Imagine a business that could run itself. A steady stream of leads, constant conversion rates, and predictable profit day in and day out without stress. A lot of people view this as the perfect business. There are plenty more that try and promise it with systems. The all-elusive auto-pilot business. But is it real? Does this mythical creature exist in the construction world?
I have had the pleasure of networking with some real titans in the industry. From mason contractors to roofing contractors, they pretty much all agree that it does not. Coasting is not an option.
Auto-pilot is designed to do one thing, keep the status quo. Anyone who has owned a business in the construction industry knows that the status quo is more of a roller coaster ride without a seatbelt than a leisurely raft trip in still waters. There are constantly changing variables, labor shortages, and a host of other complications that make smooth sailing almost unattainable.
Now, I do believe that certain aspects of a company can be organized in a way to make them more hands-off than others, but the reality is that we as owners need to constantly push process improvement, personal improvement, and growth. Even the best processes and written protocols get tweaked from time to time.
One way I see this auto-pilot mentality hurt companies, and something I have been guilty of before, is taking on a single client for an extended period of time. I am not talking about having a good repeat client; I am pointing to the companies that generate more than 70% of their sales from a single client.
When I started out, the big client sounded great! I can get a huge sales burden off of my back, have guaranteed work, and keep moving. I never thought of the pitfalls until I saw the effect it had on another company of similar size.
The moment the client found a reason to abandon this company, they did. Now imagine if your gross sales dropped by 70% in 12 months. Ouch doesn’t even cover it. It could bankrupt a good company and annihilate an average one.
As small business owners, we often spend our time taking care of existing clients. Yes, this is absolutely necessary, but how many of us devote an hour a day to finding new ones? Not many. I would say that the majority of us spend less than an hour a week. Hell, I get residential jobs all the time because we are the only company that calls back. Price is never an option when you are the only one interested. If you took 15 minutes a day to return calls, cold call a general contractor that works in your area, or follow up on a proposal that you sent out last week, I guarantee you would be amazed at how many clients you can find.
It is all about diversifying your client base. Any investor will tell you that diversifying your portfolio is one of the most important things you can do. Our businesses are our largest investment, so why not take the advice? Diversifying your client base is the way to safeguard against the clients’ flaws. Just because they are a good client doesn’t mean they can’t be mismanaged and go under.
Once a client becomes a large share of our gross sales, they own us. It becomes impossible to pursue other options. Landing a great client is a wonderful thing, but it needs to stay below 50% of your yearly revenue.
As much as we all would like to set things on auto-pilot and ride off into the sunset, it is better to grab ahold, pull back, and drive that company ship as high as you can.