The Design Builder's Blog

5 Success Limiting Actions Contractors Should Avoid To Maximize Long Term Profitability

Having grown my own contracting business and worked with hundreds of business owners seeking to do the same I have come to recognize five specific things I think dramatically limit a business owner’s success and potential long term profitability.   If you plan to grow your construction business deciding how you will address these five actions can set you on path that is more likely to support your long term professional and personal levels of success. 

Not having an exit strategy

If you have no idea where you want to end up any path will take you there.   On the other hand if you think about where you want your business to be in 10 to 15 years, and what role you as the owner want to have then, it’s more likely the decisions you make along the way will support and maximize your ability to get there.   Consider going down the wrong path will eat up a lot of value time and money that could have been used to help grow your business and will reduce your potential retirement funds.

Hiring for today without thinking about tomorrow

Many contractors hire for today.  By that I mean they hire the help they think they need for the projects they have on the books and the current size of the business.   If you plan to grow your business these employees may not have the skills or desire to grow with the business.   If you think about how much you want to grow, the organizational charts you will need at different stages of growth, and the job descriptions for each position on the organizational charts, you can make better hiring decisions.   And, long term, you will have less employee turnover and therefore lower training related expenses over time as well.

Not setting goals and metrics

Letting your business grow without having measurable goals along the way can lead you and you’re your business down a path to mediocre results.  Without a goal for example for work produced and sold per month you won’t have an objective target to hold you and your employees to as business happens.   Without goals and metrics the business may just accept whatever level of performance happens by chance.  On the other hand, by having established goals that need to be answered to, if you come up short of your goal in one month the new goal for next month can be increased to make up for the shortfall and get you back on track.  Knowing you are behind on your goals you and your team can make alternate plans and the changes required to catch up.

Not establishing your target customers and project types.

Being the” Jack of All Trades” to everyone who calls your business may work for a self employed handyman or carpenter, but that’s not a good strategy if you want to be a construction business owner with a growing business.   Deciding your niches can help you streamline and personalize your business systems so they serve both your business as well as your customers in a consistent and reliable way.  For example becoming a Design/Builder may limit who will do business with you, but on the other hand making a commitment to that business delivery method you can develop a marketing and sales process that generates the qualified leads and sales you need and will help your business become known as a Design/Build expert in your desired target market area.  My own experience made it obvious to me that consumers are willing to pay more for experts than they typically will pay for a “Jack of all Trades”.

Not getting the professional help you and your business need

Successfully growing a residential construction business is not easy and takes time.   If you go it alone you will likely attend many sessions at the “Lumberyard School of Hard Knocks”.  That educational institution can be expensive, frustrating and may require you scrap a lot of what you have done in your business because it will no longer work well enough as you grow the business.  With the right professional help and guidance you can reduce the overall long term cost of your path to success and you can get there much faster.   Considering the principle of compounded interest, the more profit dollars you earn and keep each year along your path, the bigger your nest egg can be when you are finally ready to exit your business. 

A final thought

If you find and work with the right construction business coach and or mentor your investment of time and dollars working together can have tremendous ROI.  Just make sure he or she teaches you to fish so you and your business won’t become dependent on their assistance to stay in business. 

Let me know if you want my help.

One Simple But Powerful Tip For Hiring The Right Employees

Many contractors complain about employees not doing their jobs as expected, don’t fit in with other team members and or are not performing their individual work tasks as expected.   These are common problems to be recognized and unless addressed can cost the business a lot of money and can compromise customer satisfaction.  However I find that in many cases the employee is not the one at fault, but rather the construction or remodeling company that did the hiring hired the wrong person. 

So why does this happen and what can construction business owners do about?

A big mistake I see many contractors make is creating the job description for a new hire after he or she has already been hired.  Think about that for a second.   Whether written down or worked out inside your head, figuring out the job description for a new hire after the fact may just be a way to rationalize your hiring decision.   Done after the fact the job description is only a documentation of who you hired and what you got; not necessarily who you should have hired and what that person should be able to contribute and deliver as an employee.

Instead, here is a radical idea

Why not write job descriptions before you seek to hire! 

By creating a written job description you can make sure any new hires will have the skills, personality and previous experience to fill the job’s position within your organization.  

When putting the job description together I suggest you consider and include not only the desired trade skills, but also the expected outcomes if the employee performs properly.  To make sure the person will fit in well with the position, as well as the rest of your team, also include a profile of the candidate's desired attitudes, behaviors and disposition.  If you think this through and express it in writing before you hire, you can use what you put together as your guide and as a checklist when interviewing and considering candidates.

Here are a few example considerations by job position

• Carpenter: Do you need someone who can preplan the project including making materials lists and setting up sub contractors in advance of starting projects or are you OK with a good carpenter who can figure things out well enough as he goes, but can’t preplan? (Click here for a Lead Carpnter Job Description)
• Bookkeeper: Do you want someone who can set up and use QuickBooks to track financial information and create business reports from the information, or are you OK with a data entry level person who just follows someone else’s instructions within a QuickBooks file that was created by your business coach or accountant?

You can either hire for what you need or settle for what you get

I hope you can see by my examples offered above that if you don’t define what you want in advance you may not get what you really need.  If fact, hiring the wrong person can cost you a lot of money due to wasted time and lost opportunities while you seek out and onboard a replacement candidate.  

Hiring the right employees should be looked at as an investment.  With the right employees the business can grow faster and generate a lot more profit.  Hiring the right employees can also help put you on a path towards a comfortable retirement so you won’t have to work until you die.

How about you? 

Are you a business owner who figures things out as they happen, or will you plan ahead and set up what you want to have happen when it comes to growing your business and hiring the right employees?

Guest Blogger: Beth N. Davis is the owner and operator of BD Contractor Services where she and her team create and implement dynamic marketing plans and trainings for home improvement professionals nationwide. Visit www.bdcontractorservices.com or connect with her on Facebook.

Creating A Referral System At Your Remodeling or Construction Business

Referrals have long been the lifeblood of the remodeling industry.  To ensure a steady stream of referral business, you need a system. Follow the steps below and you will be on your way to creating a simple and manageable referral system.

Lay Your Foundation

Before you begin to build your referral system, you must first take stock of the relationships and connections that you can leverage for success. Take some time to list all of your current and past clients, individuals with whom you have a personal relationship (friends, family, etc.) and those with whom you have business relationships. Be thorough.  The quality of this list will affect the overall quality of your referral system. 

You will likely want to access information about these individuals in the future so be sure to create a database in a format that you will use whether that be a Rolodex or an app on your smart phone. I have used an Excel spreadsheet for this task for over a decade and update it weekly. From this list, go ahead and delete the names of those you would not choose to work with. Identify 2-3 characteristics of the remaining individuals that highlight their importance or relevance.

Take Action

Making the ask, that all important action item that takes you from plan to procedure, can be the most difficult part of a referral system for many people. This is when you begin contacting your network and directly asking for referrals. There are many ways that you can accomplish this, but, for the sake of consistency, I recommend that you rank all of your prospects and contact 5-10 per day with a personalized version of a templated message. Whoever handles your administrative functions will be able to assist you with this. 

If you want to contact all of your prospects at once, I recommend doing a physical mailing and being sure to personalize the letters. For best results, make sure that you cover three specific things in your letter: Where the person knows you from, what specific traits about them make you think of an ideal client and what type of clients you want to connect with.

Asking for referrals is like planting seeds. You may not see immediate results, but people will start to think of you as they move through the world and the results will begin to show over time. This method is meant for steady and dependable referral income.

Exceed Expectations

It isn’t enough to secure a referral and sign a contract. Once you have sealed the deal, you need to deliver. You and your staff should always shoot to meet client expectations but it is even more important when that client is a referral.

Remember that it is not only your reputation, but the reputation of the person who referred the client to you that is weighed here. There is no faster way to lose credibility with a client than to provide poor service for someone they have referred to you.

Don’t Forget to Measure

Find out where (and who) your new customers are coming from. Ask for feedback on service and quality and make sure that you integrate the feedback into your business practices if they prove to be relevant. Committing to constant improvement shows your current and past clients that you care.

Follow Up

Always thank people for their referrals. Part of your referral system should include following up with individuals who have given you referrals in the past.  Gifts and points are nice, but the real reward for these customers is your heartfelt appreciation and the ability to connect someone they care about with quality service. 

Everyone in the remodeling industry wants to work with dynamic clients who pay on time while creating beautiful projects in the process. Doing this without spending a fortune on advertising will be a reality when you look around you and leverage your relationships for maximum results.

10 Causes of Construction Business Owner Financial Anxiety and What to Do About Them

Anxiety affects our whole being.  It affects how we feel, how we behave and has very real physical symptoms.   It can be exhausting and debilitating.  Mild anxiety is vague and unsettling.   Contractors with lower total sales volumes might be suffering already from what I call mild financial anxiety.   Then, as the number of dollars going through the business increases, say above $4-500K, a contractor can suffer from severe financial anxiety, which for some business owners can be extremely debilitating.  Not only can it be personally debilitating, it can also have devastating effects on the health of the business.

Below is a partial list of causes of financial anxiety for construction business owners.   I see these causes all the time when I work with contractors to eliminate them.  If you already have financial anxiety consider how many of these describe you and your business.   If you plan to grow your business make note of these causes.   You might want to address them before you grow.

Causes of financial anxiety

1. Not knowing the true costs of being in business as your business grows and being surprised about the costs when the bills come in.
2. Not knowing in advance if you will have enough money to pay your bills and or meet payroll when they become due.
3. Not knowing how much of the money in your checking account is profit and how much is unearned income for work not yet completed.
4. Not knowing which project types are making money and which are not.
5. Not knowing how much workers compensation insurance will actually cost you until you get audited.
6. Not knowing if you made or lost money all year until your accountant does your taxes.
7. Guessing at what to charge for labor rates.
8. Guessing at what markup you should use.
9. Wondering whether you will be selling or buying a job when negotiating price with a prospect.
10. Fill in your own anxiety trigger(s) here: _______________________________________

What contractors can do to eliminate the anxiety

All of the causes listed above can be solved by creating a true financial system for your business.   With a properly designed construction business financial system, and an accounting software program like QuickBooks to support it, your business can have the ability to:

1. Predict overhead and direct costs
2. Predetermine your mark-up and labor rates
3. Track actual expenses against budgeted using the same format as when they were determined
4. Make apples to apples estimated to actual job cost comparisons
5. Track revenue and gross profit margins by cost categories (IE: materials, labor, subs, equipment...)
6. Predict and track actual Workers Compensation exposure
7. Potentially reduce workers comp costs if your state and or insurance provider allows you to use multiple classifications for the same employee
8. Track accounts receivable and accounts payable to know in advance if receivables will cover payables
9. Tell you if you are ahead or behind your customer(s) regarding money collected versus work performed
10. Track revenue and earned gross profits by profit centers (IE: residential vs. commercial, remodeling vs. new construction...)
11. Compare produced margins for project types your company performs (IE: kitchens, baths, roofs, decks, handyman...)
12. Fill in your desired function here: _____________________________________________

Get the help you need to do it right!

Just as most home owners shouldn’t design and construct their own home, most contractors shouldn’t attempt to design and construct their own financial system.   Without the proper knowledge and experience to do so you could be putting your business and your own personal health through unneeded anxiety.

If you see yourself in what I have described here, get the help you need to improve your business financial system and your health.   Find an expert to help you.  The cost to do so may be far less expensive than the health care bills if you don’t.

2 Critical Business Investments for Contractors Looking To Grow Their Businesses

Good news!  Confidence in the future for remodeling contractors is starting to pick up.  A recent surge in new sales and leads being reported by many in the industry is a welcome change that will help businesses strapped with aging accounts payable and uncomfortable loan balances.  As welcome and helpful improved cash flow can be, be sure you prioritize how you use it.  Remodelers should not only catch up on dept with this money, but it is also important to direct some of it to invest back into your business as a way to prepare for an improved marketplace. 

Below are two critical areas remodelers should consider investing in as their finances improve and before the remodeling marketplace rebounds. Sure, both will cost money and require a commitment of your time.  However consider the lost opportunities and lost income you could be enjoying for the rest of your career if you invested in your business now.

#1, Think past the present and develop a long term perspective:

If contractors knew how to prepare for this recession, they would have been ready for it and the actual impact wouldn’t have been as dramatic on their businesses.  Knowing what you now know, use the lessons learned to better predict and deal with the next recession.  Also, start thinking about where you want you and your business to be in the future.  Be proactive and create a plan, don't wait to see what happens and where you end up.  Rather than do it on your own consider finding a mentor with a track record of success, someone who can help you and will invest the time required to understand you and your business and will invest in you. 

This should be an on-going commitment.  Don’t get started with a mentor unless you are willing to really embrace making changes and commit to the time it will take.  Establish a consistent schedule to interact with your mentor and stick to it.  You may be lucky enough to find someone who will do it at no cost.   If not, expect to invest at least an hour or more of your time a week to interact and at least $5000.00 over the course of one year to pay this person.  It is better to predict and control your future than to be subject to whatever happens.  The right mentor will have already successfully gone down the same path you are looking to get started on.

Check out this article about working with a coach or a mentor

#2, Improve your sales skills:

Consider this.  Contractors earn profits when they sell, they earn wages when they wear a tool belt.  If you want to make a lot more money you should learn how to improve your sales skills.

Selling isn’t what it used to be.  Memorized responses to prospects’ objections won’t cut it anymore and emailing your proposal is not selling; it makes you an order taker.  Find a sales training coach or program that will help you understand and take advantage of the psychology of sales and selling.  I took three years of sales training on a weekly basis during the early years of my business.  Sticking with the training and having a coach to guide me helped me “own” a sales system.  That system became second nature to me and dramatically improve not only my ability to sell at higher margins, but also allowed me to become more selective about who I would ultimately choose as my customers. 

If you join a training program expect to invest about two hours a week in the class and about $5-7,000 a year for the training.  If you have multiple salespeople consider doing in-house training and working with a remodeling specific sales coach and assume you will invest at least $7000.  If you choose the right trainer and embrace what you learn, it will be an investment, not an expense.

Should You Work With a Business Coach or With a Mentor?

I'd like to offer you something to think about if you are considering a business coach to help you with your business.  It’s something I learned by trying out several coaches when I owned my remodeling business. What I learned was that there are completely different reasons and purposes for working with a business coach versus a mentor.   

I definitely wish I knew this before I hired my first coach!

A few considerations about choosing a coach for your construction business

Many coaches can help a variety of business types in different industries. For example I worked with a business coach many years back who had never owned or worked in a remodeling business, but that guy sure knew how to help me assess and improve my marketing.  With his help we accomplished my goal of changing my business’ customer and job types so I could increase my margins.   On the other hand I worked with another coach to help me with improving my business’ financial system.  He was a smart guy, and knew his accounting, but I eventually figured out he had no exposure or experience with how a small construction business needs to do accurate job costing.   After a lot of lost time and money I found a new coach to work with who had remodeling industry experience and the difference was night and day.

One more consideration when choosing a coach is his or her past experience and level of success.   Unfortunately there are many coaches who became coaches after their own businesses failed or after they got let go by the business they worked for due to their poor performance.  Some of them may have learned from their mistakes and can still be good coaches.  However I suggest that someone who had a successful business and or a successful business leadership history is already a proven entity.  

Maybe what you actually need is a mentor

If you want help with your business systems and performance a coach is probably your best solution.  The right coach will be supportive and motivational.  However if it is you, the person, who needs help, a mentor might be a better option to work with.  
First, a mentor should be someone who has already done and was successful at what you are trying to do with your business.  Because the mentor has already personally experienced similar challenges and rose above them, the mentor already knows what you are and will be going through.  A mentor understands and knows how to anticipate the real emotional impacts the business owner will experience.   Having been a contractor as well, a construction industry mentor will probably have the exact experiences needed to help you.

Second, the right mentor will be empathetic, not sympathetic.  By that I mean the mentor will not take on your problems for you, rather he or she will help you wrap your head around what you need to think about and do so you can solve them yourself.  And, the right mentor will help you anticipate the emotional and personal challenges you might experience making the changes.  One example might be helping you figure out how to appropriately tell a long term employee you have to let him go for poor performance, without hurting his feelings more than needed and or triggering a law suit.   Another might be how to diplomatically deal with an irate client after your roofing sub’s tarp blew off in a thunderstorm last night and ruined every ceiling in the house (happened to me).  Essentially, it’s the mentor’s role is to socialize the mentee into his or her role and help avoid learning from the lumberyard school of hard knocks.  

If you’re looking for help from an expert I suggest you consider which would work better for you and your business, a coach or a mentor, before you decide on how to go forward.

One last thought: Maybe you want both in one person

Also, consider that there are some out there who can serve both purposes, at the same time.  I recommend you consider a coach who also has real life and successful experience as a construction business owner.  A mentor can warn you in advance about what it will be like to live through and implement the changes you want to make, while at the same time help you with actually creating and implementing new ways of doing business.  By working with one person who can help you in both areas, the odds for success are much higher, the results will likely happen faster, and you can avoid a lot of sleepless nights worrying about what is happening and how you feel about things. 
Hope that helps!

7 Steps for Creating A Lead Generating Web Site For Your Contracting Business

Don’t just do a web site for your construction business so you can say you have one!

Instead, put together a lead generation and prospect prequalifying machine.  And, make sure you choose a good web site designer to work with who can be a resource both during and after the initial build.  Consider the seven steps listed below before have your web site created.

The Seven Steps to Building a Contractor web site that generates leads:

1. Commit to doing it and paying for it.  Expect it to cost you about $3-6K if you use a pro
2. Do a marketing plan so you know your targets, your purpose, your messaging, your tactics and the metrics you will use to make sure it’s working and measure ROI.  If you can’t or won’t do this you may be wasting all your money because you won’t know what to measure to verify your ROI.
3. Identify the pages you want to have on your site, as well as the sub pages needed to support your marketing strategy. 
4. Then identify the functionality you will need behind the scenes.  For example things like the Content Management System (CMS) you will use to add and edit pages, smart call to action buttons so you know what pages visitors clicked through from, landing pages, a blogging tool, automated lead nurturing ability, analytics and an email marketing tool.  You will need to consider these kinds of things to get a price from a web designer for the work to be done and the CMS you will use.
5. Identify what you will expect of your web designer.  See this blog for help with qualifying a good one.   Just like home owners choosing a contractor, think past just the cost.  Also consider what kind of help, expertise, time frame and working relationship are you looking for.  Will you need help with site design, layout and colors?  Choosing a CMS?  SEO and Social media advice and assistance?  Templates for certain pages you will eventually create yourself, artistic abilities if you will need graphics (you will)?   Help with creating lead nurturing strategies and campaigns?  Make your list (“Job description”) before you contact web designers.
6. Choose your designer, create an agreement, pay the money and get the process going.
7. Start pulling together the content you will need.  This includes text for the pages, photos, your blog topics, logos, strategic links and so on.   You will need to decide what you can do yourself in house and what you will need to hire out for.   Be practical; consider both the time it will take and the expertise needed to do it well.

Now you have a web site!

Make sure you also have a plan to keep it fresh, keep adding content, and use your metrics to make sure it is serving the intended purpose for why you created it.  I hope that purpose will be to capture qualified leads based on your target customer and project types.

Check out this blog for more on targeting.

An Opportunity For Contractors Seeking To Remodel Their Businesses

Now that the economy seems to be improving and spring has sprung many contractors are seeing increase leads and sales as home owners are spending money on remodeling again.   Tired of living with their homes in their current condition, many home owners are once again investing in their homes to improve their lives.   Because home owners are now confident enough in the economy to pay contractors to improve their homes and change their lives, it’s also a good time and an opportunity for contractors to invest in and improve their businesses and their lives as well.   A Connecticut trade association and several well known businesses not only agree they are willing to help as well.

Starting on Thursday April 3^rd, The Builders and Remodelers Association of Eastern Connecticut (BAEC) will be hosting a five week “Remodeling My Business” Spring Boot Camp at their Salem CT location. The boot camp sessions are being offered to association members and other serious contractors who want to invest in themselves and their businesses.  Only a limited number of attendees will be allowed to participate due to the cozy size of the association’s learning lab and registration is required.  

To make the boot camps possible these three businesses are investing in the event and their contractor customers 

Some thoughts about remodeling your business

Just like a home owner considering a project, the scope of work for making changes at your business will depend on how much of a change is desired.  Before you make any changes I suggest you consider whether your business only needs to remodel certain areas, needs a whole house remodel, or may be in poor enough shape that a tear down and rebuild makes the most sense.

Just like any other project it’s wise to first assess existing conditions, consider practical realities like available time and money, and put a plan together with a defined scope of work.  Then decide if you should build your project all at once or in phases.  Like a good builder however, a good business owner will begin the project always keeping the end result in mind.

Get the help you need to maximize your investment of time and money

If you are considering making improvements at your construction business this year make sure you get the help you need to do a proper design before you begin any changes.   Then look for industry best practices you can adopt into your business to help make the changes happen. To avoid false starts, frustration and reinventing the wheel, seek advice from experts in the industry who have already done it before.   Most of all make a commitment to invest the time and efforts needed to really do it and do it right.

If you want some help getting started and you live in or around the Salem Connecticut area consider attending these boot camp sessions. As you can see by the topic list below by attending all five sessions business owners will find plenty of helpful information and best practices across a wide variety of important construction business systems and functions.

BAEC Boot Camp Sessions Will Include:

Session #1: Thursday April 3, 2014 - Small Business Finances: Profit Strategies for Non-Accountants

Session #2: Thursday, April 10, 2014 - Choosing and Targeting the Right Customers and Project Types for Your Business

Session #3: Thursday, April 17, 2014 – Strategic Estimating: Know What You’re Selling Before You Sell It

Session #4: Thursday, April 24, 2014 - Smart Selling for Tough Times

Session #5: Thursday, May 1, 2014 – Production: You Sold It, Now You Have To Build It

10 Steps To Building A Successful Construction Company In This New Economy

For the last five years or so many construction business owners were operating their businesses in survival mode. Now, with the economy improving and residential construction activity picking up, many contractors will be looking to grow their businesses again.  If you are looking to grow your business here is my list of 10 steps contractors should take to make the switch from surviving to thriving. 

1. Build your team.  You can't do it all; no matter how much you try.  Find the right people with the right attitudes, skills and personalities to be part of your team.
2. Be ready to take advantage of opportunities for growth.  Hire and properly train employees before you already need them and their required skills up and running.  
3. You are not the Energizer bunny!  Make sure you have a plan for recharging your batteries and keeping up the motivation you will need to make your dream business happen.
4. Be the leader you need to be.  Work on your leadership skills and make sure you understand the difference between leadership and management, and when to use one versus the other.   Good employees want to be lead, not supervised.
5. Be careful about and watch your overhead expenses.   Many construction businesses failed during the recession because they could not cover the cost of the overhead they were committed to when volume and or gross profits dropped.
6. No Wild Ass Guesses (WAG)!  Know the costs of doing more business before you do more business so you can use the right markup to price your jobs profitably.
7. Dip your toe in the water before you dive in.  Before you actually increase your overhead costs test the marketplace you plan to work in to make sure you can sell at the increased pricing you'll need and can sell enough work at that price.   Consider if you are in the right market to do business but also if you have the right marketing and sales skills in place.
8. Don't be blind-sighted by increased job costs.  If you like the idea of an extended backlog of work find a way to protect your planned profits from escalating costs.   Labor and many material costs are expected to go up dramatically before the end of the year.  Be sure to price your work for the actual costs you will incur at the time you produce it.
9. Know your limits.  Do what you can yourself but get the professional help you need to do things right; to avoid costly mistakes, increase the likelihood of success and maximize the results for your all your efforts.
10. Think things through first and create a written plan to guide you. Successfully growing your remodeling business or construction business takes much more than just selling more work and adding employees.   Without a plan to commit to, business success might only be a short lived dream for you and your employees. 

Increase the likelihood of your success

Be sure to build accountability into your business and your leadership.  Share your plan and your measurables with someone who can and you will allow to hold you accountable to following your plan and achieving your goals.  This could be a spouse, relative, business coach or a mentor.   Make them part of your team and give them permission to be brutally honest with you when needed. 

You can't do it all; no matter how much you try.