August 2012: Business Building

August 2012

Business Building

Busy and Broke Is Bad Business

By George Hedley

The economy has taken its toll on almost every contractor you talk to. Contractors who relied almost exclusively on their reputations and being low bidders to win contracts are hurting the most. These contractors are really scrambling, because they never needed or had solid business development plans or programs in place during the boom times. They generally started their companies as good field technicians versus experienced solid businesspeople focused on sales as a business growth tool. They offered quality workmanship and lower prices. They kept busy, winning enough work against a few other bidders, but they weren’t doing any real marketing or offering any differentiating factors in their sales efforts.

Be different to grow I coach and work with many contractors, trying to improve their companies. When I first meet or talk to them, I do a detailed Business Effectiveness Evaluation of their practices, management systems, people, financials, marketing program, projects, and field operations. After we fix their obvious and urgent problems, we get down to what really matters today: generating more and new profitable sales revenue via differentiation. What do you do that’s different than your competitors? Most competitors do a really good job, or good enough to get awarded the next job if their price is low enough. So you’ve got to give your customers real reasons to hire your company. If you can’t give them five or six good reasons that aren’t the exact same reasons your competitors are going to give, your only differentiating factor is price.

Get uncomfortable Contractors need to get out of their comfort zones and offer more. You have to take on more trades and more risk. You’ve got to offer more turnkey and ongoing value-added services to make your company more attractive to customers and prospects. Before the construction slowdown, you could make it by specializing in a small scope of services and products. Now you have three-times the number of competitors bidding against you on every opportunity, some from 1,000 miles away or more. If you try to compete like you did in the past, you’re going to be one of two things: busy and broke, or not busy and out of business.

Other ways to set your company apart and offer more is to find service accounts at large national corporations or manufacturing companies who need ongoing service. Go to the headquarters of a big chain, like Starbucks, and talk about servicing all their stores. Or joint venture with a minority or disabled veteran, and get on government set-aside programs with the Small Business Administration, the military base nearby, or the department of transportation in your area. These types of work have difficult barriers to entry and, therefore, less competition. Contractors never had to do that before.

Make marketing mandatory Traditionally, contractors would wait for a developer or general contractor to call and say “come on in to pick up a set of plans and give us a bid.” That was their marketing program. After they’d submitted the bid, their one sales effort was to call and ask: “How does my bid look?” That doesn’t work now. Most contractors don’t have a dedicated full-time professional accountable for generating profitable revenue and looking for new opportunities, customers, services and projects. Hire a professional who will focus 24-7 on growing your business, or put yourself 100 percent in charge 100 percent of your time.