Q:
Hi George, I am president and owner of my own concrete company, and my husband Bill is vice president and field operations manager and estimator. We're a commercial, union-affiliated subcontractor working from our home, serving southern New York.
After starting this company back in 2007, we didn't receive our working capital until June 2008, due to the Small Business Administration (SBA) loan process. From that point on, we signed up with Blue Book as a Women's Business Enterprise (WBE) and also received our public works certification. Bill works full-time estimating, and I am 100 percent involved in the office. I employ him as full-time in order to keep his union benefits. We have only the best union workers ready to work for us when we land our first job. We have provided proposals for about seventy general contractors (and were the lowest on about half). Unfortunately, those contractors weren't awarded the jobs.
Working capital is going down. Out of the $293,000 the SBA lent us, I spent $15,000 per month, plus monthly expenses. Approximately $80,000 purchased two vehicles and equipment for startup. We have about $2.5 million in outstanding bids. With a balance of $95,000 in our bank, I'm a little concerned.
I'm aware that we need to advertise more, and I'm currently in the process of establishing a basic website and possibly looking into other subscriptions such as Construction Journal and Government Bids. We may be better off starting with government projects since we stand a better chance being awarded the work. I do have a few connections with the state's WBE department, and I'm currently working on some solutions. The bottom line is that I wasn't aware it can take months of bidding prior to working. That was not in my business plan, which is now being revised.
Bill has thirty-four years experience in concrete construction working for other companies, yet nothing to show on paper of any work performed with our new company. I know that will come, and we have been told from numerous contractors that our number is "right there." Bill is working sixty to eighty hours per week, and the invitations to bid are coming on a daily basis. Can you offer us advice as to where to go to from here?
Angie Smith, President/Owner
Smith Concrete and Construction
A:
You have the good work ethic and desire to make it happen. The most important part of any business is getting customers to buy what you offer. It starts with a very targeted customer list of companies who have the need to hire you. To build a good customer list, it takes a concentrated sales effort. While estimating is a part of the sales process, it is not sales. Sales is taking customers to lunch and building loyal relationships with them so they want to do business with you.
Unfortunately, now is a lousy time to get any construction work with customers who don't know your company. The total work volume is down 35 percent or more, and companies are most likely going to use other companies they have done business with for several years-unless you are the stupid low bidder by a big margin. One tactic is to buy some work at a break-even price to get started and build a track record. I suggest you start by bidding some very small jobs or service accounts cheaply, get in the door and then build customer relationships.
Another tactic is to make sure when you bid a job, you offer your price to all of the bidding contractors. That way you won't get left out when your general contractor doesn't get the job.
Action steps:
- Take four or five customers to lunch every week.
- Don't bid jobs where your odds are less than 4 to 1.
- Pre-qualify before your bid. Ask these questions:
- Will they negotiate?
- How many other bidders are there?
- Who else is proposing/bidding?
- Who was awarded the last three to five jobs?
- Are funds available?
- What are the chances the project will be built?
- How will bids be opened?
- Who opens and reviews bids?
- Who makes the final selection?
- What is the selection criteria?
- What are the chances you'll be awarded the job?
4. Bid every contractor bidding
5. Make a target customer list of companies that need what you offer.
6. Get some small jobs with companies who have a lot of potential.
7. Stop spending any money except on customer lunches!
8. Make sure you dress for success. Look like a banker-not a carpenter.
9. Sell first, estimate second.
10. Did you read No. 8?
Construction Business Owner, September 2009
