Category Archives: subcontractors

Sales Is A Numbers Game!

What business activity makes the most $$$ for your company? I bet you didn’t say: ‘Sales!’ To most contractors, their total sales effort is no more than picking up a set of plans from a customer, estimating the job, turning in a bid, and then waiting for the results. They rely heavily on price to sell most jobs. As the economy has gotten worse, and work is harder and harder to get, many company owners have thought about how to increase their sales. Some have even decided to hire a salesperson to increase their revenue. But then what? These frustrated owners don’t know how to manage a salesperson to get the results they need or want.

Sales is easy!

It’s a numbers game. When competent salespeople make regular sales calls on good prospects who need what you offer, your company will get their share of the business. When you don’t make the calls, you won’t get the business. It’s like professional hockey. The team that takes the most shots, usually wins the game. The more sales calls, the more business. Simple and easy.

Most business owners don’t like to make sales calls. So they try to encourage their estimator to make them. Most estimators are not built to sell. They are built to analyze at a set of plans, use their calculators and computers, and put a price on a specified amount of work. Like business owners, estimators also they don’t like to get out of their comfort zone, go out and make sales calls, and spend a majority of their time selling. So, in tight markets, small business owners often want to hire salespeople to solve their lack of revenue problem.

Why do companies struggle?

A major reason small to medium size companies struggle is caused by a lack of a systemized and focused on sales and marketing plan. They mainly rely on their reputation to earn the right to be awarded enough work to make a reasonable profit. This works in good times, but not during a slower economy. Successful companies must have written sales systems and marketing plans that pro-actively and aggressively look for and attack new customers, targets, and contracts.

As I observe the successful subcontractors who our general contracting company use, there is a common thread. They have a plan to find and attract new customers and follow it diligently. Every week the come by our office as a part of their sales route to meet with our project managers, and build relationships with our people. They are always in the selling mode and ready when we have an opportunity for them. The majority of subcontractors wait until we call them, the successful contractors are already there waiting for an opportunity to attack.

A pro-active sales plan starts with a business owner or general sales manager who will hold their salespeople to a required standard of performance excellence. These required standards can include the number of calls per day, number of customer lunches per week, number of face to face meetings per week, number of proposals, and total proposal volume per month. To know how you’re doing, you’ve got to keep score.

Keeping score with salespeople is often difficult, as they tend to not want to be tied down to a set number of calls required. They like to let their instincts take them through the day. They don’t like to be held accountable or to a minimum standard, and don’t like to track numbers. They also don’t like to write, don’t like discipline, and don’t want to follow a written plan. They generally feel their gift of gab will get them through and reap enough results. But without numbers to hit, most salespeople will fail and not meet your expectations.

Sales numbers to track:
– The type of customers you want
– The markets you want to attack
– The project locations you like
– The project sizes you want
– The minimum fee per job
– Sales calls per day
– Leads from calls
– Face to face meetings per week
– Proposals from leads
– Proposal follow-up tracking
– Proposals or bids hit
– Referrals from customers
– Average job size
– Average profit margin
Continue reading

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

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

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

Why Companies Fail!

The number one cause of small business failure is when the owner doesn’t make the necessary changes required to build and sustain a successful company. They continue to tread water and do business the same way they always have. What do entrepreneurs do when they face tough times and need to make some big changes? They do something! Anything! They try new ways and work different. They start moving and call the necessary plays to win in any environment.

You have to make tough decisions. When one of your subcontractors asks to get paid for the 27th time without a signed change order, give him the right answer: “no!” When your project manager is over-budget again, replace him with the right person. When one of your 20 year superintendents doesn’t fill out his timecard correctly for the 8th year in row, give him one last warning to do it right or don’t come back. When a family member employee isn’t cutting it, do the right thing and let them go. When your estimator makes another mistake on the bid, replace him with the right person and the right software. When one of your long time customers doesn’t pay you on-time again, tell them never again and start looking for the right customers for you. When your accounting manager gives you the monthly financial statements four months late again, find the right controller who will do the right job. When you catch one of your employees lying to you or stealing time or money, eliminate them and find the right people.

You have some choices to make. You can ignore reality and continue to tread water by sitting and waiting for “it” to change and hopefully get better. Or you can make a decision to do and work differently. In other words, be an entrepreneur and get back to building, or do nothing and hope for change. Here is a small list of 15 changes you can make to ‘re-entrepreneur’ your company:

1. Preserve cash now!
Postpone purchases except those which will make you money. Invest in marketing, your website, sales, and customers.

2. Cut overhead now!
Hold a contest for your employees to find ways to cut your overhead by 25%.

3. Keep the best & fire the rest!
Now is a good time to get rid of your poor performing employees or those with bad attitudes. You can easily find great replacement people who want to do an excellent job.

3. Control job costs now!
Hold an all field meeting and ask for money saving ideas. Reward the best ideas with an incentive. Have them think about your general conditions, labor costs, productivity, safety, and schedule.

4. Get out of debt now!
Meet with your banker and work out a plan to pay off all of your high ticket loans. The interest rates are now lower. So consider consolidating all of your loans into one low cost payment plan.

5. Cut equipment costs now!
Get rid of every piece of equipment you own that doesn’t make you a profit every month. If you haven’t used it in weeks, sell it now. You can always rent equipment when you need it.

6. Subcontract more now!
Why keep extra crews sitting around waiting for the next job. Make a deal with another competitor to share your crews to keep your costs lower.

7. Add profit centers now!
What can you do to expand your business? A roofing contractor started a pallet company and now does over $1,000,000 in pallet sales.

8. Add new project types now!
To grow you must expand your project types. Go out and land some new work in new territories and project types.

9. Buy real estate now!
Seek opportunities to turn your built-up cash reserves into wealth building investments. Start buying a small rental property you can fix up with your expertise and crews.

10. Seek better subcontractors & suppliers now!
The slow down gives you the time to find better subcontractors and suppliers who will give you better service and lower prices. Do it!

11. Get close to customers now!
Go and visit your top 20 customers this month. Take them to lunch or to a ballgame. Get to know them better. Ask them how your company can offer more services to get more of their work.

12. Find new customers now!
Make it your urgent goal to find at least ten new customers in the next 3 months.

13. Offer more services now!
What else can you offer your customers to get more of their work? Consider design-build, pre-construction services, total team approach, partnering, maintenance, build-to-suit, joint ventures, asset management.

14. Bid more work now!
You will need more work to keep your total profit margin at the same level. Gear up to bid at least 33% more projects.

15. Have more fun!
Make a decision to stop whining and complaining about the economy, the market, your competitors, your customers, the President, or your current situation. Be positive. Look for the good in everything. You attitude is your choice. Choose to be happy.

Are you acting like an entrepreneur?

When you look at successful businesses and how they succeed in good times and bad, you’ll notice they are focused on building their business. They focus on hitting their numbers, making a profit, increasing their stock price, purchasing or investing in new markets, seeking joint ventures, growing their revenue, finding new customers, buying new businesses, developing strategic alliances with other companies, or finding new business ventures.

Today is a great time to approach struggling competitors and ask if they would consider joining their company with yours. The strong will survive. The weak shall perish. Why not take advantage of the opportunities right in front of you and do something to be successful?

Stop Doing Their Jobs For Them!

Several years ago, I made a commitment to take charge of my company, put my priorities first, and focus on building a business that works for me. I committed to work smarter, get organized, be in-control, focus on things that produce bottom-line profits, delegate as much as possible, spend more time with customers, and get home at a decent time! When Monday morning rolled around, I couldn’t wait to get to the office. I got to work at 6:00 a.m. and made a list of all the things I had to do. I prioritized these tasks into these categories:

___Must Do
___Should Do
___Nice To Do
___Don’t Have To Do

Guess what happened at 7:30 a.m.? I started to get calls, faxes, and emails putting demands on my time. People were requesting I attend meetings, customers had problems needing immediate attention, project supervisors were having subcontractor problems with needed my attention, one of our field crews were sitting around waiting for the concrete to be delivered, and one of our trucks had broken down. So I did what I always did: I went out and tried to fix everyone else’s problems for them.

When I finally got back to the office at 4:00 p.m., I realized I had missed lunch and my desk was piled with at least 25 new requests, notes, faxes, invoices, call slips, and files requiring my immediate attention. So much for getting to my priorities! Then a good customer called and asked me to play golf with him at his country club the next morning. He wanted to introduce me to a banker and talk about his next project. How could I play golf? I didn’t have enough time in the day. I had to fix everyone’s problems and put out all those fires to keep jobs moving and the crews busy.

If you’re like most business owners, this has happened to you. You have good intentions and want to change the way you operate, but can’t make it happen.

– What’s on your ‘must do, should do, nice to do, and
shouldn’t do’ lists?
– What’s your top priority and #1 focus?
– What will make your company successful?

Think about what you an stop doing!

Put Your Money Where Your Mouth Is!

In your business, which is most important to giving customers what they want?

– Meet or Exceed Customer Expectations?

Most business owners and managers say their goal is to exceed customer expectations. When is the last time your expectations were exceeded by a company you use? Less than 5% of companies ever exceed their customer’s expectations. In fact, less than 25% actually meet their customer’s expectations on a regular basis. My premise to succeed in business is simple. Do what you say you’ll do. Period! No questions! If you just do what you promise, you’ll be in the top 5 to 25% of all companies you compete with and be able to charge top dollar for it.

At the heart of building a successful business is the concept of “INTEGRITY”. Integrity is doing what you say you’ll do. If you commit to deliver on a certain date, that’s expected without excuses. If you tell your customer you’ll be there on a certain day, you’ll be there without exceptions. If you promise you can handle a bigger job than normal, you’d better figure out how to make it happen even if you don’t have enough money to hire extra people. If your contract calls for certain things you don’t usually do, do them without question. If you have to work overtime to keep your commitments, do it.

Are You Living A Lie?
Do you understand the basic meaning of integrity? Most business think they have integrity but their actions speak louder than words. They often make too many promises and do what’s best for themselves instead of their customers and what they’ve committed to do. I call this the big lie. When you don’t do what you say you’ll do, you’re living the big lie that less than promised is OK with your customers. Guess what? It’s not OK. Excuses and circumstances don’t give you a pass either. Plus your customers will remember your actions for a long time.  And they will tell their friends about your lack of commitment to do what’s right. And then guess what? When you don’t have impeccable integrity, your customers will only give you the next job if you’re low bidder by a lot.

Your Promise Is A Contract
Realize that your promise is a binding contract between what you say you’ll do and your actual performance. When your promise matches your performance, you have integrity.

Promise
+ Performance
= Integrity

Consider everything you promise to do when you sign a lengthy contract. There is often more than meets the eye. Most written contracts have numerous clauses that require strict conformance. But many companies don’t like to do everything required by the contract and try to skip things that seem unnecessary to them. I’ve had many arguments with subcontractors who don’t want to follow the contract they signed. They think the normal industry practice or what we required on the last job is all that’s required to complete their contractual requirements on this project. This good ‘ol boy attitude creates stress on our business relationship as one party is asking to do less than required and still get full pay for their work. This seems like a lack of integrity to me.

For example, our subcontract requires written prior approvals on extra work in order for subcontractors to get paid. Therefore, when subcontractors don’t submit written requests for change orders before they perform the work, we have the right to reject the request. The subcontractor who didn’t do what their contract required, then complains the general contractor is unfair. The problem is really not doing what one agreed to do.

When you tell the truth and do what you agree to do, whether verbal or written, your customer knows what to expect, all the time. When you sign contracts or make promises, and then change your commitment or attempt to alter the written agreement after the fact, your customer gets confused and upset with your integrity. These issues become evident when the promise and results differ. In other words, the customer didn’t get what they were promised.