Category Archives: Contractors

Hire the Right Players Now!

If you were the owner of a NBA basketball team, one of your top goals would be to have the best players on your team. With only five players on the court at any one time, every one of them is critical to winning. If you don’t do a good job hiring the right players, your team won’t win many games. And eventually the fans will stop coming out and spending their money on tickets. In other words, the success of your winning team is to have the right players on the floor at all times.

Business owners tell me they can’t find any good help. But how much time do they actually spend finding the right players? What you get is a direct result of your priorities. When you don’t take enough time to find, cultivate, and train new players, how do you expect to grow a winning team? Professional sports teams have a full time executive in charge of player personnel – finding the right players, managing their contracts, and keeping them happy. But most small companies don’t spend more than a few hours a year making sure their roster is balanced, robust, and excellent.

Before the annual draft, every professional sports coaching staff makes a list of all the positions and their current players to analyze what they need to change or add to improve. In your company, the draft is now. To get started, make a list of all of your company positions, the talents required at each job, the player currently assigned each position, and then rank how well you think they are doing.

Player Personnel Ranking Chart
Position Talent Required Player Ranking

  • Estimator Knows accurate costs Jim B C+
  • Completes bids on-time Jim B A-
  • Maximizes sub-bid coverage Jim B B-
  • Presents company well Jim B B
  • Project Manager Manages budget Bill C+
  • Maximizes change orders Bill B
  • Keeps customer happy Bill A
  • Paperwork on-time Bill B-
  • Superintendent Finishes jobs on-time Dave A
  • Pushes crews to the max Dave B+
  • Safe jobsite and no accidents Dave C-
  • Coordinates subcontractors Dave B-
  • Foreman Manages crews and jobsite Sam B-
  • Brings jobs in under budget Sam C
  • Knows how to build quality Sam A
  • Follows company procedures Sam C-
  • Carpenter Can build per plans Joe A-
  • Hustles & works efficiently Joe B
  • Takes initiative & action Joe B-
  • Team Player & good attitude Joe D
  • Office Manager Completes tasks on-time Sue B-
  • Understands accounting Sue C+
  • Understands construction Sue B+
  • Team player & good attitude Sue A Continue reading

Fill The Seats Or Go Broke!

If you were the owner of a NFL football team, your number one goal would be to fill all the seats every week. To fill seats takes a multiple approach. You must put a winning product on the field and you must sell seats. Seats don’t sell themselves. It takes a huge effort to create sellouts at profitable ticket prices.

Over the last ten years, you didn’t have to sell very hard to keep profitable revenue flowing into your company’s coffers. If you put a mediocre team on the field, called the usual plays, and used an average business strategy, your customers would keep coming back for more, if your price was somewhat competitive. And because business was plentiful, you didn’t have to try to win over many new customers. You stayed focused on doing the same type of work for the same type of customers and your business grew. Because there was enough work, you also didn’t have to try different types of projects, customers, or contract delivery methods. In fact, you even prided yourself as a specialist in a very focused type of business niche.

Fast forward. Today it is hard to fill the seats, revenue is scarce, and customers are hard to find. Having a winning team doesn’t matter if they can’t find a game to play in. You’ve cut your overhead and reduced your expenses as low as you can to survive. You continue to bid more and more work against too many competitors at lower and lower prices. Now you are even calling on new and potential customers you really never wanted to work for. You’re trying to get on any bid list you can including public works, which you always avoided because of the paperwork and prevailing wage issues. You’ve assigned your office manager or estimator to cold-calling and emailing any lead they can find in hopes of a miracle. Nothing is working and getting new business at a reasonable price is next to impossible.

Now what? You’re thinking you’ve got to fill the seats with paying customers or go broke. If the sudden slowdown in the economy taught everyone one thing: ‘Putting all your eggs in one basket won’t work forever.’ Many contractors and business owners focused their efforts on doing only one kind of project and service for one type of customer. For example, to keep revenue and jobs flowing in, many focused on only building housing tracts, or shopping centers, or industrial parks, or custom homes, or office building interiors. Some focused on building for general contractors, developers, or home builders. Some expanded and did more than one type of project. But, most didn’t crossover into totally different or diverse types of work. And offering a service component to their revenue stream wasn’t even considered as they were too busy to mess with little jobs.

Multiple streams of income sells more seats!
A diverse business plan includes three types of revenue streams with many different types of projects per stream. For example, here is a partial list of the unlimited revenue and business opportunities contractors have to choose from:

Multiple Revenue Streams & Opportunities          

1. Contracts & Bids

Private Construction
Retail shopping centers
National chain stores
Industrial buildings
Manufacturing & factories
Metal buildings
Office buildings
Banks
Medical buildings
Hospitals
Self storage
Renovations
Interior Improvements
Utility Company Projects
Housing Tracts
Custom homes
Residential remodeling
Residential home upgrades
Residential replacement work
Site improvements

Public Works Construction
Schools
Offices
Hospitals
Facilities
Roads & highways
Transportation projects
Sewer & water projects
Storm drain systems
Plants

2. Service Work & Ongoing Accounts

Ongoing Monthly Or Annual Accounts
Property management
HVAC maintenance
Electrical maintenance
Plumbing maintenance
Landscape maintenance
Site service & management
Spring & winterization
Light bulb replacement
Roof service
Road and drainage repair work
Generator service
Energy management & controls

Repairs & Service To Fix Broken Components
Plumbing & mechanical repairs & upgrades
Window replacement
Tenant improvements
Tenant relocation
Carpet and flooring service
Building damage repair
Clean-up and debris removal

3. Wealth Building & Passive Income

Own income producing real estate

Rental homes
Apartments
Shops and yards
Industrial buildings
Offices
Shopping Centers

Own income producing businesses
Rental equipment companies
Wholesale materials
Supplier
Services Continue reading

The Business Do Over!

In sports, the coach gets to start over every season. Winning coaches look at their past records and make positive decisions of what they need to drastically change and achieve better results. If they continue to play the game the same as they did last several seasons, they won’t continue to build and win. They have to look at how they play the game, players, coaches, methods, offense and defense, training, strategy, and tactics.

Now imagine it’s your turn to start a new season. You are the coach of your business and want to keep your job and make a lot of money for the owners. What should you do differently to win the game of business? What tough decisions should you make? What new plays will you call? What players should you replace? Where should you play the game and how? Will you keep doing what you’ve always done or decide to do whatever it takes to grow your business and make a profit? Below is the list of the top “Do-Overs” I hear from the many business owners I have surveyed.

Do-Over # 1: Invest Sooner Than Later!
When your business was busy, you didn’t have enough time to stop and look for investments. And you were growing, so most all of your cash-flow went to fund your company’s growth. The snowball effect was keeping you excited as your business got bigger and bigger. It was like a shot of adrenaline as you did more and more work. The more you grew, the bigger you wanted to get. Volume is addictive, so you bid work too cheap and never missed an opportunity to grow or gain a customer. Everyone thought this gravy train would never end. Continue reading

Low Bid Gets the Job In Public Work

In public works construction, the low bidder usually gets the job and there is little or no room for sales strategy or tactics. The best way to be the low bidder and awarded a contract is to have the lowest possible costs and the most efficient construction management and field operation possible. To keep your costs lower than your competitors, your field crews must be lean, productive, and well trained. There must be no downtime, job problems, quality issues, coordination conflicts, or mistakes. Your subcontractors and suppliers must also be supervised and managed tight without gaps in scheduling, productivity, conflicts, or quality. This can only be accomplished with diligent leadership, accountable management, and ongoing training focused on productivity and efficiency.

Now you are in the sales business!
In private work, it takes a lot more than just bidding and negotiating to win contracts. You’ve got to give customers a differentiating reason to hire your company. It’s not just about the price, inclusions, and exclusions. Now there are too many competitors who can do the same job as your company and will cut their bid below their cost to get a job. To win more contracts at your price, you must face reality. You are not in the construction business. You now have to also be in the $ALES business! Continue reading

Win More Contacts At Your Price!

Every construction company business owner wants to charge a higher price for their services and products. And especially today, I’m sure you are looking for the magic ingredient that will give you more jobs at your price. But why should customers award your company a contract? In this tough economy there are less jobs to bid and more competition. Many of your competitors are pricing jobs at prices lower than their costs. They are trying to keep their doors open and crews busy hoping something good happens soon. Ask yourself this question:

Why should customers award your company contracts at your price or higher than your competitors?

It is what it is!
Perhaps you are starting to realize that it’s not what it was. The new economic reality is here to stay for at least 3 to 5 years. If it hasn’t hit you yet, get ready. Just a few years ago you could do a pretty good job and get lots of work from your customers. But today, your old sales strategies won’t get you enough work to stay profitable. It takes more than doing a good job, producing quality work, and bidding projects per plans and specifications to win contracts. Now, you must do more and offer something different than your competitors to win contracts. You need to renovate, innovate, change, improve, and upgrade your estimating systems, bidding strategies, proposal format, presentation methods, customer contact approach, marketing plan, and sales tactics to be successful today.

I started my construction company in 1977. At that time there was not a lot of competition and getting work was relatively easy. Through my business contacts, I could find a nice job to bid, call the customer, meet them, get a set of plans to bid, do the take-off, estimate the job, and then turn in my proposal with a reasonable mark-up on it. A few days later I would call to see if I could meet with the customer to review our bid. At the meeting we would negotiate the terms, inclusions, exclusions, and agree on a final price. Simple. 

Do your customers want more?

Joseph owns a residential landscape company doing new installations for homeowners. He mainly works on referrals from custom home-builders, architects, and past customers. Sometimes his company is busy and other times he waits for the phone to ring. By chance he was asked to do some hauling for one of his contractor customers. In the past he didn’t pursue this type of business because is was a nuisance and disrupted his operations. But this got him thinking about how he could expand his revenue sources.

Joseph decided to set up a new division that focuses on service work. He moved his chief estimator into the role of division manager to build the customer base, added a service manager, and put a bookkeeper in charge of managing the accounts. He started by asking his customers what other type of services they needed on an ongoing basis. His homeowner customers trusted his company, liked their work, and actually wanted his company to provide more ongoing maintenance for them as well. They asked for weekly lawn and garden service, annual weed removal, yearly tree-trimming, winterization service, and annual irrigation repairs. Some of his customers owned pools and also wanted his company to do their pool service, maintenance, and repairs. Some customers had young children and wanted swing sets and playground equipment installed. Some wanted new barbeques installed, fencing added, stables for their horses built, cages for their pets, and patio covers added. Some customers asked him if he installed annual holiday lights as well. Some customers even wanted his company to offer debris and junk removal and hauling. WOW! All that business and Joseph hadn’t even thought about providing it for his customers. Continue reading

Contracting is not just about construction!

How can construction companies increase their steady stream of ongoing reliable sales income regardless of the economy? What type of ongoing revenue can your company, employees, infrastructure, technical skills, reputation, equipment, knowledge, customer base, experience, or potential generate? Attendees of my two day Profit-Builder Circles come to learn how to get their business to work the way they want them to and then take them to the next level. As I look back over the hundreds of past attendees, the business owners who are the most successful are the ones who have two types of contracts, revenue sources, customers, and business models. They do both lump sum contracting work plus have a significant amount of their revenue come from steady ongoing service accounts.

These successful contractors don’t rely solely on bidding single jobs, one at a time, to generate most of their revenue. When you mainly rely on bidding or negotiating work to win contracts, your business becomes ‘fast and furious.’ Your business is either hot or cold, fast paced or dead, busy or slow, and you cant’ control your workload and your revenue isn’t steady or reliable.

‘Slow & steady’ business keeps your crews busy as the workload keeps on coming regularly over and over every month. You can count on a steady flow of work as annual service contracts provide ongoing revenue. With steady regular service accounts, you can plan your schedule, workload, and cash-flow.

Multiple types of income, contracts, and revenue sources compliment each other. This business model allows these type of companies who do both bid and service work, to become very efficient, generate steady workflow for their employees, and create wealth for the owners. But they require two different types of management, sales efforts, cost accounting, customer service, employee training, professional standards, and marketing efforts.

Steve is an electrical contractor who has two separate companies that work together. He has a new construction division that bids to general contractors and does commercial projects, large shopping centers, and office buildings. He has ten steady general contractor customers who typically give his company enough work to make a small profit during good times.

As an offshoot to his contracting company, Steve started an electrical service company several years ago that installs, services, and maintains back-up power generators for homeowners, commercial facilities, industrial plants, hospitals, government buildings, and offices. This company seeks annual contracts for all service work required to keep customer’s buildings electrified during power failures. This specialty service work includes design, engineering, preparing studies, permitting, new installation, repairs, maintenance, testing, fueling, implementing technology, and ongoing monitoring work to insure the generators will work when needed. This service business has grown as he has focused on acquiring new customers, providing excellent customer service, regular weekly employee training, and lots of sales and marketing to attract potential customers. Continue reading

The 5% Factor: 5% Faster jobs = More profit! (part 3 of 3)

How can you make your jobs finish only five or ten percent faster? Many of these critical scheduling factors can cause major delays:

– permits
– procurement
– submittals
– approvals
– material selections
– long lead items
– probable delays
– potential problems
– anticipated conflicts
– critical decisions
– phasing issues

 Time is easy money!
Those major factors can cause your projects to take longer. But we are looking for the little things that really cost you money. When you don’t focus on faster, it doesn’t happen and you let your crews go with the flow. When you focus on speed, you get the whole team moving faster and becoming more efficient. When you start every project, get the easy money flowing by getting your supervisor and crew together. Explain the projected and budgeted schedule. And then ask them to brainstorm ideas how they can improve the schedule by a minimum 5% to 10%. Explain to them how 5% faster will translate into dollars and will keep your company competitive in the tougher

 Squish the Schedule 5% or more!

Total projected sch. = 100 crew days
Total bud. @ $3,000 /day = $300,000
Beat the sch. by 5% = Save 5 days
Total crew savings = $15,000
Beat the sch. by 10% = Save 10 days
Total crew savings = $30,000

In addition to saving on your crew labor budget, the overall project will finish faster as well. You will save even more money concurrently on general conditions, equipment, clean-up, temporary facilities, and supervision costs. This money adds up fast!

Miracles can happen!
Years ago in July, I was on a job-site meeting with my superintendent and concrete foreman. I asked them when they were going to erect and tilt-up the exterior concrete wall panels on a large warehouse project. They both told me they were planning on tilting-up on November 15th. That seemed too long a schedule to me for our 20 man crew to get the work done. So I asked them how they arrived at that date. They told me they met with the crane company and thought that date was ‘doable’ and they could easily make it happen.

I didn’t like their answer so I asked if they could finish a few weeks faster. They both squirmed and didn’t want to answer or commit. Then I asked if they could finish by October 25th if I offered them each a $1,000 incentive. In less than ten seconds, they both said they could make the faster October 25th date. A miraculous change of mind by two veterans. And they made the new date. It cost me $2,000 and saved me 15 days for 20 men. You do the math.

Sometimes we have to get creative to get the results we want. When we go with the flow, we don’t push our people, and it costs us real money. When you compete, you run a little faster. When I used to swim in high school, I always went faster in the meets than in practice. Competition makes people go faster. Challenges make people work harder. So do games where you keep score and can declare a winner. I like to say: ‘No score, no game!’ What incentives can you offer to get your crew excited about beating the schedule?

Annual Savings @ 5% Faster

20 Crew @ 200 days @ $35 /hr
Labor savs. w/5% faster sch.
Equip. costs saved – 4 pcs @ $50/hr
Costs saved 4 jobs @ $1,000/day
Tot. Annual Savings = More Profit

Trash your old tools!
Another consideration is the working condition of your tools and equipment, and their overall effect on your crew efficiency. When is the last time you did a tool inventory or a detailed equipment analysis? Some you should keep, trash, replace, or upgrade. Field workers tend to use old, broken, or bandaged tools and equipment rather than admit to the boss that they might be broken or worn out. How much money are old unproductive tools or broken down equipment costing you?

The added benefits of having quality tools and great equipment will be increased crew teamwork, improved morale, more pride of workmanship, better quality, less mistakes, safer projects, and more efficiency. This will translate into even faster jobs and more bottom-line profits for your company.

Poor Production = Poor Profits!
Do you think your crew wastes at least 3 to 6 minutes per hour? Those few minutes are costing you a ton of money.

20 Person Crew 5% Time Lost
Time lost /person = 3 minutes /hr
Time lost /day /crew = 8 hours /day
Total hours lost = 1,600 hrs /yr
Crew labor rate @ $35.00 /hr
Annual Prod. Lab. LOST = $ 56,000 /yr

There are many ways to improve crew efficiency and finish your jobs faster. Start by taking a hard look at your start time, break time, lunch time, and quitting time. Does stop working at 3:30 pm mean start rolling up at 3:00 pm or 3:10 pm or 3:30 pm? For a 20 person crew, every minute you lose per day costs you as much as $2,500 per year or more.

Double your Profits!
Call an all crew team meeting and discuss ways to improve your schedule, save a few minutes every hour, define your exact hours for production expected, create meaningful incentives, improve your tools and equipment, increase efficiency, and strive to implement the 5% factor to get more everyday from everyone.

Construction Risk Is a 5 Letter Word! (part 2 of 3)

The biggest risk and opportunity to make or lose money is… LABOR! Let’s look at a typical job breakdown to see what happens if labor runs over budget by 5%.

Typical Construction Contract Budget

Labor $40,000
Materials $40,000
Equipment $10,000
Subcontractors $10,000
Subtotal $100,000
Overhead @ 10% $10,000
Profit @ 5% $5000
Contract Amount  $115,000

The 5% Factor = 100% More Net Profit!
Most construction companies only make an average annual net profit between 2% to 3%. If you can IMPROVE your LABOR costs by only 5%, you can IMPROVE your net profit amount to 4% to 5%. This can be as much as a 100% increase in your bottom-line!

If you can improve your labor by 5% in the example above, your net profit will increase to $7,000, or from 5% to 7% net profit. And if you improve your labor by 10%, your net profit will increase to $9,000, or from 5% to 9% net profit. This is real money and will put you far ahead of your competition and give you some breathing room to invest back into your company.

But, if you overrun labor by a small 5% amount, you’ll spend $2,000 more than your labor budget and reduce your profit margin to only $3,000, or to 3% net profit. If you overrun you labor by 10%, your net profit will be reduced to only $1,000, and 1% net profit.

Is your crew working efficiently?
Consider how productive your crew is everyday out in the field. Studies of typical construction field crews show revealing facts and much room for improvement. Field employees spend some of their time planning the work. Then they produce the work. Some of the time they support the work doing layout, seeking information, fixing equipment, looking for tools, repairing tools, locating the right material, and asking questions. And of course some of the time is wasted goofing off, standing around, starting late, quitting early, extending their breaks, smoking, making personal cell phone calls, waiting deliveries, running out of materials, or taking care of their dogs loose on the jobsite.

Typical Construction Field Productivity

2% Planning work 0.2 hrs /day
40% Producing work  3.2 hrs /day
25% Support  work 2.0 hrs /day
33% Wasting time 2.6 hrs /day

Do these results shock you? Go out to any job site and look around for a few hours or days. Just sit and watch what really goes on. You will be under-impressed and appalled. So where do you start to improve productivity? It starts with identifying the areas that take away form your crew’s efficiency. Look for things that slow down production, create down time, or allow them to be less than productive. Some things that hurt your field productivity include:

– When the superint./foreman leaves site
– 5 trips to hardware store per day
– Run out of materials or small supplies
– Tools break or don’t work properly
– Wrong equipment for the job
– Waiting for right equipment to show
– Smoking while working
– Cell phone calls
– Dogs running wild
– Not starting on time
– Quitting early
– Breaks and lunch time extended
– Bad attitude employees

Win the race!
NASCAR is a good model to follow. At each pit stop, there is no time to waste, as every second counts and can cost the team millions of dollars if they loose any time. How can you get your crew to win the race and become:
– super efficient
– super fast
– super productive
– super organized

Focus on the 5% factor!
The dilemma for most contractors is a downward spiral and never ending treadmill. When you try to do it all yourself, you aren’t focused on field productivity. You get too busy taking care of small tasks that need to be done but don’t make you money. When you’re too busy to meet with your supervisors regularly to help them plan properly, problems continually happen. You only have enough time to react and fight fires. This causes your crews to stand around and wait for you to get them answers or needed materials.

You know you are losing money and your crews are inefficient as they waaste more time than they should. But you don’t have enough time to stay out on the jobsite all day to tell them what to do and keep them working faster. So you rely on untrained foreman to get the work done. These supervisors have no incentive to work at a high productivity rate, so they do what they feel is fast enough based on their experiences over the years. Besides, what’s the worse that could happen to them? You come out a few times a year and tell them they’re over budget and try to get everyone working a little faster. Not much of a productivity improvement program.

The 5% Factor: Produce More To Make More (part 1 of 3)

In the good old days, construction companies were owned and run by builders. These proud, tough, hard working men (and women) learned their trade in the field, had years of practical experience, and knew what it took to get their projects finished on-time. If they didn’t produce quality workmanship, they didn’t last long. Back then it was all about getting the work done no matter what it took to meet their obligations. It was about delivering solid structures with unsurpassed craftsmanship. The contracts were negotiated face to face and enacted with handshakes based on integrity, reputation, trust, one’s word, and doing what’s right. It was all about building a project the contractor could remember, be proud of, and then rely on their customers for recommendations and new work.

Fast forward to today. Now successful construction companies are run by professional managers, engineers, and accountants. These business leaders are focused on the bottom-line and following what is only required by the contract. These managers have college degrees and little or no construction field experience. It’s now about paperwork, documentation, notices, claims, and tracking systems. Building the project isn’t as important as getting the work, doing the paperwork, and getting paid, even if it involves litigation.

Combine this lack of real field construction experience at the top of many companies today with the lower and lower profit margins. Years ago there was not enough qualified construction companies to handle all the work available in the marketplace. Under this business climate, contractors could afford to always do a little extra to insure a perfect project and still make a good profit.

More demands = less profits!
But over the last 40 years, the number of contractors has tripled while the total amount of construction has stayed relatively flat (adjusted for inflation). Therefore now there are more contractors than needed to do all the work required by the market. This has created a price squeeze and reduced contractor’s ability to do more than the minimum required by their contract. In addition, with increasing competition, construction customers are now demanding more than ever before. They now demand faster schedules, safer projects, better quality, more communications, better technology, all at much lower prices.

These added customer demands on contractors who are willing to sign contracts for less than they should, have killed the construction business as it once was. Add to these demands poor architectural plans, problematic engineering, incomplete specifications, conflicting contract documents, material shortages, price fluxuations, more regulations, added paperwork, lender’s requirements, third party inspections, construction managers, and red tape, has all but eliminated a fair profit for the risk contractors take.

It’s time to refocus on the field!
These issues have put pressure on contractors to save more and more money in the field. The average crew size has increased, while the number of experienced field workers on the crews have decreased. Training is a thing of the past as most employers have eliminated it as an unnecessary expense. Superintendents and foreman are younger than ever which also translates into less experienced field leadership and less efficient crews. This has resulted in poor or flat field productivity improvements over the last twenty years. Consider your challenges fighting against competitors who charge less than they should, have inexperienced and untrained field crews, and building projects that now require more paperwork and increased risk. A need now emerges for contractors to refocus on improving field productivity as their only viable solution to compete and improve their profit margins.

Construction profitability is about reducing risk. Contracts require contractors to assume more risk than ever today. Have you considered what’s at stake?

Types Of Construction Business Risk:

– Project Loc. & Access – Project Type & Sz
– Project Sch. & Duration – Constructability
– Customer – Architect, Eng. & Consultants
– Contract Terms – Financial , Funding & Pymt.
– Regs & Inspections – Subcontractors & Suppliers
– Material Costs & Aval. – Plans & Specifications
– Approvals & Acceptance – Project Management
– Supervision & Coord. – Manpower, Prod. & Safety
– Quality & Workmanship – Estimate & Budget
– Factors Beyond Control

So how do you reduce risk and increase your bottom-line? Your choices are many. But consider which will give you the biggest return on your time, energy, and money. In other words, where can your company gain the biggest advantage over your competitors?

– Lower Material Costs
– Better Subs. Costs
– Better Equipment
– Better Supervision
– Better Project Mgmt.
– Labor Productivity