

What Project Types We Do   

• Commercial buildings What Size Projects We Do  
• Over 20,000 square feet
• Over $1 million.

Where We Do Business  

• Within 60 miles from our office Who We Do Business With
• Manufacturing companies

How We Do Business   

• Full service and full value
• Total project management
• Design-build contracts

Call Winning Plays

To build a winning business, start with a new playbook with blank pages. Ask the question: “If we could start over, how could we design this company to be a cutting-edge and profitable industry leader?” Forget about your current people, positions, procedures, equipment, strategies or customers. Think new markets. Think real customer needs. Think creative approaches. Think different and new delivery systems, pricing structures, chains of command, incentives and profit goals. Think about rewarding and compensating results in new ways.

Today’s customers want it all. You’ll have to think faster and better than ever before. Design your product or service for the demanding customer who expects perfect quality and exceptional service at a great price. Design your company to deliver bottom-line results that are twice the industry average because of your productivity and efficiency.

Construction Business Owner, September 2010