Getting Your Business to Work

Surviving The Economic Slowdown: Part Three

For more, see Part One, and Part Two, of this series. Look at your fixed costs! Another part of the equation is your fixed cost of doing business. What things do you need and what things can be postponed or eliminated from your ongoing cost of doing business? If you think your business volume will go down by 20% in the future, start cutting your overhead by 25% now. Cut more than you think you’ll need as profit margins will also go down in a tight economy. Start with your largest expenses first – your equipment, backhoes, forklifts, cranes and trucks. If you aren’t using them on the jobsites at least 24 to 32 hours every week, they’re costing you more money to own than they are making on the jobs. Sell what you don’t need and lease the equipment you need when you need it. Getting rid of that old unused equipment littering up your yard will free you to focus on getting more profitable business instead of keeping your equipment busy. Take a hard look at your management, supervision, administration, foreman, and field personnel. Now is the time to eliminate every “C” player, keep the “A’s” and warn the “B’s” they need to improve. As work slows, you will be able to replace poor workers with quality employees who will be readily available. Don’t accept less than the best now. It is an employer’s market so take advantage of it. Get your team together and let them help you reduce fixed expenses. State your goal to cut your fixed cost of doing business by 10%, 20% or more. Let them come up with ideas how to make it happen. By making cost reduction a team activity, everyone will help and feel a part of keeping your business running as costs go down. Be sure to look at every major cost items including job costs, production, benefits, training, receivables, payables, banking, insurance, and technology. George Hedley

Surviving The Economic Slowdown: Part Two

What moves are you willing to take to get ready for your future? Consider two parts of your business as you decide what to do. Look at both your target market and cost of doing business. (Part One, yesterday. ). Look at your target market! What types of customers have you built your business with? Do you have a short list of customers you have targeted to obtain new or repeat business from over the past several years? What other customers have you ignored as your backlog has stayed full? Which customers need what you offer even as the economy might slow in the future? What other services can you do for your existing customers? Which potential customers will gladly consider your company to be on their bid list? I have noticed I am getting a lot more phone calls from new subcontractors seeking projects to bid. They cold call and ask if they can get on our bid list. There is kind of a desperate tone in their voices. They have to get work or they’ll go out of business. They aren’t looking to build a long term customer base. They’re looking for work to survive until their regular customers call them again. Before you start blindly calling every new customer target you can think of, have a strategic plan of attack. When I get those cold calls, the salesperson doesn’t have a clue about our company or what we specialize in. Research your targets. Find out what kind of work they do, how they do business, and how your company can help them meet their goals. Pick only potential customers you want to create long time relationships with. Building and growing a loyal customer base takes time and commitment. Not a short term fix. To enter a new target market, you’ll have to convince potential customers your company is qualified and experienced in the type of work you’re proposing on. You’ll also have to demonstrate how your company can help new customers build faster, better, or cheaper than the subcontractors or contractors they are using now. Be ready to show how you can solve their problems and become a team player. Show them you are in it for the long haul. You are not there to just get on their bid list. You are there to build a relationship and you know relationships take time. Also consider what other types of project types, locations, sizes, or services you can go after. If you are in the heating and air conditioning business, why not offer monthly service as well? If you specialize in building new commercial projects, consider offering development and construction management services. If you are a drywall subcontractor, consider adding metal stud framing, acoustical ceilings, insulation, painting, and door installation so you can become a full service tenant improvement contractor. For more, Part One. Part Three, Tomorrow!

Surviving the Economic Slowdown: Part One

Do you think business will go up or down in the years ahead? What will you do to survive if your business shrinks by 40% or more? Shouldn’t you start doing something about your future right now? What are you waiting for? It’s the last quarter in your last game of the season. If you win, you’ll get into the championship playoffs. Lose and you are eliminated. You are twenty points behind and only a few minutes remain in the game. What will you do different to win? Is it finally time to change your game plan and try a new set of plays? Think about your business. Most business owners know a slower business market will become a reality in the future. But most don’t want to make a move and change the way they do business. They are sitting and waiting wait for something to happen. In the slowdown of the early 1990’s, my business went from $50,000,000 to $5,000,000 in annual sales in only one year. It was hard to believe the construction business nearly stopped as quickly as it did. There just weren’t any jobs to bid or build. I had to reduce the number of employees from 150 to 10. I had to cut my overhead budget from $2,000,000 per year to $500,000. As your business slows down, it is almost impossible to reduce your expenses as fast as your revenue diminishes. You have to keep people on staff to finish the projects and do the paperwork long after the work is finished. In other words, you lose money in a slowing market. Consider your choices! The choice is yours. You can continue to charge ahead doing business the same way you always have and hope the economy continues to boom ahead. Or you can make some strategic moves to get ready for a business slowdown. In the late 1980’s we anticipated our core industrial building construction business market to slow down in the upcoming future. To weather the storm and diversify, we made a decision to invest in the future and hired an experience retail construction division manager to seek major retail construction work. We also tried bidding public works construction at the state universities. The retail decision worked out well and we soon become a major contractor for many of the national retail chains including: Mervyns, Costco, and Wal-Mart. What moves are you willing to take to get ready for your future? Consider two parts of your business as you decide what to do. Look at both your target market and cost of doing business. (Part Two, Tomorrow) George Hedley

Stop Whining! It is what it is!

Remember 5 or 10 years ago when your business was only half of what is was in 2008? Or your investments, or your house value or your salary? Well it is time to stop looking back and start looking forward. Looking back will get you depressed and all upset about what you had. Guess what? You don’t have what you had anymore. It’s time to start building again from where you are. Building is fun. Whining is over rated and depressing. Calculate the gross and net revenue you really can expect for 2009 and 2010 and then figure out how to make a profit with what you’ve got. If it means you will have to cut back your expenses 60%, then do it now. If it means you will have to go back to working hard, making sales calls, getting out of your comfy office, or getting your hands dirty, do it. I know you thought you could retire in a few years or reduce your involvement in the business. But you can’t. Besides, you don’t want to be one of those old folks who do nothing positive with their time except complain about the price of healthcare. My current message is to START BUILDING & START MAKING A PROFIT with what you’ve got. That means you now have a chance to redesign your future. Exciting! Now you can design your business to be the best in your market. It is back to basics! As a result, I have re-designed my Profit-Builder Circles Academy to help every business owner Re-Build using the basic 7 characteristics every “Best In Class” business has in common. Excellent market leading companies all have: 1. Passionate Vision, Clear Written Targets & Goals 2. Structured Organization & Accountable Responsible Team 3. Operational Systems To Run The Business 4. Above Average Profits and Focus On Numbers 5. Unique & Different Delivery System, Product Or Service 6. Pro-Active Sales & Marketing System and Fast Growth 7. Equity Growth & Wealth Building Ready to start over and build your business better than ever before? Let’s keep talking! Stay tuned for more ideas to help you get your business to work! ~George