5 Mistakes of General Contractors
As part of my business coaching for builders, I am in the fortunate position of seeing what successful builders do versus those who have some improvements to make. One thing I think we can all agree on, running a business in the construction space is not easy. The work is physically hard, it’s often quite complex, it often comes with emotionally charged clients and margins are often too slim. There is limited space to make errors, either technical or in running your business.
I can’t help you become a better builder, from a technical perspective, but I can help you reduce errors in the running of your business. So what are the main errors I see by builders finding and running their own jobs, ie the general contractor? There are many, but here is my top 5 to work on first:
Poor client communications.
The majority of problems in a trades business can be racked back to poor communications. That client who turns ferrel towards the end of a renovation project is often caused by poor on-boarding prior to the build starting, or even poor education during the sales process. That error on site when the wrong flooring turns up. Again it is poor communication at some stage of the specifying and ordering process.
Back in my corporate days of exporting perishables around the world, we had a saying, “Assume Nothing”. Most errors could be tracked back to someone assuming something and not checking. It may take a few extra minutes to double-check, but that can save you big time by making the right decision. Make sure you paint a very clear picture for your clients and seek their confirmation that they understand. Keep testing the temperature of your client during the build and if any small concern is even hinted at, address it fast.
Not charging enough.
The building industry is a competitive one and customers are always looking for value. The numbers are often very large and so there is a tendency to keep your price as low as possible so you don’t shock your customer with the price. This is not helped when the client has dreams that are bigger than their budget, or are swayed by an architect to go for a more expensive design. Some customers then expect the builder to trim their prices down to deliver this Mercedes design for a Toyota Corolla price.
As a business owner you need to shift your value proposition away from the technician viewpoint (charging a good hourly rate as a quality practitioner of your craft) to that as a true business owner. You have a business to run and a fair profit to make in order to provide the level of service and back-up support that a client should expect. If the client does not see that value, you have either done a poor job communicating that during the sales process (see above) or you need to find a better class of client.
Being a Superman.
One of the hardest things for business owners to master is delegation. This is especially true during the earlier years of growth where developing trust in people you hire or contract is hard to develop and easy to loose. Most good business owners are control freaks. They are driven to develop their business to see it succeed and take the lion’s share of the risk in the process. When it’s “your name on the door” it is often easier to hold on to responsibilities longer than you should and even when you ask people to perform a role, you helicopter over them and micro-manage the process.
Being the Superman with the attitude “nobody can do it as well as me” will hold your business back from growing, will frustrate those who work for you and will increase your longer term stress. While there is nothing wrong with being a control freak the trick is to maintain control without having to do everything. Following a structured process to properly delegate responsibilities to others will help you focus your time on higher value tasks and also develop a stronger, happier team around you.
Not understanding the numbers.
You probably didn’t go into business to be looking at financial reports and dealing with markup versus margin debates, however being a business owner is different from being a tradesman and you must put more focus on the numbers in your business. Assuming your business is a company structure you also have a legal requirement under the Companies Act to know what is going on in your business financially. Just like when you drive your vehicle down the road you have a dashboard to refer to to ensure you aren’t exceeding the speed limit (too much), you have enough fuel for your journey and there are no red warning lights blinking at you.
The same applies to your business. What are the important dials on your business dashboard that allow you to get a feel of how things are tracking and if there are problems brewing that need your attention. Some people drive their business like they were driving their vehicle with a piece of cardboard over the dashboard. If you want to improve the profits in your trades business, have a healthy cash flow and build a comfortable retirement, you should figure out what are the key numbers to work on and put a plan in place to monitor your progress.
Growing too fast.
Like the road safety ad says “The faster you go, the bigger the mess”. Unfortunately this can also apply in business. That is not to say a fast growing business will always result in a spectacular and messy crash, but uncontrolled, fast growth can often lead to that. A fast growing business will put strains on all the resources of the business, especially cash, people and systems. Growth for growth’s sake and to have bragging rights down at the pub on how many staff you have working for you is a red flag to me. Check out my related article HERE.
Construction companies in particular are relatively easy to grow. Just price cheaper than your competitors and you will get plenty of work. Thinking that what you miss out on in margin you can make up in volume is a difficult business model to get right. Many of those who try this method end up crashing back to earth, with the associated collateral damage. Slow but steady wins the race.
To discuss where you could make some improvements in your business management contact me here or email direct at andy@tradescoach.co.nz or phone 027-6886721 and we can talk.