The State of Our Industry

With the certainty that the U.S. economy could be contracting, and the global economy slowing, one must ask deep questions as to what the near future will bring us.

For myself, I am not being an alarmist, nor a dream slayer. I consider myself a realist. I believe it is far more prudent to see things as they are and be prepared accordingly, then to be wrong and caught unprepared. I lost my rose-colored glasses many years ago as a young contractor. I seek only the correct truth. Even in the Great Depression, the smart survived and thrived. Please remember this as you read this blog.

When I read the press releases of the so-called experts and national associations, they paint an overly optimistic colored picture, one that clearly points to an upward trend. However, my own analysis sees a different take and one that might be truer to form for the existing economy and our industry. You may agree or disagree; I ask that you only keep an open mind and digest it for yourself.

Many say that the housing industry has bottomed out, and they point to their facts that new home pricing has surged to its highest since 2005. However, it is still below any figure that could sustain a long-term impact on the industry, especially when inventory has remained unchanged. Even one national organization Chief Economist himself states that the 'razor-thin supply' of new homes for sale is about the half-way back to what could be considered a 'normal' level of activity. Just the use of the word 'about' raises questions of certain uncertainty in his statement.

This points to many of my earlier statements that we are in a sluggish crawl out of a very deep hole. And because it is such a lethargic crawl, it may be too early to make a valid call.

My main point is to be safe rather than sorry. Instead, I urge my fellow contractors to digest the real problems that need to be overcome before we think that we have bottom-out and invest heavily in rebounding with great vigor.

I see some problems, maybe I'm wrong, but I do believe they warrant consideration and attention. Allow me to present them to you.

Employment-

One cannot ignore the indisputable fact, too many Americans are out of work. You can distort the unemployment figures with voodoo math all you want. However, you can't ignore the real number. The employment force is at its lowest. The true number may even be greater when one formulates the rise in our population into the equation (something that appears to be lacking in the present calculation). Too many Americans are out of work, and too many are becoming addictive to government entitlements.

For us in the construction industry, we must face the facts. Experienced labor is almost unavailable, at least in large numbers. Many of those have long since retired, sold their tools or moved to other areas or different careers, and I believe an immediate up-tick in construction activities would be quickly suffocated by the lack of skilled labor. Our only recourse may be to open the flood gates to illegal workers to satisfy the demand, thereby doing more harm to a fragile recovery, populace and costly support system.

This is a problem. A real problem, and I believe it needs to be addressed by the contractors themselves. Somehow, someway, they must reach out to our young and convince them that learning a trade may be better than spending foolish amounts of money trying to get a college education that no jobs exist for. The course of action would have to be initiated at a local level by the contractors themselves. The time is now before the need arises.

The Economy-

Our economy took an injurious turn when the Democrat's initiatives of a home for everyone were forced on the banks to give loans to unqualified people. This in itself set the banks up for failure by forcing them to find a way to deal with the bad loans. The result was derivatives and the bursting of the housing bubble. All of which was fed by the greed and stupidity of the individuals perpetuating and participating in it.

The result is another problem that was created for the economy, a working class of poor people. With hundreds of billions of dollars thrown stupidly into the winds, with failed initiatives that produced nothing but more pain and misery, a greater dependency class and the deepening of financial wounds, where is the job-growth that was promised when the politician screamed the need for stimulus, bank bail outs, green initiatives and quantitative easing? Instead, we are saddled with almost 33% of all working families struggling at the poverty rate of income. The rising number of 'working poor' in this country in itself, proves the lack of leadership and failure of this government's policies.

It appears to me, that all of these initiatives have benefited no one except the big banks, the large campaign contributors, and those on the inside of the beltway in the 'Land of Oz' that we call Washington, D.C. Job growth and job creation appears to be nothing more than misleading talking points of the politicians that they spoon feed the populace, so they can keep their mystical lives of opulence and overabundance alive and well at our expense in their Wonderland. When will enough be enough?

The truth is, the U.S. economy is on life support. It will require extensive changes in order to be pronounce it a survivor. The average American is suffering. Many are being forced to tap into their retirement in order to get along. With savings deteriorating and prices moving up, the problem created by this lack of leadership will only get worse. It cannot be corrected by printing more money, increasing the national debt or big government. Someone needs to take a chainsaw to this government's out-of-control spending and slash it profusely. In a remake of the words of Marie Antoinette, "Let the politicians eat the cake!"

The Housing Recovery-

Is the so-called housing real or make believe? What is driving the rise in pricing?

I believe it is in itself something that has never been seen before. It is not the purchasing of homes by individuals as it is instead the surge in the purchasing of homes by institutions.

Institutions are purchasing existing homes and turning them into rentals. The Blackstone Group itself has bought $2.5 billion worth of homes --- over 16,000 units with cash.

With this surge of institutional home purchasing and turning them into rental units, other institutions are doing the same. Why not? Investments in other sectors are producing slim pickings. However, this isn't an actual recovery, instead it is a 'shift' in home ownership from individuals to renters. The question of any verisimilitude is, what happens when these investors see a better rate of return somewhere else?

First-time home buyers are declining, and that is not something you want to see in a recovery. We need jobs, good-paying jobs in order to reverse this effect.

Where do we stand?

Reality is real, there is no doubt about it. As contractors, we must take care of our businesses and families. That means accepting reality and adapting to the changes that are taking place around us.

There will be opportunities, maybe not in great number, but it will be what you make of it. This will require a re-invention of your business and mindset. You must no longer wait for your phone to ring, instead, make yourself competitive and innovative in this economy.

Earlier, I said that even in the Great Depression, there were those that survived and thrived. I believe that a "Street-Smart" contractor can and will do the same in this Great Recession. The question this economic picture has painted for you is this, are you capable of becoming that "Street-Smart" contractor?

What Your Struggling Business is Dying to Tell You

A Word of Caution: If you think your business revolves around you. This article may offend you.

When the bottom fell out of the construction industry in 2007, I wrote an article that stated we would see an immediate colon cleansing of many construction businesses. This was not a difficult statement to make since I understood one major thing. Contractors have great construction skills, but possess poor business skills.

Let me explain.

At one time or another, we all fail to perform as well as we can. Once we taste success, more money, better lifestyle, or growth, we get complacent. In fact, we sometimes get downright egotistically stupid. Especially, in a robust economy when getting work is no problem because there is such an abundance of it. We actually believe we created the success for ourselves; no one else had anything to do with it.

Then, we fall deep into a trap. And I mean deep. We start to believe our business revolves around us. At that point, we’ve set ourselves up for a major reality check, and the nature of business is always willing to oblige us.

However, that is not how it works.

Business is all about raising the bar, constantly, driving your business to new heights. Owning a business means you must subscribe to the process of constant and never-ending improvement. If you do not, you will get left behind.

Since all change is incremental, you can dramatically improve your managerial skill set, including your perspective, approach and style, at anytime you desire. All you need to do is come to terms with the reality of your present limits, and be willing to expand your restrictive envelop.

Now, here’s the flip side of the coin:

If you refuse to deal with this, refuse to see the early-warning signals that are blasting their caution at you, you are effectively sabotaging your own business. Doesn’t make sense does it? Unfortunately, it is true, it is exactly what happens, and you need to realize this.

However, for our understanding, let’s focus on the early-warning signals. The one’s that give you a precept of what is coming at you full sped.

Here’s what happens.

Just as you think you’ve reached the pinnacle of success, you get complacent. You effectively take your hands off the steering wheel of your company vehicle. Blinded by overly enthusiastic pats on your own back, you become contented.  Because the first signs are modest dips in sales and/or profits that barely register on your Richter scale, it hardly resembles an on-coming train wreck. You chalk it off to a temporary blip or a harmless hiccup.

Then, things persist. They don’t get better too soon. At that point, it’s easy to blame the economy, heck, everyone does. You might even blame it on the competition or some other factor beyond your control. And it is always blamed on something beyond your control.

Meanwhile, your business continues down its slippery slope as a week turns into a month, and the months quickly into years. And before you know it, because you failed to acknowledge you needed help, that you were at your limit of existing managerial skills, the slippery slope turns into disaster-ville.

If your company is a little bigger, it sometimes can postpone the inevitable a little longer. Unless, of course, if your overburdened with debt. If you’re fortunate to have a larger financial cushion however, you can delay the doomsday scenario that is careening out-of-control at you. However, don’t take solace in this since it is only a disguise of the fact that the business is spiraling downward, the victim of your ego.

This takes us back to the initial reason why you even started your business in the first place. It was because you wanted either financial freedom or freedom of lifestyle. As your business approaches the bottom, it hardly seems to be a worthy mission statement any longer, doesn’t it. Instead of creating that vision or dream, you created a job for yourself. You put in the long, hard hours, tons of risk, and very little money for your efforts. The only problem is, you’re feeding on yourself and the pickings are getting mighty slim.

You can change this around, if you want. Let me explain.

I know from talking and working with so many business owners, this is the most difficult undertaking that they have to face. The realization that they need help, advice or an easy to follow step, right now . . .  not later, that will put them on the right track. I’ve seen many reach out and then find some lame excuse for not doing it. Some are so wrapped up in their day-to-day chaos that they created themselves, they can’t find the time. For others, they’re afraid to make the investment. However, the nature of business isn’t very kind. The inevitable is only being pushed temporarily out of your mind, but not out of your reality.

Let’s strain this through a coffee filter (of sorts).

If you really serious about owning a successful construction business (and like I pointed out, not creating a job for yourself), you have to come to terms with the obvious fact that you must improve your business skills, in other words, fire yourself from your hourly worker job, and hire yourself as the manager of your business. And that, brings us to the next important question you need to answer:

“Would you hire yourself with your present limited business management skills, to run your business, turn it around, or make it successful, or seek someone better qualified?”

I rather expect you wouldn’t hire yourself; you would seek the better qualified person.

A business-model innovation is required for your business.

You have to face the facts. Either your skills are not what they should be, or your business model doesn’t work anymore. This blunt claim won’t be far from wrong. It is one or the other. Let’s face it, even if the model worked before, today isn’t yesterday anymore.

Every business is forced to change its business model to meet the ever changing times. It’s impossible to survive by not doing it.

That also means you must change or improve your present managerial skills, so you can overcome your hurdles, attack your goblins, and slay your dragons … because every day you play Mr. Rogers, they’re winning and you’re losing!

Think of it as your early-warning system that has flipped to a Code Red!

Building a successful construction business is complex, and there are always factors that lie beyond your control. Without some outside help, you’ve stacked the deck against yourself. You’ve set yourself up for imminent failure.

Another mistake a lot of business owners make is this. They make EVERYTHING overly complex. It’s as if they are fascinated with complexity.

This leads us to the next crucial element.

It’s a big one. It’s easy to avoid, yet everyone falls prey to its crushing grasp.

The scene falls out like this …

Instead of mastering the managerial skills one-by-one, perfecting them, implementing them, monitoring them, and perfecting them, they grab anything that appears to them to make their problem disappear quickly.

They grab some useless ‘thing’ that they heard about, read, or was told, maybe even messing it up with some other method under the sun, like applying a Band Aid on a deep cut that needs stitches, and thinking they’ve solved their problems.

When you apply Band Aids on every problem in your business, you end up fixing nothing at all.

And it doesn’t matter how great your construction skills are, or how much cheaper you’re willing to work, or how many hours either, you’ve spread yourself too thin and you can’t manage or build a successful business on a foundation that is structural unsound to begin with.

Your Double Edged Sword

To be successful in business, there are certain rules and knowledge that must be known, perfected and skillfully applied. However, you must be willing to invest the time to know them and master them if you’re serious about making your business a success.

The top edge of the sword is realizing that something is wrong and being willing to face it and understand it. You need to open your eyes and come to terms with what is working, and what isn’t. It is one thing to be a hands-on manager, another to be able to put your finger on the problem.

But that is only half the equation.

The second edge is being able to find out what works. Until you’re willing to accept you don’t know, you can’t even be able to start finding out what does work. Until you can, you’ll keep spiraling downward while scratching your head wondering why.

The good news is, once you get it – When you really understand it, your results will improve immediately.

Sounds easy enough, right? So will you sabotage your success, or face your obstacles head-on?

Look, self-doubt is natural – but when it prevents you from achieving the success you deserve it’s downright unnatural . . . it’s a major problem!

So there you have it. If your business could tell you, this is what it would say. Are you listening?

Are you going to do something about it, or let it do something to you? The choice is yours.

>>>Use this for change and improvement<<<

 

If you found this blog to be worthwhile, please pass it along to your other contractor friends. 

It's Not Your Fault

Do you remember when you first started dreaming about owning your construction business?

I remember my own early days. From high school, I always wanted to be a contractor, just like my Dad. I did all the right things, went to college, worked out in the field, and put in the endless hours mastering my construction skills. I'm sure you did the same.

Then, I started my business, just like you probably did, thinking I possessed all the skills; I need to become a success.

Hang in here with me while I explain something that has an immense impact on you and your contracting business.

Somewhere in the beginning, an idea started to evolve within us. One grew in size and desire to own our business. That idea felt great and seemed in itself destined for success.
Not that this idea of owning our construction business was perfectly aligned and flawlessly synchronized with the proper business intellect driving it. That didn't matter at the time, our long hours driven by our dream was all that counted.

I'm certain that just like me. You have experienced the starts and stalls, static periods, frustrations with employees, clients and unsatisfactory results, and times when your dream appeared bigger and better than your business.

The problem only gets worse when we think we need to accept it as part of doing business. Which is false.

It's an imbalance just like the love as a parent sometimes eclipses the skills as a dad. No one properly prepares us, and no owner’s manual exists.

Fortunately, for me, my early warning system warned me that what felt solace was really a prelude to complacency. I was accepting something that was always going to be lesser than I desired until I took action to change it.

No construction business has ever grown over time by accepting complacency. When business skills and their executions are in harmony, nothing moves forward since neither has to catch up to the other. Stagnation settles in.

However, back in the seventies, there was little help available who were skilled in the knowledge of owning and operating a successful construction company. So I had to dig deep.

Everyone needs a guiding light!

You see. Success is ALWAYS out in front of us. It is there, ready for us to catch up to it. Even in a down economy, success exists, all around us. It lies in waiting for those prepared to catch it.

As you move through life, nurturing a family, and building a business, you face the option of doing what comes naturally or ---and this  BIG or ---driving yourself to achieve a higher standard. Pursuing relentless improvement. Continuously assessing every aspect of what you do and how you do it with the determination to raise the bar.

The passive amongst us are "comfortable within their own skin," but the truly successful reject this, shedding their skin as they grow towards the new and continuously more effective embodiment of themselves.

Athletes know this. Even with natural athletic skills, they still require a coach to perfect their performance. Jimmy Connors required a coach to help improve his swing. Tiger Woods the same for his putt. They couldn't do it alone because they were not equipped with the all skills, and they recognized this one determining fact. Without help, success alluded to them easily.

There is a powerful dynamic at work here. Anyone who has achieved success knows it. Rather than accept who or what you are as the finished product frozen in place by time or genetics, you can get help to take you to a higher level.

Anytime you can learn from anyone, anywhere, seize the opportunity. This isn't idle talk. It is the fundamental core of the risk and reward equation that alludes to many. However, only a small number  listen to it.

Don't allow this holding pattern to obstruct your fulfillment of your original dream. Instead, realize that it is not your fault; rather it is something you can overcome. However, see it as a natural process that you can perfect with a little help from the right source. Chalk it up to a B-school education, if you want. It doesn't matter, as long as you do something about it. That is the key. Just don't allow yourself to become comfortable or worse yet, complacent.

There will be no business, no turnaround, no growth, no success, and no change, if you close your eyes to the problem.

That's where I come in. That's where my business coaching can help. It will enhance your skills, improve your business, your philosophy, expertise, methodology, and give you someone to help you create new and innovative ideas for you and your business.

I'm announcing the opening of a new website, focusing on coaching contractors. In the last three-months, I've had great results with those willing to do something. If you're one of these take-charge personalities, not afraid to seek help, please check out e site at:

http://www.contractorcoaching.com/

Check it out, the future is yours, seize it!

Housing Boom or Crawl?

The latest news from the entire media source is touting a boom in the housing industry. The truth is the numbers are so small I tend to call it more of a long, hard crawl out of the deep hole we’re in. I especially say this since I believe the misrepresentation causes rippling effects over the economy in a false manner.

To be truthful, this alleged turning point in the housing market can very quickly fizzle to a new low. Any business venturing into such sticky waters may find itself short on its expectations. The expected revenues, the costs of doing business, the cost of acquiring customers could be a gamble that might not pay off.

                  

However, some indicators are up, including data for housing starts and permits as well as the NAHB/Wells Fargo Index of traffic of prospective home buyers, which has made a spectacular rebound since last spring.

Unfortunately, it is difficult to pin down because nothing drastically different has occurred in the economy from March until September. I for one, have a serious time believing the unemployment rate, for example, dropped to 7.8 percent from 8.2 percent. Yet, 24 million workers are still out of work?

I believe we have a short run of optimism playing out here. Something that could fizzle, if one economic element shows its dirty face and spoils the party. I would not bet the farm on any significant recovery lasting a long period of time.

Take a look at the facts. The mortgage market is being dominated by the government. This can’t be good because they really have no reason to be in the mortgage market. Between Fannie Mae, Freddie Mac and the FHA, they are holding 90% of the market in loans. That just doesn’t make me sleep better at night.

The FHA is also in a bind facing a $16.3 billion shortfall, and the only way out is to look to us the taxpayer. Unfortunately, the FHA can’t foreclose on a property and turn around a doomed note, maybe even leasing it back to the defaulted owner. They have rules they have to follow.

The truth is, they are holding approximately 734,290 seriously delinquent loans in the FHA portfolio alone. Next year, they expect to dump up 50,000 of these bad loans to private lenders. The question is, and then what, we bail them out with taxpayer funds also? It seems like a cat chasing its tail.

I wouldn’t be so naive as to think that the worst is behind us. It appears that Americans are more likely to rent rather than to own. According to the Census Bureau, the home ownership rate has been falling from 69.0 percent in the third quarter of 2006 to 65.6 percent in the third quarter of 2012. This is validated by the strong numbers in mufti-family units’ construction and the availability of single-family homes at discounted prices scooped up by investors for renter units.

The other storm cloud hovering over the entire economic growth is what remains to happen in the other aspects of our economy. The ridiculous spending in Washington, the lack of job creation, tax increases, the Middle East and of course, the problems in Europe, all playing a possible spot as a spoiler for the economy.

With all this uncertainty floating in the air, I would be cautious with making any speculative moves. Play it close to the vest until we can see a brighter future on the horizon. Meanwhile, keep your expenses down, pay off old debt, and be careful what work at what price you take on.

Sorry, I can’t offer a clearer picture full of rosy news. I don’t see it, and I think misleading anyone is the wrong thing to do. Until things get better, this will be a long, slow crawl out of a very deep hole.

How to Make Money as a Contractor!