Thursday, April 20, 2017
Tuesday, April 11, 2017
Do you understand what you need to charge for your construction services?
Whenever a prospective client tells me they’re doing a lot of work but not making the money they should, I know they have a basic pricing problem. In other words, they’re either not charging enough, or their costs are too high.
One big problem is the use of pie-in-the-sky markup rates or guesstimating the job cost. Either one will lead to some form of financial headaches. This is where the low-ball arena will take you.
There is a way to properly calculate your markup, but few even make the attempt to run through the numbers. However, there are some other factors that must come into play when determining your pricing model.
One big element is what you bring to the table. Do you have a selling process that uncovers exactly what the prospective client is looking for, is it something they can’t get from your competition, and can you deliver?
No one can put a monetary amount to value, even your prospective client. But they do know they want it.
What are your costs associated with the service or product you are delivering? How much is the “cost of goods” or as I call it “cost of sales.”
One of the problems with using margins to develop your selling costs is that it must cover your overhead and produce the profit you desire. If something changes below your gross profit, such as your overhead, this will impact your use of your gross margin making is an ineffective pricing method. That is why I use the markup method. It forces you to monitor your overhead and net profit amounts.
In the low bid arena, where you must have complete control over your costs, the MUR (markup rate) is especially helpful if it is coupled with good cost control and budgeting models.
What are you trying to accomplish with your pricing?
This depends on what you are trying to accomplish with your overall business strategy. If you are pricing low to maximize sales, you are bootstrapping your cash flow and it’s a no-win game.
Are you trying to maximize long-term profits by increasing market share through an economy of scale? If that is the case, revenues might be more important than profits and that can be a no-win game.
Higher revenues at a slim profit, or even a loss, reveal what I call the Wal-Mart Syndrome which is a risk based on market capitalization.
The bottom-line is where you need to focus after you have considered all related costs, including your reasonable salary. Here are some basic considerations:
· Your pricing model must be high enough to cover reasonable variations in sales volume.
· Your selling price must be enough to provide you a reasonable wage.
· Your pricing must produce a reasonable net profit.
· Your price should NEVER be below your direct and indirect costs.
A pricing model is a tricky thing to develop. It takes a lot of variables that must be considered and tested. You are entitled to cover your costs and make a profit. That profit is what you determine, not your client.
Your pricing model must provide the value that the client is seeking because it is worth what someone is willing to pay for it.
However, if you don’t know your business metrics, it will be tough getting anything of value formulated. I suggest you start there. If you are looking for help, I have some business coaching slots available. Click on the link below and let’s talk about how I can help you.
Wednesday, April 5, 2017
Since I work coaching contractors on improving their businesses, I’ve found they are suffering with the same constant problem no matter where they are in this country.
This problem is causing endless headaches, and I think we’ve made a major mistake.
When I first started my own construction business in the 70’s, I made a pledge with myself never to hire a foreman unless he had the following attributes to offer me:
1. An impeccable reputation of getting the work done on-time and on-budget
2. Have sons working in his crew
2. Have sons working in his crew
I was trying to not only bring to my company a quality person, but also wanted to make sure I had future workers or foreman who were trained to that performance level as well.
My first foreman I hired had four sons in his crew of seven. They were all well-trained and excellent workers. Over time they were promoted up the ranks, one became my Vice-President of operations.
The problem is, try and do that today.
We’ve made a mistake that is costing us in the construction industry in a big way. We are suffering with the ability to find workers, let alone good workers.
Over the years, I’m sure you made the same mistake I did with my children. Telling them they had to go to college. The result is, not too many sons have followed in their father’s footsteps to master a trade.
The result is, we can’t find good people. It seems every young person believes they are college material. Some find out later in life they made an error. Unfortunately, sometimes too much time has passed them by.
To make matters worse, the price of college has skyrocketed. We have a generation of students graduating with degrees they can’t find a job for, and over-burden with debt. That also means the American dream is nowhere within their grasp.
The question to answer is, why would we saddle them with such debt and disappointment?
Working in construction can be rewarding in many ways. Most certainly, is a good paying job. Some can easily make six-figure incomes. Plus, the future looks good for continuing employment.
We must find a way to attract young people into the construction industry. Especially, when so many are not college material. I believe we need to look at our younger generation and show them a path to a trade school so they can learn a payable skill.
It’s our industry. If we don’t take the initiative in attracting young people to learning a trade, we’ll suffer with this problem for a long time. A problem I believe we created.
Wednesday, February 22, 2017
If I were to begin my journey of owning my own construction business again, I would refrain from the believe I had in the beginning of thinking I knew what I was doing. Instead, I would have paid and sought the advice from those who had already experienced what I was going through much sooner than I did.
You see, back then, the Internet wasn’t available so you did much painstaking trial by error by either doing it or wishing you had done it differently … after the fact.
It was by luck that I met a man who had his Doctorate in Business and was intrigued by what I was struggling with. Our offices were close by, and one day we met in the hall and that started the most rewarding episode in my journey. It literally shaved years off my journey and opened my eyes as to what really makes a construction business work.
We took the business apart, piece-by-piece.
We worked solutions and uncovered what really makes a construction business work.
It was an education because once you know what makes something work, you can use it to optimize the business. Education is the answer to reaching your dreams and true potential.
I’ve taught this business model to many other contractors. I have spoken with many contractors as well. Some ‘burned through’ tons of cash trying it their way with poor results. Partly because they believed they could develop it themselves and for years never believed a business coach could put them on the high road to success.
This group of people who try to solve all their problems themselves on their own, no matter what, miss one important point. If you don’t have the right tools, you can’t fix it. Imagine trying to repair a washing machine with only a spatula and a pen as your tools.
Nevertheless, the effect of a strong attachment to doing it yourself produces the constant struggling with problems that could be easily solved with a business coach, not to mentioned the ongoing exorbitant cost of the problem not being solved.
Maybe it is an ego problem? However, whatever it is, working on them yourself without some outside eyes who are not attached to your problem can be costly, time consuming, creates more problems, or gets you stuck at a certain point and you cannot go any further. Which draws the conclusion that doing it yourself without help doesn’t work.
Here are seven reasons why working with a business coach will be more effective than trying to do it yourself, reading a book, consulting with people who do not have a grasp on your business, or even attending a seminar.
1. Taking the first step. Just by acting to setting up a meeting with a business coach is very meaningful. It gives you the message that the problem is meaningful to you. The action is also a turning point in your career as the owner of your own construction business. It shows you care about your business, it means you recognize and can identify the problem, and you’re willing to confront it so it can be solved.
2. The Commitment Effect. Nothing in this world is free. Committing to coaching requires you to pay a fee. The process also takes time. Moreover, as you work with your coach in solving your problem, you are engaging with another person who sees the problem from a different view. The synergy in this increases the possibilities of solving the problem and revealing interconnecting problems that need your attention as well. The effect makes people more willing to keep their declarations and do their “homework” more carefully.
3. Stronger Concentration. Two things that hamper a human is concentration and comprehension. Have you ever read a book or listen to someone speak and found yourself drifting away? This happens in business as well but more so when you are working it alone, one’s vulnerability to distractions is higher when working it alone. It is easy to get distracted or off-course, whereas a business coach keeps you focused and on course.
4. Knowledge. The business coach most likely has much deeper and broader knowledge on solving the problem, and the experience of solving the same exact problem for others is saving you time and money.
5. Taking Your Blinders Off. The real caveat of having a business coach is that they can help you uncover the problems you don’t see or unaware of. The business coach can help you put together the unconnected details into one larger picture, and can point out the underworking or missing parts of a system in your business (for example, perhaps you always intentionally ignore the real reasons you don’t have cash flow). For example, I take my new clients through 22 question business evaluation that reveals the deficiencies in their business.
6. Concentrating precisely on your needs and moving from theory to application. It is one thing to listen or read about doing something VS doing it. Let me use this example. You attend a seminar or read a book on marketing. During that listening or reading process, almost everyone ‘thinks’ they know the basic principles, such as finding your perfect customer, communicating the benefits of working with you, or closing the deal. However, when it comes to applying these principles in practice, many people can’t do it. This is because logical understanding is something completely different from applying knowledge in real life. A business coach helps you bridge this gap.
7. Implementation. The true benefit of coaching is not only uncovering the problems, or presenting the solution, but creating in the business owner the will to implement it in their business. This means creating a new habit. The result of a business coach showing you how to set up the process is all well and good. Teaching it to the business owner so that he understands it is another positive factor. However, getting the business owner to implement it and monitor it on a regular basis is entirely another issue. If a person has a bad habit of not doing it, that means the business coach must rewire the owner into creating the good habit of doing it on a regular basis. Implementation is the key. It takes time and patience but a good business coach is experienced is helping you accomplish it.
Too many business owners struggle with the same problems year in and year out. The result is costly and destructive. Even worse is the business owner who finds their excuse to ignore it. Their excuses range from; ‘it costs too much’, ‘they can’t afford it’, ‘this is the way business is’, ‘I can solve it myself’, or ‘their business is different’.
When you are absorbed in your problems, you can forget your strengths. Your skills, positive circumstances, and past situations are taken over by a black hole of chaotic thoughts and emotions.
Your ability to work and solve your business problems becomes cloudy, and like being in a fog you can’t find your way out.
When faced with heavy issues that may shake your outlook or working on a problem that may trigger overwhelming emotions, you can lose control.
Sometimes the support from a business coach is just about support, sometimes it’s about pointing you in the right direction or helping you work the solution and encouraging you to follow through. And sometimes it is more complicated.
I have seen massive changes in business owners who have sought my help, worked with me and developed the good habit. They have made more money, assembled a dynamic team, and found more free time for themselves to spend with family, friends, or other pursuits.
Clients who have coaches start to think and act in a constructive, positive manner as they implement the skills they are learning from their business coach. Instead of reacting, they become process-oriented.
Unfortunately, business skills are usually left by the wayside for many business owners. Instead, they focus on building their construction skills to improve their business, all the while ignoring the real problem, their business skills.
Contractors don’t fail or struggle for a lack of business skills, they fail or struggle for a lack of business skills.
If you are ready to roll up your sleeves and work on your business, not in it. Click the link below and let’s talk.
Tuesday, February 14, 2017
That clinking and clanging you're hearing might be the ball and chain your business has attached to your ankle
If your business has you chained by the ankle to it, making you a slave to the business, and missing out on the important things in life, maybe you need to get help?
And … If you've ever said to yourself, “There’s got to be an easier way to run a construction business,” then today is the day for you to know that you’re right – there is an easier way. It’s called: The Golden Hard Hat Mentoring Program.
How does this sound to you?
· >> Increasing sales and profits
· >> Optimizing your business with a proven business model
· >> Implementing the systems and processes that empower your people to do a better job and make the work flow without you getting into it
· >> Organizing your business and the flow of responsibilities
· >> Having under your thumb at all times the financial stability of understanding your business metrics, all without the ball and chain weighing you down?
This is how this business-building program works.
The Golden Hard Hat Mentoring Program is made up of three modules:
1. The Business Evaluation
2. The Knowledge Mastery
3. The Implementation
The Business Evaluation focuses on a series of questions and answers. It takes a focused look into your business to uncover those systems, processes, and procedures that are either not working, or not in place.
Beginning with a proper Business Evaluation is essential. Because it highlights the missing puzzle pieces that need to be put in their proper place. Important to know what to fix for immediate results.
Once the Business Evaluation is done, you move into the Knowledge Mastery.
Here we start learning the Business Metrics that drive your business. These metrics are the backbone to your construction business. It is critical to your businesses success that you understand your metrics.
Then we develop and set in place our strategic business plan.
The last prong is implementation. Keeping on-track and working everything that you've been taught. Having your feet held to the fire. This process develops the ‘habit’ by working with me on a weekly basis. You are NOT left on your own. I will take you through the steps, one-by-one. Plus, you have my four HUGE volumes of reference material to reinforce what we are working on.
The program that accomplishes that is the Golden Hard Hat Mentoring Program. Right now, the contractors in this group are $3 million to $10 million in sales.
What type of contractors? This business model works for all contractors. Part of the process is adapting it to fit your type of contracting business.
The results? Well, if I told you, you wouldn't believe me. However, they are growing their business, sales, and profits.
And, best of all, members share what works and how it worked, thereby giving you many good business savvy minds feeding you great ideas.
Can you get in? This is a limited program. I only have so much time. However, I can accept three more participants.
What do you get? First, you will get my proprietary information. It weighs over 18 lbs. I’ve never been accused of holding anything back. But the good news is this. I will lead through the information. You won’t be left on your own. We also have a member’s web site which is full of downloads and training sessions. Plus, we talk by phone every week on Thursday at your designated time for up to one hour and you get unlimited email with me.
The cost? The cost is $25,000 and 10% of any additional profit I help you bring to your bottom-line. The renewal fee is $1,050 per month with the 10% of any added profit after the first year.
How does the added profit work? Easy, let's say last year you made $200,000 in Net Profit. This year working with me, we bring in $300,000 in Net Profit. The added profit is $100,000 X 10% added NP fee, $10,000.00 of it is paid to me. This gives me a vested interest in working with you and if this happens in your business, your return on investment is 15.7%. Not bad because you can't do that with your savings account.
Do you have a payment plan? Yes! $5000 down and 11 monthly payments of $2,013.
Is there an option for not paying the 10% on added profits? Yes, but the cost is slightly more.
When can I expect results? Most clients start to see results in a 6 to 9 month period. But that depends on you.
As you can see, this program accomplishes everything necessary to help you in your business. It is a proven business model.
Let me ask you this.
Which is quicker trying to do it without a proven method or having the proven method?
Let’s saw off that ball and chain that’s holding you down. Let’s get together and start building a construction business that works for you!
Click on the link below and let’s talk!
Wednesday, February 1, 2017
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.
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.
Want help with your business? Click here for a free telephone call to discuss your concerns.