January 2008: Business Building


January 2008

Business Building

Flat Times are Here to Stay

alt1y George Hedley

Are you waiting for the economy to turn around? Get over it! You can’t afford to wait. Over the last decade, the construction industry grew consistently. The last two years have been up, down, rocky, sporadic, and now slow in most parts of the country. While there still may be positive growth in some markets, the construction business will not reach previous levels for many years to come. It won’t be great in 2008, and it might not be fine until 2009.

With past positive growth of the construction industry came too much expansion and increases in construction capacity. This resulted in too much competition and shrinking profit margins. Suppliers, manufacturers and distributors were driven by Wall Street to grow revenues and expand beyond market demands. Contractors, architects and engineers who became accustomed to growing 15 percent to 25 percent per year took on more overhead, raised salaries, gave bonuses, and became used to working at maximum capacity and increased spending at a higher level.

Got that shrinking feeling?

To make matters worse, everyone got into the act. Architects became consultants, real estate brokers became construction managers, engineers got into design-build, banks became investors, Home Depot got into the construction business, and people without any money called themselves developers. The result? Too many competitors were seeking too few opportunities.

Your total market share is now less, while the number of competitors has risen. This leaves a shrinking pie that is smaller and more competitive. Continuing to do business the same way as before will get you less in the future. Contracts will be tougher to get as bid lists grow. Profits will shrink as construction companies buy work to keep their people and equipment busy.

Do it differently

Working harder will only make you tired. Working smarter is the only answer. But, in which areas should you work smarter? Sales? Quality? Productivity? People? Whatever you choose, you must do something different to get different and better results.

Nine different ideas to add to your arsenal include:

Seek at least one new project type to pursue. For example, home remodeling will soon surpass the new home construction market. In some areas, school and health care construction are up 200 percent. Public works will be strong for many years to come.

If you can’t beat Home Depot, join it! Home improvement stores need lots of contractors to do work. Somebody is getting lots of repeat work. Are you?

The home market is dead. But there are opportunities. Find some depressed real estate to buy and upgrade for rent. This can add to your workload and boost your bottom line. Developers need more equity today than in the past to get their projects financed. Offer to invest some of your working capital, savings or labor and materials in your customers’ projects.

Open your books to key employees and share the profit with them. Give each team member an area of responsibility and make him accountable for his own bottom line. No profit equals no profit sharing or salary increases.

Make everyone aware of your fixed cost of doing business. Make a goal to reduce overhead by 25 percent. Ask for suggestions to reduce overhead costs and reward those whose ideas are implemented.

Hold quarterly meetings with your entire field team. Ask for input to lower your job costs, improve productivity and speed your job schedules. Use a written suggestion box and reward good ideas.

Now is the perfect time to eliminate your poor employees and replace them with top players at a reduced price. Good people are easier to find now. Face reality: Some of your people won’t help you be successful in slow times.

To bid more jobs, see more people. Ask each key person to make it a part of his job to be on the sales, marketing and estimating team. Everyone must pitch in to make more proposals and get more work.

Get out in your community and see lots of different people. Seek input from your existing customers, bankers, competitors, suppliers, subcontractors, architects and engineers. More importantly, make a commitment to seek leaders who are not in your industry. Ask them for ideas and suggestions how to change the way you do business.

Don’t expect things to get better without doing your part. Stay put, and go nowhere. Sit and wait for something to change, and it won’t. Try one of these nine ideas to get your bottom line aiming upward.

Best-selling author and professional speaker George Hedley helps entrepreneurs and contractors build businesses that work. He is author of the “The Business Success Blueprint Series,” available in eight workbook and audio CD sets. Contact Hedley to present to your organization on his proven system to build profits, people, customers and wealth. Construction company owners are invited to attend the two-day Profit-Builder Circle boot camps. Email Hedley at to receive a free copy of his book, “Everything Contractors Know About Making A Profit,” or signup for the free monthly e-newsletter. For more information call 800-851-8553, or visit




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