You are good at what you do. Your projects are always done ahead of schedule. The quality of your work is known throughout the area and you have more job requests than you can keep up with. Everything is running great right…right?
Well, maybe not so great. Tell me if any of these sound familiar:
“I just won a brand new job I didn’t think I was going to get, but all my guys are tied up on other jobs right now. Where am I going to find the resources to pull this one off?!”
“That is two jobs this month that payment has come in late. All my money is tied up in materials for these new jobs — one more setback and I am not going to be able to make payroll.”
“I knew I shouldn’t have taken that job. The margins were too slim and now I have to go back and fix something for the inspector. I won’t be surprised if I lose money on this one.”
Don’t worry. Most have been in these situations a time or two – or more. It is not the end of the world (even though you may think it is), but there may be a few things you need to change for your business to recover. Let’s take a look at a few reasons why even the most successful contractors fail at running their own businesses.
1. Not seeking advice/guidance from your finance team. We get it. You are a contractor and your project skills are what makes you money. Your bookkeeper isn’t out on the job site with you, so they don’t understand how much you need that new piece of equipment! Unfortunately this is a mistake made far too often. A good bookkeeper or accountant is far more in tune with your finances than you may be. They should be the first people you go to when planning a big purchase or even a new hire. Your finance team will know if you can afford to buy that new piece of equipment or if buying used would be best, until you have the free cash to buy the brand new one. You need to work with your finance team to build a budget (and stick to it) and to create a plan for your capital investments. Just because there is money in your bank account, it does not mean you have the money to spend.
2. Lack of succession planning. It is a big change to step up from Project Manager to Business Owner. Specifically in the contractor world, it can be even more difficult to separate yourself from the day to day tasks of planning and running jobs. However, in the long run you are only hurting your business’s chance to succeed. As a business owner, it is now time for you to stop doing and start training others how to do. We know what you are going to say:
“But, these guys don’t know how to run this place as well as me.”
You are probably right! And they never will be able to, if you don’t take the time to document your processes and train them to do your job the right way. Ask yourself this:
Did you start your company to own a job or to own a business?
A truly healthy business can operate sufficiently while the owner is away for extended periods of time. This will never happen if you are the only person that knows how to close the sale or handle that special customer.
3. Lack of innovation. Are you still doing things the same way your father did 20 years ago because “that is the way we have always done it”? Look, you wouldn’t use a hand shovel to dig out a basement. Technology has constantly improved to make our jobs easier and faster; your business processes are no different. They should be reviewed and revised often. Create a schedule and plan to revisit areas of your business periodically to see if improvements can be made or find inventive ways of reducing your costs without cutting corners.
4. No defined process for accepting or rejecting a project. When you are starting your business the mantra of AFAB (anything for a buck!) works because you need work, you need to get your name out and you have bills to pay. But once you are established, with employees that are relying on your business, this thinking will lead to your downfall. Not all projects are created equal. Both customers and general contractors will try to back you into a corner on a job that has tight margins and high risk of return visits, which can lead to a loss overall on the project. As the business owner, you need to draw a line in the sand and define what aspects are required for you to accept a job (margin, delivery time, complexity, payment schedule etc.).
5. Lack of strategic planning. This one ties into innovation in #3 above, but more on a CEO level instead of a PM level. As a business owner, you need to be looking internally and asking yourself defining questions about your business:
Who are we as a business?
Where do I want my business to go?
What do we do well as a business and need to do more of?
What don’t we do well as a business and need to stop trying to provide?
Are there customers that are difficult to deal with or don’t provide good margins that we need to ‘fire’ to make room for a more ideal customer?
You should revisit your company mission and values regularly, or you risk moving away from what puts you ahead in your industry.