The construction business has been struggling since the financial crisis and their problems over the last five years have been particularly difficult.
Fortunately, the economy has improved considerably since those dark days and today the demand for residential construction has picked up again. Consequently, many contractors are now looking for ways to regrow their business.
However, many of the problems were not due to the economy itself, but due to a lack of business acumen when it came to managing money and properly pricing projects.
10 Ways to Improve Your Business
Let us look at 10 ways to make the transition from surviving to thriving so that your construction business flourishes:
- Strive to be as resourceful and economical as possible. Composite Technology by AJ Weller is one way to make equipment last for years to come. The Industry of Wear Technology is focused on reducing downtime, prolonging service life, and lowering operational costs.
- Build a reliable team. If you hire the right people to do the work, then you will have the right skills to get your projects off the ground. Once you develop a reputation for completing projects in a timely way, you will attract more clients.
- Emphasize the value of employee training. By properly training employees, they will have all the necessary skills to do the work quickly and efficiently. What’s more, they will do the work with a minimum of costly, time-consuming errors.
- Improve your leadership skills. Your goal is not to supervise employees, but to practice sound management strategies and good leadership. At every level of your business, motivation is necessary to create a successful outcome. Motivated employees will get the work done quicker and better.
- Avoid scope creep. It’s easy for a project to fall behind schedule. Supplies don’t come in on time. Workers call in sick. And certain tasks take longer than anticipated. The only way to avoid scope creep is to use best practices for project management.
- Keep an eye on your overhead expenses. One of the primary reasons why the construction industry experienced such a heavy loss during the recession was because many construction companies could not cover their overheads. The way to manage overheads is by knowing how to give clients accurate quote. To do this, you must know all your business expenses before you sign a contract. You must be able to accurately estimate a price-to-profits ratio.
- Hire a good marketing and sales team. A good business team is not only essential for getting new clients but also essential for selling your services at the right price point. Without the right marketing and sales positioning, your overheads may be too high and your profit ratio too low. In Guidelines For Success In A Construction Business, Michael Stone suggests: “If your price is in the same ball park as other companies, no problem. If your price is higher than others, you are selling a different kind of job or service and you may have to change your clientele and/or your advertising to get to the people willing to pay for the service you provide. Most important, you need to work on your sales skills. You have to effectively communicate the differences between your company and others to ‘sell’ your services.”
- Anticipate escalating costs. Chances are that the cost of labor and material costs will go up. If you are not accounting for the rise in prices in the near future, your projects may not be profitable. You may just break even or even run at a loss.
- Don’t take on more work than you can handle. Don’t take on a higher volume of work, work within tight deadlines, or take on highly sophisticated work that you don’t have the expertise to do. Instead of thinking about short term gains, think about the long-term benefits of developing one successful project after another. By staying within the limits of your time and money and talent, you will be able to build up a positive list of accomplishments. This will make a huge difference in winning new clients.
- Avoid unnecessary expenses. It might be tempting to buy new vehicles and equipment because these will be tax deductible, but you will only jeopardize your cash flow because you will have to make monthly payments. Instead of buying new vehicles and equipment, buy good, gently used stuff. Don’t risk going broke because of insufficient cash flow to keep your business running.
Be Open to New Ideas
As a contractor, you may have learned how to do things using old-school business techniques. However, now is the time to be open to new ideas on how to run your business. By learning better ways of running a business correctly, it will be easier to make a profit. Moreover, you will make more money with less effort. For instance, marketing yourself as a green building contractor will attract the type of clients that are willing to pay more for the higher value of your work.