Category Archives: Recession Proof

The Worst Case Scenario: What If You Lost All of Your Clients?

When work was plentiful, it was easy to stay busy doing the same things over and over to the same customers. You didn’t have to look for new ways to improve your business, new services to offer, or new customers to build relationships with. Just bid enough jobs to your same five or ten customers, you’ll get your share, and make enough money to stay in business. You really didn’t have to be the best, creative, or innovative. You just had to be as good as your competition. The old saying: “A rising tide lifts all boats” applied during the good times. But now as the tide goes out, all boats will go down as well.

During one of my recent “Profit-Builder Circle” two day business owner boot camps I hold every few months, I asked the attendees what they could do to make a profit if they lost all of their business in the next few months. Most didn’t have an answer. They were so used to doing the same thing and business the same way for so long, they were stuck. Most said they would just try to survive. Survive? Survive doing what? I again restated the question and asked them to consider that all of their sources of past business would be non-existent and they would have to do something different. Still no real good answers. Do you have an answer to the question?

As I started to dig deeper, David told us he was an underground utility, sewer, water, and storm drain contractor in Florida. Ninety percent of his customers comprised of track home builders and ten percent were public works and Cities. The good news was that over the last ten years he had built a large successful and profitable company doing over $8 million in annual sales. He had over 25 managers and supervisors, 150 field employees, 100 pieces of equipment, a large yard, an equipment manager, two full time mechanics, and a net worth in excess of $5,000,000.  The bad news his home builder customers had put all of their projects on hold indefinitely and he was now pursing more public works projects to keep his equipment and crews working. On these projects, the bid lists had grown to over twenty bidders, and the only way he could win any contracts was to price lower than his actual costs. Plus his $1,000,000 annual overhead expenses were starting to eat away at his net worth he had built up over the last five years. David didn’t know what to do.

I asked David how long he would last waiting for something good to happen. He said he could probably hold on for at least a year. How much would it cost? He said he would lose at least $2,000,000 per year trying to keep everyone working. I asked him if it was worth it to give up everything he had worked for just to keep his long time loyal employees and managers working while his nest egg depleted. His simple choice: keep the money or give it to employees hoping the economy comes back fast. Not an easy decision. Then I asked what his equipment was worth. He said he could sell all 100 pieces of his equipment for around $5,000,000 net after debt.

Now the real question for you: Why are you in business? Is David in business to put pipe in the ground, grow his equipment fleet, and pay his overhead expenses? Many business owners forget the purpose of their business is not to cover their costs, do work, and keep busy. It is to give them what they want. Do you want to only break-even by working hard, and keeping yourself, your crews, and equipment busy? Or do you want to own and build a company that produces a constant flow of money, passive income, equity, wealth, and freedom to you as the owner? Your business is a tool to deliver the results you want and fulfill your dream of business ownership.

David and I discussed his options in detail. Keep doing what he had always done and watch his future disappear. Or consider a radical change. If he sold eighty percent of his equipment; reduced his overhead by 20 people to one project manager, an estimator, and a few office staff; and just kept a few crews working; he could stay in business at a reduced break-even level of $1,500,000 in annual sales. That way, when the economy turns for the better, he could jump right back into the main business he excelled at and his company would be one of the last underground contractors still standing. Then he could take at least $3,000,000 generated from selling his equipment and invest it. I suggested he start looking to buy under-market and under-valued fixer upper homes in good locations that could rent out easily to families at break-even lease rates. I recommended he seek single family homes in clean and safe neighborhoods near business centers, schools, shopping centers, hospitals, and government offices. He could utilize his crews during down times and when work was slow to do the repairs and refurbishment on his investment properties.

David made a goal to sell much of his equipment fleet and invest $3,000,000 to purchase 100 houses (100 houses @ $125,000 average price = $12,500.000 in value) within the next six months. If each home appreciated at least 25% over the next three years, his $3,000,000 investment would reap him at least $3,125,000 in net profit. This is a lot more than his construction company would have ever made, even in good times. David realized that his business was not the end, but a means to an end to ultimately get what he wanted.

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Do You Have Your Act Together?

A balanced and ‘On-Purpose” business is never built with good intentions. It happens when the business owner stays focused on what really matters. As you observe successful and profitable business owners who have their act together, think about:

What characteristics set them apart?
What do you admire about them?
What’s their primary focus?
How do they spend their time?
Do they get to their priorities?
What’s their key to success?
What do they do that you don’t?
What don’t they do that you do?

Successful Business Owners Live Their Priorities!
When you observe successful business owners, you notice they live their priorities. I have a very successful business friend who owns a major construction company we compete against. His company is continually recognized as providing the best service and quality in our marketplace. Plus, he makes lots of money, and seems to have lots of time for his family, friends and customers. He surrounds himself with a top management team. He makes customers his top business priority. I see him at the golf course weekly with a foursome of well know business executives and customers. He annually hosts numerous customer fishing trips to Alaska and other outings. In addition, he takes several extended vacations with his friends to great golf resorts, and weekends with his wife and children on a regular basis. He is truly living his priorities. And his personal and business bottom-line is doing very well as a result.

Check Your Priority Scale!
When you put immediate business pressures first, you don’t have time for the important things that make you the most money and give you the greatest returns

Continually Ask Yourself:
– Is this a good use of my money, my time or my energy?
– Is this activity moving me towards achieving my targets
   and goals?
– Am I doing what I should or want to be doing?
– Am I living my priorities or someone else’s?

It is meaningless to waste energy on doing things right, while doing the wrong things. The more problems you fix for others, the less they do for you. Employees work for their boss. The boss doesn’t work for employees. As soon as you realize the reason for having employees is to get them to do what you want them to do, allow you do grow your business, allow you to make more money, and allow you to work on your top priorities, the sooner you’ll start getting your business to work for you.

Only accomplishing YOUR priorities will make your business successful. But, if you never get to them, your business will continue to struggle and you’ll have to keep doing all the ‘important’ work yourself. The more you do, the less they’ll do! The more you do tasks that your employees should be doing, the less you’ll make! What are your priorities this week? What will make you the most money and give you the greatest return over the long haul? What activities will give you the greatest return – taking a loyal customer to a major league baseball game or sitting at your computer and ordering all the materials needed to keep your employees working today?