Thursday, June 2, 2011

Things That Kept Me Awake At Night As a Contractor

When I first started my construction business in the 70's, I was young and full of hopes and dreams. What worries could there possibly be?

In a short period of time, I learned that life has its complications. Around every corner is an unknown. In this short blog, I hope to help some of you to discover the steps that helped me improve my construction business.

Like many of you, I started my business with a little money and a pickup truck. As a matter of fact, I didn't even own any tools.

After completing my tour working in the Middle East, I came home sick with viral pneumonia, and a small amount of cash saved up. After three weeks in the hospital, I contacted my friend and had him incorporate my business. When that was done, I had my business cards printed, and I was now a contractor . . .  so I thought.

Weeks without work, banks not excited about extending a line of credit for me, and surety companies telling me I was too young, left me without work, a slow drain on my cash, and dreams slowly being shattered.

That was the first thing that kept me up at night, worrying about not having work.

This brought me to lesson number one. Never wait for things to come to you, get up and get out and capture them for yourself. From that, I learned how to market my construction services. I also learned PR and used that very effectively to promote my business. Even in the most dismal of times, this two business metrics helped me to survive and thrive.

With work in the pipeline, I soon experience the next 'thing' that would keep me awake at night. MONEY!

You see. Your business survives on cash. Reality is, it is a cash eating machine, and if isn't controlled. It WILL eat you out of house and home.

That brought me to lesson number two. Understand your financial metrics.

My Dad was a successful contractor himself, and with a degree in Accounting, he taught a very valuable lesson. The real 'money' is made in the business end of the business, not in the contracting end.

What did he mean?

Simply put, you can make money in the contracting end, but if you do not understand and control the business end, the money will disappear through lack of control. You need to learn and control your financial metrics!

Once I mastered my financial metrics, I was making money, real money. My competitor's couldn't figure it out. I controlled my expenses, maximized my earnings and turn cash into assets. These assets became money-producing assets, not depreciating expenses. There is a difference. Shiny objects are depreciating objects, and it is in one's best interest to stay away from them. They will take you down!

Life was rolling along and I was being prepared for life lesson number three. There is only so much of me to go around.

Before I knew it, my time was being consumed from all sides and every angle that existed in my business. I was quick to realize that I didn't own a business, my business owned me!

The lesson I learned was "systematization."

This is probably the most misunderstood areas of a business. Very few contractors ever make a fortune owning their own construction business. Instead, they find themselves a slave to the business.

You can discover very easily if your business owns you by answering these simple questions:

Are you too involved in your business? Could you leave it for a few weeks and have your employees run it for you, getting sales, doing the work and making a profit without your assistance?

Could you let go of your "baby" without any fear or worry?

Do feel no one can do the "job" as well as you can?

Be honest and answer them for yourself. Understand that if you can't answer 'yes' this is not what owning a business is all about. Almost all contractors who own their own business work too hard for too little. Everything about their business is in their heads, and they believe they are the only people who can do it. A self-sabotaging misconception. In essence, they're trapped in their own business!

In this economy, you do not want to be trapped in your own functionless beliefs. You need to master your business metrics and properly apply them to your business. Times are difficult, and things are not going to be easy for some long time in the future. You need to take control of your business now, so you can survive and possibly thrive.

Knowledge is the key to success. What we do with knowledge determines the level of success we achieve.

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1 comment:

  1. Great words of wisdom! For me, also a master builder; I too started in '79 with a $150 pickup, a father-in-law Pat for a great & reliable partner and lots O piss&vinegar to go around many times over. My first battle was to learn "not" to worry that we would die from lack of cash flow. With consistent work I found there was always light at the end of the tunnel. I had to learn it all as I had no role model. The mid '80s saw more estimates coming in in a day then I could possible handle. Point here is that when times are good- remember it's better to say sorry I can't provide an estimate now then never show up! Back in the '80s, banks gave out "checks" as if we were kids being given candy. That was not a good thing and in fact began the banking debacle we now see today. Cash is king but only if it's handled properly as Henry spells out. And last but not least, the old saying "The man with the most toys when he dies wins" is not true in the least. Sound investments of your time and "cash" is what will win out. Family comes first so build on that capital. Buy low - sell high works well here as well. I often bought clean used equipment. Used it - then sold it later for at the very least what I had in it. Oh, buying a $$$ mega expensive turbo slayer truck with a new magnetic sign will not earn you instant success nor will it necessarily have you looking like a successful contractor. Master Builder mike in Maine