Editor’s Note: This is the seventh in our 2008 series of “Get Your Business to Work,” written by our regular columnist George Hedley.
There are lots of ways to make a profit in the construction business. They include cutting costs, reducing overhead, improving field productivity, accurate estimating, reducing field mistakes and having an excellent training program. All of these will give you a small improvement in your bottom-line, but not enough to make a significant difference.
The easiest way to make more money is to create it! Profit starts with revenue. The more profitable revenue you create, the more profit you make. Revenue comes from customers. Profitable revenue comes from satisfied customers who want what you provide and will pay a little extra for your excellent service. To make more profit, you must find and keep more profitable customers. Are customers your No. 1 focus? Do you have a business plan to take care of your customers and put them first? Studies show it costs and takes five to seven times more money to find new customers than to keep existing customers satisfied. Maximizing profit is dependent on satisfied customers-current, repeat, loyal and future.
Are You a Money Maker?
Are you focused on making or saving money? What do you spend most of your time doing? What are your top priorities? Do you really care about your customers and what's best for them? Do you keep your commitments? Return customers calls immediately? Man jobs properly to finish on-time? Do you keep your customer's jobsites clean? Schedule jobs based on what's best for your customer or what's best for you?
Money makers are focused on making money. Money is made by taking care of customers. Look at the hotel business. The large successful hotels are 100 percent committed to giving their guests a great customer experience from the minute they enter the front door until they checkout. They treat customers as guests and strive to give them what they want. These hotel managers don't focus their time trying to save as much money as possible or scheduling people based on running the most efficient hotel operation. They focus on creating satisfied customers who'll come back over and over again. This customer focus creates profitable, repeat loyal customers. It also stops customers from shopping price when choosing a hotel chain to frequent.
The cheaper budget motels, in contrast, are money savers and do whatever they can to save every penny possible. The furniture is bolted down to the floor, you only get one thin towel, you don't get a morning newspaper, you can't remove the clothes hangers from closet rods, the hot water is turned down to warm and the hotel clerk's goal is to make your life miserable. These motels offer poor service, average quality and cheap prices. Guess what? These cheap hotels are like most small businesses. They sell low price and don't have loyal customers. They also constantly struggle making a significant profit.
What's Your Focus?
What do you do to give your customers a great customer experience? Have you forgotten where your money comes from? As your business grows, you get busy and don't have time to take care of your customers the way you really want to. But those who make customers their number one priority make 100 percent more money than those who provide mediocre service. The vast majority of small business owners and managers focus their energy on getting work done and saving as much money as they can. They don't focus on making money by creating profitable revenue and satisfied customers. Meeting their customer's needs and providing great customer service is an afterthought in their every day activities. Small business owners start their company with a dream of working for themselves, calling the shots, making a lot of money, having some freedom and extra time off. They were good at running jobs, estimating or installing materials. But they never spent much time focused on taking care of customers.
The typical business owner is a good worker and builds a good product or service. So when they start their companies, they don't have trouble getting customers. They get busy doing the work and then hire some workers to help them get the work done. Because employees aren't as efficient as themselves, the owners scramble to get everything done and forget to take care of their customers. They get overwhelmed, overworked and don't have enough resources to hire enough qualified people to stay ahead of their workload. This causes customers to get upset as deliveries and completion dates begin to slip. This causes their overall company operation to leak customers, people, money and profits. The business owner is now stressed-out and doesn't know what to do to fix it. He works as hard as he can, but it isn't enough to keep all the balls in the air.
Business owners mistakenly focus on saving money instead of making it. What's your focus? Are customers your No. 1 priority? How much time do you spend satisfying customers? Do you have a customer service training program? Or do your customers seem like an interruption? I once heard a customer tell a rude store clerk: "You don't get it! You're overhead, I am profit!"
Do You Lose Customers?
Have you ever been to a store and waited in line to pay while the clerk talks on the phone? What do you do? Scream and yell. Wait patiently. Tap on the counter. Look for another clerk. Go to another cash register. Give them a lecture on customer service. Ask for their supervisor. Studies show that nine out of ten men and four out of five women have stopped using a store forever because of long lines or long waits. What ticks off your customers?
- Not returning phone calls
- Lack of instant e-mail contact
- Slow service
- Missing deliveries or scheduled installations
- Leaving a mess
- Punch-list too large
- Not enough men on the job
- Don't show up when promised
- Not protecting adjacent work
- Not properly funded
- Untrained crews
Customer Focus Test (Rate on scale of 1 to 10)
____ We regularly survey our customers:
- To find out how satisfied they are
- To ask for suggestions to improve
____ We regularly review these suggestions and make positive changes.
____ We have a customer mission statement.
- I can recite our customer mission statement.
- Everyone in our company can recite it.
- Everyone understands it.
____ We track customer satisfaction:
- Quality
- Service
- Errors, problems and call-backs
____ We continually train our entire staff in customer service at least four times per year.
____ New hires get an in-depth training which includes customer service.
____ Our compensation and incentive pay includes customer satisfaction.
____ We regularly reward and recognize for great customer service.
____ We don't have any stupid rules that are not customer friendly.
____ Everyone has the authority to do whatever it takes, to satisfy our customers.
It Pays to Please!
According to surveys satisfied customers will pay up to 10 percent more. Satisfied customers also tell two to three people about your great work. The bad news is that dissatisfied customers will tell ten people how bad your company is. It is imperative to remember that satisfied customers are the No. 1 reason for your daily activities, your job and your company. Your customers are not interruptions, distractions or problems. They are why your company is in business!
Your customers don't care how busy you are or about your employee problems, your cash-flow issues, your broken down equipment, your chain of command or your company rules or policies. They hired your company to perform, not make excuses. Your problems are your problems, not your customer's.
Are You Leaking Cash?
As a general contractor and builder of industrial buildings, we get calls every year from desperate building occupants during the rainy season. Their roof drains are clogged and water is backing up on their roofs. We go up on their roofs to discover their drains haven't been cleaned and they are full of debris. So we fix the problems and the rain water flows smoothly down the drains again.
[[{"type":"media","view_mode":"media_large","fid":"248","attributes":{"alt":"","class":"media-image","height":"170","typeof":"foaf:Image","width":"307"}}]]Where is your company being held back, clogged or stopped up? What is blocking you from achieving your maximum bottom-line potential? Where is your weakest link? This profit pressure point causes your company to leak cash. You are not making the money you should if everything was working properly. You work hard to get signed contracts. Then during projects, things go wrong and your customers don't get what they want or expect. This causes conflicts and hurts your bottom-line. I call this the "profit pressure point."
In order to unclog your pressure point and stop leaking $$$, look at your company systems, policies, people, service, quality, technology or training issues that restrict the flow of your operation. These clogs and obstacles don't allow your company to take care of customers and cost you lots of cash.
Check Your Calendar!
Think about what happens every day. Most business owners and project managers spend at least 90 percent of their time doing the work at hand. They multi-task as they manage employees, subcontractors, suppliers and projects. Their only customer contact is during project meetings, bid negotiations, haggling over change orders, fixing field problems and scheduling crews and materials. They take repeat customers for granted and assume if they do a good job, their customers will put them on the bid list for their next project. This may be enough to build a business in good times, but what about during a slower economy?
When new customers call with project opportunities, you immediately drop everything and put them first. You call your existing customers and cancel meetings to allow time to wine and dine potential customers. You put on your best clothes, take them to the finest restaurant, and present them your shiny brochure filled with glossy photos of your company's accomplishments. All while current customers wait for you to return their calls or fix a project problem. Sound familiar?
Your calendar doesn't lie. How much time do you invest creating satisfied customers versus getting projects built? Do you take time transforming current customers into repeat customers by finding out what they want and then delivering it to them on a regular basis? Or better yet, do you make time to take your loyal customers out to lunch, a ball game or a monthly round of golf to get to know them better?
Does your company have an action plan to make every customer satisfied? A customer satisfaction program takes concentrated effort and will return big-time to your bottom-line. You can be a repeat customer of K-Mart or Wal-Mart, but you aren't satisfied, so you'll shop anywhere the products are available. Satisfied customers will use your company over and over again and pay you more than your competition. People want to help those who help them. Look for ways to help your customers make more money. Be more of a business partner than a provider of services. Before I meet with customers, I try and identify how I can help them be successful. I come prepared to share a business tip or trick that will help their bottom-line.
Time is money. How you focus your energy will decide how much you make. Meaningful time satisfying customers is big money. Make it your priority to invest at least 50 percent of your time focused on satisfying customers. This will return more profit than you'll ever make ordering materials, scheduling crews or supervising operations. Rearrange your calendar, put customers first and watch your bottom-line grow!
Construction Business Owner, July 2008
