Why Am I Not Making Any Money? - Part 3
By Kevin Lister

In my first two articles of this four-part series, I shared with you the first six of my top 12 profit drainers: 1. Sporadic Marketing Effort, 2. Inconsistent Sales Process, 3. Poor Customer Service, 4. Incorrect Estimating, 5. Low Gross Margin, and 6. Inadequate Job Costing. If you would like to read these two previous articles, you can view them on our Web site, www.paradigmstrategies.com.

Poor quality work can hurt your business in two ways. First, it increases your cost of labor on the job, thus lowering your gross margin. Second, and more importantly, it diminishes your chances of getting referrals from your customer as well as using them as a reference, consequently hampering your sales and marketing efforts.

If you are facing work quality issues, I suggest getting to the root of them. These problems could be related to limited employee skills (where training may be helpful), lack of good management and direction, or improper tools and materials. Once you have determined the cause(s) of your quality issues, do your best to address them right away to prevent them from doing further damage.

8. Low Productivity
Happy employees are motivated employees and essential to your business' success. When employees are happy with their circumstances, they are more productive, thus improving your gross margin. They attract other good people to your company, thereby lowering your hiring costs. And, they create a strong advantage that your competition will be unable to imitate. If you want your organization to excel, you must create an environment that allows your people to be their best.

If you are experiencing poor morale, there are several things you can do to improve the situation, such as good strategic planning, sharing your company vision, strong company communications, promoting a positive attitude, praising employees' performance, goal-setting, empowerment, quarterly employee assessments, clear job descriptions, yearly employee reviews, ongoing training, team-building, and instituting an employee bonus program.

9. Inefficient Operations
Like poor quality workmanship and low productivity, ineffective operations can damage a contracting business, lowering gross margin and increasing overhead. If you want to maintain and grow your company, your operations (people, processes, equipment and subs) need to be efficient as well as have the ability to handle additional capacity.

If you are encountering quality and/or productivity issues, take a close look at your operations because these three areas are interrelated. I suggest reviewing your project management system for holes and bottlenecks. Look into installing a project management software program if you are not already using one. With the software selection on the market today, you can easily find a package that fits your organization's needs. You might also want to ask a fellow contractor what he or she is using.
Secondly, take a close look at your company's tools and equipment to ensure you have enough in-house to meet your current and future production needs. If you don't, you may need to upgrade your existing equipment and/or purchase additional pieces.

If you have a business-related question that you would like me to answer in one of my upcoming articles, please feel free to contact me at info@paradigmstrategies.com. Also, if you would like to read any of my previously written Contractor Power newsletter articles, you can view them at our Web site www.paradigmstrategies.com.

About the Author
Kevin Lister, founder and president of Paradigm Strategies, the business advising firm to the trades, is a leader in the field of business performance improvement. He possesses nearly 20 years experience in business management and consulting, effectively operating his own ventures and assisting others with realizing business success.

With an entrepreneurial spirit and CEO's point of view, Kevin brings hands-on expertise to helping building contractors, sub-contractors, and suppliers. Kevin has deep knowledge and understanding of the trades, based on 14 years in the construction industry, a family history of owning trades businesses, and a genuine interest and enjoyment in helping blue collar enterprises.

Kevin possesses a Masters of Business Administration (MBA) from Olin Graduate School of Business at Babson College and a Bachelor of Science in marketing from Bentley College. He teaches management and marketing for the University of Phoenix Online.

Kevin is a member of several professional and business organizations, including the Institute of Management Consultants (IMC), the Associated Subcontractors of Massachusetts (ASM), the Builders' Association of Greater Boston (BAGB) and the Boston Chapter of the National Association of the Remodeling Industry (NARI).