Wednesday, December 31, 2014

How to Make 2015 Your Best Business Year Ever!

Are you constantly struggling with financial headaches in your construction business?

Unfortunately, most contractors are because they do not understand their business metrics.

One of the first things I'll do with a new client who wants their business to be a better success, and after I've helped them sort out their financials, is to do a budget.

It is amazing how they change their results simply by learning a new mindset. It isn't easy, it does take time, but the results are worth it.

Let me simplify it for you.

Think of your business as a bucket. At the bottom of the bucket is a hole. We'll call that hole spending. How big it is, or how small, depends on your spending.

Think of the amount of water you pour into the bucket as sales. Sales depend on how much water you can collect and carry. As you pour your water into the bucket, some of it, maybe all of it, runs out of the bottom. Which means, you need to collect more water (sales).

So, the more water you can keep in the bucket from running out, the more money you'll have in your account. The idea is to maintain the correct level of water in the bucket at all times. It is all about control.

Budgeting is one of the tools you use to control the size of the hole. The smaller you can make spending, the longer it will take for the water to run out.

I like to have my clients develop a strategic business plan. Then, we turn that plan into a budget. Think of your strategic business plan as your map of where you want to go, and your budget as your GPS. When you add monthly reports on your progress, you now know your variances and what you need to do to keep on your course.

I realize it is over-simplified, but I hope you've got a better idea of its importance.

No matter how busy you are, try to find some time over the next two weeks to reflect, think, give and plan.

Meanwhile …

I’m offering a free report titled: “7 Ways to Kill Your Construction Business Overnight!” It will help you to avoid the problems that plague most contractors. Click on the title to get yours today!

And remember, do not neglect to commit to set this business planning time aside, or you will find that the business of life can and will get in the way.

Monday, December 8, 2014

Are You Chasing Deals?

I have to be honest. I'm seeing a lot of contractors chasing deals. These deals are promises of work if they can beat the price. To me, that is a losing proposition.

In my 40 odd years of being a contractor, I too in my early years, fell into the trap of chasing the deal. I learnt quickly, deal chasing is a losing proposition. You see, only the owner wins the deal.

Let me ask you a question.

Have you ever, agreed to beat the price to get the job, lose money, and years later when the owner sells the project for a profit, have him call you up and tell you he has a check for your share of the profit he made off of you doing the work for nothing?

I doubt it.

The truth is, they put the profit in their pocket and move onto greener pastures.

So, why does this happen?

In some cases, it is desperation. Needing a job to produce cash with hopes it will buy you time or profit. That is not the way to run your business. That is an act of desperation.

In other cases, it is ignorance. Ignorance of knowing what the meaning of the value of what you are selling, or the value in money to your business.

I was had a very smart surety agent tell me that "All the work in world for nothing still adds up to nothing. Volume doesn't make up the difference!'

Here is what I know.

I get to work with hundreds, if not thousands of contractors over the last 20 years or so. I've seen countless financial reports and performance reports for these contractors. I can say without a question, the majority do not know their financials, how to use them or how to correct them. And almost all, told me that they did know them. That is the common underlying factor. You see, they thought they did.

The other flip side of the coin is, those that did not allow their ego to get in their way, were willing to do the work, and made massive improvements and profits just with a great working knowledge of their financials. They completely turned their business and lives around for the better.
However, let’s return to the why does this happen.

I said earlier that it either was chasing a deal for desperation, or ignorance of not knowing the value.
They are both correct, because one leads to another. 

Let me explain.

If you do not sell the value of your services for the right amount of money, manage that money correctly, you are forced into desperation. You can't even be desperate unless you don't have the money, correct?

Therefore, you must understand the value of money and its worth to you and your business first.
And that, brings us to a basic and common problem. Most contractors are using either a bogus or wrong markup. In other words, what they sell the job for isn't enough to cover their costs and make them money to begin with.

This leads me back to something I've learned from working with so many. If you do not have a working knowledge of your numbers, you have no way near a working markup rate.

To correct this, you need to grasp a better understanding of your numbers and your markup rate.

Monday, September 8, 2014

Seven Signs Your Business Is In Trouble

Understanding more about the financial performance of your company will help you see trends as they are developing and not wait until a crisis. Some problems are acute—they happen suddenly—and some are chronic—they go on for years, and you learn to live with them. Here are seven situations that should put up red flags.

1.   Little or No Revenue Growth.

Early-stage companies normally experience substantial growth as customers find you and your market enthusiastically. Then there is a leveling-off period when growth seems to slow and then stop. It may work to spend a short period at that plateau while you allow your business systems to grow to handle the volume. But then you must look at ways to get back on the growth path.

The reasons not to do so are understandable. You may be working 50 - 60 hours a week just to handle what you have and there is little time to find new clients, even if you thought you could handle their business. However, growth is a necessity—because even with a reasonable level of inflation, flat revenues sincerely means a loss of revenues in terms of much needed dollars.

And, as you know, the costs to operate your business never go down. Rent, utilities, phone, and even postage is always going up. Wages also ... including your own. As your employees become more experienced, you will want to pay them commensurate with their contributions, so raises are understandable, in benefits as well as salary. You may have increased insurance and added vacation time. All of this has a cost. And you need to replace and update equipment as well.

So what effect does flat growth have with this scenario? It lowers your profit. Costs become a greater percentage of revenue and ultimately profits become smaller. It may begin to create a serious cash squeeze and imperil your ability to pay debts and keep up with needed equipment purchases or repair.

2.   Deteriorating Capital Base

Periods of flat growth in revenue can cause a negative cash flow. You need a steady stream of profit to allow cash to pay principal debt service and allow for reinvestment in brand new technology, equipment, or unknown project development.

After a fairly short time, you will find yourself in a double bind. You aren't generating enough cash to fund any meaningful growth, and this lack of profits may prevent you from borrowing to fund it as well.

If you have gotten to this point, chances are your alternatives are few. One may be to look to outside investors for funds, although this is typically difficult for construction companies since the risk is known to be far too great, and you may have to give up a good bit of control to get the capital you need. The other possibility is to sell off assets to raise cash. This may be a dangerous strategy, without considerable thought. You don't want to sell something you will need later.  

Selling jobs to cheap or at a loss will affect profits as well as solvency.

3. Equipment Failures That Threaten Productivity

Not having positive cash flow will not just jeopardize growth; it will also affect current operations. If your equipment is not operating properly, your production may be slower, or quality not what you need or expect. In addition, total breakdowns will stop production and cause employees to stand around not accomplishing any work. This will raise your direct costs and lower profits even further.

4.   Poor Employee Morale

Look around at your employees and give close consideration to what you see. Are they angry, disillusioned, or confused? Are they short of materials, tools, jobs, or ... working on substandard equipment, or always fending off threatening phone calls by disgruntled customers? Are you communicating with them?

Surely you know that having good employees is a contributing factor in the growth and success of your venture. So it makes sense that when (and if) they feel negative, this will have the opposite effect. The most immediate result will be diminished productivity. People who don't care, show it. They take more time off and seldom think of ways to accomplish the task at hand quicker or efficiently. If wages are frozen or bonuses missed, the attitude becomes "What's the use?" And your job becomes tougher because the need to communicate becomes more urgent.

And remember as well, your employees are often the public face of your company. If they have gripes, that's where they may air them. I still remember traveling on Delta Airlines in the midst of its most difficult times. All you heard from employees were complaints and dissatisfaction. It made the trip uncomfortable and forced me, a fairly frequent flyer, to look at other airlines. I wasn't the only one, and the loss of business further hurt the weakened airline.

There are not merely business reasons to care about the concerns of workers. There are human reasons as well, and you want to keep a sense of community in your company.

5.   Unpaid Taxes

No business owner sets out to get into trouble with the tax collector. Most of us have enough sense to know how painful that can be. However, it may start accidentally and grow quickly. It often starts with a single payroll when the money isn't fully available. Paychecks are issued with the expectation that withheld taxes will be covered as soon as customers begin to pay outstanding invoices. Even so, by the time these payments are received, other bills have to be paid or another payroll is coming up. Before you know it, taxes are owed and the money just isn't there. Now you are in dangerous territory.

First of all, many taxing bodies have the power to collect that exceeds those of ordinary creditors. They can make a demand for payment, file a lien, and execute a levy on your bank or even your customers in record time. They are effective collectors.

Second, the financial burden grows very quickly, particularly if unpaid returns are not filed. For federal taxes, there are penalties both for failure to file and for failure to pay—5% per month. So, in the end, you won't just be paying the tax, you will be paying back the tax plus penalty and interest.

Another consideration is the possibility of personal liability. If you are the responsible officer, that is, the one who makes the financial decisions, an assessment can be made against you as well as your company. Then the collection actions will be aimed at your assets.

And if all this weren't enough to motivate, there is also the matter of criminal prosecution. It is unlikely for payroll taxes, but it is far more frequent for not remitting sales tax. That is often charged as theft, as the money belongs to the state, not your company. If your business has found itself in this kind of trouble, see a professional as soon as you can. This is one problem you can't ignore!

6.   Failure or Closing of a Major Customer

Most new businesses are warned about becoming dependent on a single customer or even a few. That is easy in theory, but often difficult in practice. When a customer offers you a lot of business, it isn't easy to turn it down. If you are in an industry where there are only a few players of any size, this may be your reality.

If it is and one of these major customers cut back operations, files for reorganization, or closes, your entire business may be jeopardized. So pay attention to what is happening within the industry as well as with your customers.

If payments get slower, take some action. If the company is big enough, the accounting side does not talk to the purchasing side, so you won't lose the business. Anyway, if you're not going to get paid, you don't want the sale. I had a client who was a small electrical contractor who allowed a major Fortune 100 companies to get so far behind that my client had to file bankruptcy. Minimize your exposure.

If orders slow down, don’t wait until they stop: Get out and look for new business. At the same time, keep your lines of communication up with your customer. These are the times when you have to work hard just to stay even.

7. New Technology Creating Pricing Pressure

The landscape of America is full of rusted plants, some of which are still partially in operation. It's impossible to believe that they could be efficient. Jobs that were done by workers are now being done by robots. Planning production is done by computer. Inventory and shipping are managed by scanners. The years bring new technology: If older companies cannot afford to keep up, they are likely unable to compete.
Labor-intensive businesses must be able to avail themselves of labor-saving devices. Pricing pressures come from those domestic companies that can afford to do so in addition to the offshore operations that use low-cost labor. Staying in business without currently, a profit makes little sense.

These are not the only serious problems a company can run into. I could write a book about the perils of the construction companies, their overuse of running their business by the seat of their pants and under use of business models. Regardless of how new an idea is and how clever the folks that thought it up; business was now and will always be about revenue exceeding costs and creating profit. This is not a theory; it is a reality, and you must have a stream of income.

The latest and greatest idea may come and go, but at the end of the day, it's hard work and good dealings that secure the future for most businesses.

Need help? Don't wait until it is too late! Come visit us at:

Wednesday, June 18, 2014

The Iraq Turmoil and Your Fuel Cost Index

Unfortunately, the chaos that is taking place in Iraq at this moment, will play havoc with the cost of fuel. Rumors are spreading that we could see the cost of a barrel of oil rise to $116 per barrel. That would add .40 to $1.00 to fuel.

In my weekly radio show, "The Contractor's Corner" on Mondays at noon (EST) I announce the cost of gas and oil for the opening bell of the week. This way, contractors can adjust their fuel cost index for their estimates for future work. I would think with all of this turmoil in the middle-east, that index needs to be increased.

In other words, if you are paying $4.00 a gallon for diesel, you may consider an index of $4.50 to $5.00. The same consideration should be applied to gasoline. This covers you for rising fuel costs in your estimates.

You will also see increases in materials and transportation rise. Expect the same for these items, and consider placing an escalation clause in your proposals and contracts.

Since pricing varies from area to area, you must determine what rice increase is best for you.


Friday, May 9, 2014

The #1 Mistake Contractors Make With Their Business

What is the #1 mistake contractors make with their businesses?

It is thinking if we just ‘work harder’ or ‘take the work cheaper' we will make more money.

The result?

You do more and more, still struggling, but the hole gets deeper.

 The truth is sometimes you don’t need to do more, but instead you need to remove the obstacles in your path to get better results.

Are there any obstacles in your path to success? 

If so, what are they and how are you going to overcome them?

Can you even identify them?

After working with hundreds of contractors, I've seen the obstacles.

The obstacles are not their lack of good construction skills. In fact, they have mastered that end of their businesses very well. It is their business skills that need the help.

Now, here is the startling part.

They think they've got the business skills down pat. The truth is, they don't. They just need help in utilizing the right skills in the right manner. Once they've learned them, they see a huge difference in the performance of their business. Even in this difficult economy, they make more money, and have more time for themselves.

Want to help your business perform better?

Want to drive more money into your pockets?

Want to have real control over your business?

Get help with your business skills.


Wednesday, April 30, 2014

Why Having an Executive Business Coach is Scarier Than Dating Angelina Jolie

In the last twenty years, I have been working as a coach to owners of contracting businesses, I've come to realize more owners prefer not having a coach to help them with their business, then the number that actually engages coaching services. The question is. Why is that?

The answer to the problem is two-fold.

One. Too many contracting owners allow their ego to get in the way. They feel, that hard work, long hours, and greater risk are the only way to succeed, let alone, admit they need help.

Two. Accountability. Some do not want to be held accountable for their actions. I guess it is a lot easier to blame anyone or anything else. The problem with this approach is that the problem never goes away.

For me, as an executive business coach, I have to talk to 100 prospects before I can land a client. That means at least 99 continue  with the same problems, never improving. Think about that. 

For that 1% that do engage my services, they proceed to solve their problems and mastering their businesses, getting a huge R.O.I. for the coaching, thereby making more money for themselves, and having more time for themselves. 

You would think more would prefer success over hard work and low returns, unfortunately, that is not the case. Human nature is somewhat baffling.

1% seems to be a specific number. 1% of those who are successful earn more money than the average 99%. You would think more of the 99 would want to join the one percent.

Meanwhile, I guess it is a lot less scary to be dating Angelina Jolie.