The Top 12 Business Mistakes - Part 1
by Kevin Lister Over the years the statement I have heard most frequently from both contractors and sub-contractors is: "I'm not making any money!" There are numerous possible reasons why they are not as profitable as they hope to be, and their frustration deepens because they are unable to pinpoint the profit-draining culprits. Issues may lie in sales and marketing, customer service, operations, finance, management or the workforce. From past experience, I have found the solution to this problem isn't a simple one. But, if addressed in a systematic manner, the problem can be resolved and cash flow and profit will once again thrive. Over the next few months, I will be sharing with you what I think are the top twelve business issues that prevent trades people from earning the money they deserve. We will begin with numbers one through four.
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To promote regular referrals from your existing customers, you need to touch base with them on a regular basis, such as monthly or, at the very least, quarterly. To encourage continuous referrals from referral sources such as your subs, local realtors, engineers and interior designers, be sure to touch them repeatedly as well. To attract new customers directly, job site signs and targeted direct mail are very effective. Lastly, don't forget to also network with relevant business or trade associations, and to use public relations and your Web site to gain business.2. Inconsistent Sales Process Many contractors don't have a consistent sales process that starts with the initial contact from the prospect and follows through to the signed contract. To be successful in sales, one needs a repeatable and measurable process ? a course of action that involves managing your prospect's information (building a database), conducting a customary sales conversation (discussing customer needs, budget, project time-frame, and the benefits/value of doing business with your firm), and performing regular follow-up. If you don't have a good system in place for managing prospects, I would suggest beginning to create one. Basic customer management software can be purchased on the Internet or at your local office supply store, and you can find many very good sales books and sales coaches online as well. 3. Poor Customer Service All the time and effort you put into sales and marketing will be wasted if you don't provide great customer service. Please remember that, on average, sixty to seventy percent of your business should come from referrals. If your customers (as well as your referral sources) aren't thrilled with your workmanship and customer service, they will not refer you. Period. Thus, you will have a very difficult time growing ? and possibly even maintaining ? your business. To prevent that from happening, you want to hire good people, use reputable subs and quality materials, and resolve all customer issues (punch list and warrantee items) in a timely fashion. Remember, you are only as good as your last job. 4. Incorrect Estimating Too many times, I have seen contractors and subs lose money due to poor estimating. If you estimate a job too low, you will lose money, and if you estimate too high, you will not get the job (opportunity lost). Thus, it is crucial that your job estimates are correct. Estimates can be done either manually (according to time and materials or square-foot pricing) or via estimating software. I feel it is usually better to use some sort of estimating software when bidding jobs - Excel is a good first start. There is a bit of a learning curve, but once you have mastered the software, you can create estimates very quickly (saving time), easily track where you went wrong in your estimate (was it labor hours, materials or subs' costs?), and, with no trouble, make the necessary changes so your next bid will be much more accurate. If your gross profit on a recent job was less than projected and you cannot easily put your finger on why, then I suggest you begin searching for a simple, yet effective estimating software program. You can begin by asking other contractors what they use and/or searching the Web. The sooner you begin this process, the closer you will be to consistent gross profitability. I write an article almost every month for Contractor Power. If any of you have a business-related question 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 Builders Association of Greater Boston (BAGB), the Boston Chapter of the National Association of the Remodeling Industry (NARI) and the Associated Subcontractors of Massachusetts (ASM). Kevin has been awarded the Certified Remodeler Associate (CRA) designation from NARI. He has also been named to the board of directors of the Eastern Massachusetts Chapter of NARI. |
