Saturday, February 28, 2015

Are YOU a Victim of “Cash Crunch?”


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Are YOU a Victim of “Cash Crunch?”

As a business owner, you usually have many hats you have to wear.

On top of that, you've got a couple of dozen ‘urgent’ priorities dragging you away from what needs to be done.

With so much going on, being pulled in so many different directions, it is difficult to focus on what is most important to your business.

However, a word of caution …

Whatever situation your construction business is in now.

It is usually NOT just one ‘thing’ that is holding you back.

Instead there is a whole bunch of little things that conveniently slip under your radar.
On their own, they may not grab your attention.

Add them up all together and it is a different problem.

You see …

They feed off of each other.

They even have the ability to run a muck in what appears to be a healthy company, slowly, ever so slowly, making it sick and sicker.

Let me ask you a question.

Have you ever found yourself desperate for cash?

You might realize it after you've paid your bills, maybe not all of them, and found not enough left to pay you?

If that is the case, you’re suffering a ‘cash crunch.’

Cash crunches are the result of those pesky ‘little things’ that slipped under your radar.
It happens when you’re not paying attention to your business metrics.

The next thing you know, you’re caught short and … in a ‘cash crunch.’

Let me dig a little deeper..

Cash flow is the lifeblood of your construction business.

Without it, you find yourself shackle to an 800 pound Gorilla. Not nice.

With poor cash flow you find yourself …

>>>Wondering where all the money went.

>>> STRUGGLING to pay your bills.

>>> Robbing Peter to pay Paul.

>>> Doing without for yourself and your family so you can try and keep the business alive.

Or even worse …

Not paying all your bills including Uncle Sam!

Seriously, put some thought into this. Aren't you missing something?

I can tell you the answer is a resounding YES!

What this boils down to is NOT understanding your business metrics.

As I said earlier, cash flow is the lifeblood of your business.


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With that thought in mind, here are some metrics you need to know.

ACC – Account collection cycle. Basically, how long does it take you to get paid on your receivables?

CCC- Contract to cash conversion. How long from the time you start the work until you get paid the last dollar owed to you.

Working capital. The amount of money available to you after you've paid your liabilities.

Capital Reserve. The amount of capital you need to have available to you in order to pay your bills according to your ACC.

And that’s just for starters.

I usually find that these other following items impact cash flow.

Pricing model. The amount you markup your work to arrive at a selling price.

Leakage. What you are unnecessarily expending with no return for its loss.

Seepage. What you freely give away to get the work.

Haltering. Taking on too much in Sales without the capital funding or the resources to support it.

So if you find yourself at the end of a month, good or bad in revenue, still scratching your head wondering where the money went …

You have a serious cash crunch problem, and … you need help NOW!


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Thursday, February 12, 2015

Why People Won’t Buy From You

Have you ever gone through a sales presentation thinking this is really best for the customer, and then they do not buy?

You can’t force anyone to buy your services. However, you can take action to avoid the reasons they play out in their head for not making the purchase. Hopefully, by doing this, you’ll encourage them to buy instead.

Today, people are wrapped up in themselves and their daily lives. They are often too busy to stand back and analyze what is best for them. They will make time for what is important to them, but not necessarily what is important for them. Instead, they conjure up all kinds of excuses for not doing it. 

To remove them from this vicious circle of no, show them how your product or service will truly benefit them, all while touching their emotional touchstone.

Understand that everyone buys for emotional reasons. These emotional buying triggers are:

They need something
They want something
They desire something
They have a problem they want solved

No one likes to be sold. This is even true for you. However, everyone likes to buy. Any form of steering them away from being sold to the enjoyment of buying can also speed your closing along the way.


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Other people have a fear of buying. What if it is a mistake? This is where your testimonials and credibility plays an important factor. Find a shortcut from the doubt to the benefits that they will enjoy after they made the purchase. Show them how you’ll eliminate their perceived doubts, step-by-step.

Others may not understand what they are purchasing.

Provide as much information on the product benefits since the average person can emotionally tie to benefits over technical specifications. I've seen contractors go deep into technical specifications and jargon completely losing their clients attention. You are trying to sell the value, or as famously said, the sizzle, not the steak.

Still others are focused on price. It is true everyone wants the best price. It is also true that there are some people who will be never satisfied with whatever low price they get. I’m not a fan of being the low price. Instead, price out what it will take to give them what you promised with a reasonable profit. 

Realize this.

When your customer is focused on a lower price one of two things is taking place.

1. The person just wants cheap and most likely will be a problem for you if you drop your price.
2. You have failed to touch their emotional buying so they are resorting to logic which is price.

If you can't get them focused off of price remember Kenny Roger's song the Gambler; "

"You've got to know when to hold em, know when to fold them, know when to walk away."

Learn to ask questions that will help you uncover their emotional buying trigger that they are using, then adjust your sales process to satisfying that trigger. You’ll close more deals at your pricing and a lot faster.

Tuesday, February 3, 2015

Understanding the Business Metric of Volume Derivation

I was reading a question posed on one of the construction group forums last week that asked how much volume a contractor should have to be successful and make a profit.

Unfortunately, the basis of the question is wrong to begin with. It assumes that there is a ‘magical’ amount that makes things work (I had to laugh when I saw some of the answers, especially from so-called ‘experts’). Sadly, there is no one size fits all.

Here is how it really works.

The idea is to develop a realistic model of a company’s capacity to perform within its marketplace, an optimum market mix, and the optimum use of the time and skills of its management staff.

The key word here is “Optimization.” That means utilizing the full capabilities and capacities of the company.

The derivation is based on an optimum Distribution of Management Time, typical Job Characteristics of the market, and the Overhead Expenditures needed to attain a balance among sales, production and finance.

These three sources of information formulated from the existing company provide the base for the model that will guide company’s capacity to sell, perform, and finance its volume according to capacity.

The company’s Volume Derivation combines data from the Distribution of Management Time, the Distribution of Job Characteristics and other pertinent statistics such as capture rates and markup rates to perform a series of calculations. This is the capability of the company to achieve the volume.

It is these calculations that set the sales goal for the company and its people. These calculations also balance the Sales production and Financial Capabilities of the company, which drives the optimization factor.

I teach this to my Golden Hard Hat Mentoring Group. That is why they understand what they need to produce for sales and by utilizing the Job Characteristic Report, which sales optimize profitability and management time.

Unfortunately …

Most contractors try and sell as much as possible, mostly at low pricing models. Selling alone will not make a company successful, and neither will the advice of a consultant or coach who doesn't understand Volume Derivation. 

Remember, optimization of the company’s metrics will always produce the best results.