Business Builders Blog

Category: Increasing Your Profits

Marketing Your Construction Business

Do you ever wonder what the “right” marketing approach for your construction business? Should you be doing SEO, or posting to Instagram, doing mailers, or upping Yelp reviews? There are so many choices, and sometimes it can feel overwhelming to know what is right for YOU.

Then there are those times when you’re super busy, and you don’t do any marketing until one day you look up and the work is drying up and you panic!

Sound familiar? There is another way…

First things first – have a strategy…

In my interview with marketing expert Spencer Powell with Builder Funnel, he emphasized the significance of aligning your marketing strategy with your company’s overall strategy. This involves identifying your ideal clients and the types of projects that best suit your team’s expertise and profitability.

Before diving into tactics, Spencer advises contractors to analyze past projects to determine where they’ve been most profitable and efficient. This self-assessment helps in identifying your target market and crafting a marketing strategy.

Turning ideas into an action plan…

To translate these insights into a tangible plan, Spencer suggests focusing on projects that align with your team’s strengths and interests, as well as those that yield the highest margins. This approach not only improves operational efficiency but also enhances customer satisfaction and referral rates. By consistently attracting projects that align with your strengths and goals, you can build a reputation for excellence and set yourself apart from competitors.

Once you know who you want to target, then you can understand better how to reach that target client. In this recording, Spencer shares great tips and strategies for how to do that. Also, make sure to check out his FREE website assessment tool and see how your website is working (or not) to help promote your business! You can get it here.

Final Thoughts…

In a nutshell, marketing strategy shouldn’t be a “shotgun” approach; it’s about aligning your business goals with your marketing efforts to attract the right clients and projects. By defining your niche, understanding who you best serve, and focusing on what sets you apart, you can create a sustainable marketing strategy that fuels long-term growth and success. Watch the video now and get ideas on how!

Pricing Pitfalls in Construction

In the contracting industry, a prevalent but deceptive notion persists – the idea that pursuing higher sales volumes at lower prices will lead to greater profits. This assumption may appear sensible on the surface — secure more contracts, increase your revenue, and anticipate a surge in profits.

Be aware that this myth could pose serious threats to your business’s profitability and success! You can grab this simple (FREE) guide, “Beyond Breakeven, to help you see from a numbers perspective why this is dangerous, but keep reading….

The Misleading Allure of Volume Over Margin

Imagine this: you’re selling more than ever, but your bank account tells a different story. This is the harsh reality I’ve seen countless contractors face. After 30 years in the business, I’ve witnessed too many go from profit to peril, chasing volume over margin.

Think about it – a single wrong move during a tough project can turn a profitable year into a catastrophic loss. I recall a client who plummeted from a $250,000 net profit to a staggering $500,000 loss by following this flawed volume-over-margin approach.

Sandy’s Cautionary Tale

Meet Sandy, a contractor whose story is all too familiar. His company’s revenue jumped from $2 million to $12 million, yet profits were nosediving. Why? Because Sandy fell into the trap of thinking lower-priced, larger projects would balance out. They didn’t. His profits dwindled as his gross profit margin shrank alarmingly.

Revitalizing Your Bottom Line

When Sandy and I sat down, I outlined the two fundamental ways to impact your bottom line: boost revenue or slash costs. You can only increase revenue by either selling more or charging more. To cut costs, you need to either increase production efficiency (by far the hardest of these 4 things) or reduce overhead. Sandy had upped his revenue but overlooked the essence of business – a healthy gross profit margin. Remember, it’s not just about making money; it’s about keeping a consistent profit.

Gross Profit Margin: Your Lifeline

As a contractor, your gross profit margin isn’t just a number; it’s your business’s heartbeat. Believing that lowering prices for higher sales will pump up your profits is a fast track to financial trouble. It’s a perilous misconception that can drain your business’s lifeblood.  When Sandy started focusing margin over volume, his business made a sharp turn-around and his bottom line started to grow!

Mastering Your Pricing Strategy

Before you even consider sending out a bid, pause. Do you have a strategy to ensure your bids align with your gross profit margin goals? Don’t let market trends push you around. Instead, arm yourself with a deep understanding of your business costs. Know your break-even point and aim for a healthy 10 to 12% net profit margin on your bottom line.  That’s what successful contractors set as their targets!

Watch the video to learn from Sandy how to avoid this pitfall in your business.  Make sure to check out the resources below to help you gain confidence in your numbers when pricing.

Empower Your Decision-Making

Get your real overhead breakeven percentage by following the steps in this simple (FREE) guide – “Beyond Breakeven.” It’ll guide you in understanding the correct overhead percentage you have to mark up bids JUST to break even, thus enabling you to make informed pricing decisions.

Also, explore our “Price for Profit” category on the Profit Builder blog for valuable resources to fine-tune your pricing strategy.

Your success as a contractor hinges on maintaining a solid gross profit margin – these resources will help you do just that!

Financial Clarity = Greater Profits

In the world of construction, a common pattern I’ve seen is a reluctance to look at financial data. This avoidance is often due to a lack of confidence in how to read your financial reports, AND/OR fear of confronting disappointing results.

The problem? This makes it nearly impossible to truly know if the markup and margin you plan for in bidding are coming to fruition on your company’s bottom line!

Not looking can significantly impede your ability to produce consistent profitability. Today’s post is about helping you have more clarity and confidence in your numbers so you can produce greater profits.

Understanding Your Financials: A Key to Success

In my experience with contractors, avoiding financial numbers is like ignoring the compass that guides your business. Your financial data—be it profit and loss statements or job cost analysis—is not just numbers; it’s a story of where you are versus where you aim to be.

The Transformational Story of Joe

Consider the case of Joe, a contractor who initially shied away from his financials. When we finally examined his data, we focused on crucial aspects like profit margins, overhead costs, and revenue trends. This process was eye-opening for Joe. By understanding the narrative behind his numbers, he gained clarity and was able to make strategic decisions to enhance his bottom line.

Embrace the Data, Even When It Is Daunting

The lesson here is clear: avoiding your financial data breeds stress and uncertainty. When you start to lean into your numbers, understanding them even when they’re not as favorable, you unlock the ability to make impactful changes. It’s about shifting from anxiety to a state of informed confidence.

Resources to Guide You

If interpreting financial statements seems daunting, don’t worry. I offer a range of resources, including instructional videos on my blog and YouTube channel, tailored to help you gain fluency in your financials. These tools are your first step towards greater clarity and the ability to positively influence your construction profitability. You can check them out here.

Your Path to Greater Profitability

Remember, understanding and acting on your financial data is your pathway to freedom, peace of mind, and control over your construction business’s profits. I encourage you to watch today’s video and check out the video on how to read and use your financial reports as a powerful management tool.

Embrace your numbers, put ‘profit first’, and start steering your construction business towards greater profitability.

Constructing Your Vision: How to Set Achievable Goals

Happy New Year! As we embrace the fresh start that comes with a new year, it’s a perfect time for reflection and goal setting, especially in the dynamic world of construction. While many of us set personal resolutions, the real game-changer lies in constructing a vision and setting achievable goals in our businesses.

A common challenge for many businesses is beginning the year without a clear direction. Often, we get caught up in the operational whirlwind and lose sight of long-term objectives. This lack of focus can lead to stagnation and missed opportunities, impacting both business growth and personal satisfaction.  The key is doing some simple goal-setting as I’ve outlined in this post.

A Personalized Approach

Instead of the usual New Year’s resolutions, I advocate for a more profound, vision-focused approach. Ask yourself: “A year from now, what will I want to have achieved?” This question shifts your focus from the immediate ‘how’ to the ‘what’ and ‘why’ of your goals. It’s about envisioning your desired outcomes first. This is just like planning a project – you start with a blueprint or schematic of what the end looks like BEFORE you begin building out a budget!

One General Contractors Plan

Consider a success story from my client Debbie… Her vision began with setting specific goals for increasing revenue by 10% and maintaining a 10-12% bottom-line net profit. Then she envisioned developing two team members into senior roles, freeing her to focus on strategy and client engagement. She then outlined her vision for what it looked like to have them managing day-to-day operations. This clear vision allowed her to see her business operations and personal work from a different perspective, and she was able to make a clear plan with her team of how this would get accomplished. First, though, she had to define what the “blueprint” looked like.

Clarity in Goal-Setting

The solution lies in having a clear vision of what it will look like once accomplished. By vividly picturing your ideal year-end scenario, you set a clear direction for your business. This clarity guides your decisions and actions throughout the year, keeping you aligned with your ultimate objectives.

Action Steps

  • Define Clear Goals: What does success look like for you this year? Be specific.
  • Write Them Down: Goals in writing are commitments rather than just good ideas.
  • Regular Reviews: Schedule quarterly check-ins to track your progress and make necessary adjustments.

Your Year of Success

Now, it’s your turn to envision and actualize a successful year. I encourage you to watch the accompanying video for deeper insights into this process. Take this opportunity to reflect, write down your goals, and regularly review them. Remember, a clear vision is the first step towards a remarkable year in your construction business. Let’s make this year count, not just in numbers, but in the satisfaction and growth you achieve!

The Power of Celebrating the Wins!

As business owners, it’s all too common to move quickly from one thing to the next, often overlooking the victories we achieve along the way. This habitual oversight can rob us (and our employees) of the joy inherent in our accomplishments.

In this post, discover the power of celebrating wins, big and small, that is both fun and rewarding. Along the way, you’ll discover how this approach can inspire and motivate your team as well!

Celebrating The Wins – a key to employee motivation

Each year, I encourage my clients to pause and reflect on their successes. This isn’t just about financial targets met; it’s about acknowledging the smaller, yet significant, victories. Did you hire a great team member? Overcome a major challenge? Turn an unhappy client into a satisfied one? These are all wins worth celebrating and sharing with your employees.

The Power of Reflection

Looking back over the past year is an enlightening exercise. It’s not just about what goals were met or missed; it’s about recognizing the progress made in various aspects of your business. This can include improvements in team performance, enhanced client relationships, or even a slight increase in your close rate. Such reflections can be a powerful tool in understanding the strides you’ve made.

Sharing Success with Your Team

Once you’ve identified these wins, share them with your team. This act of sharing not only fosters a sense of collective achievement but also boosts morale and motivates people to want to continue to contribute. Let your team know their efforts have contributed to these successes. It’s essential to celebrate these moments as they often overshadow the daily grind of running a construction business.

Takeaway

As we approach the end of the year, or even at the start of a new one, take a moment to engage in this exercise, and tap into the power of celebrating the wins and successes of the past year. Record your thoughts, then, choose the highlights you’d like to share with your team. Remember, personal wins are just as important as professional ones.

In my next video, I’ll delve into setting goals and visions for the upcoming year. Until then, I wish you a prosperous close to this year and a joyous start to the next. Let’s not forget to celebrate our wins, as they are the milestones of our journey in business.

Remember, every win, no matter how small, is a step towards greater success in your business.

Uncover Your True Labor Costs

In the construction industry, understanding your true labor cost is crucial. This was a hard-learned lesson for Mike, a seasoned contractor who thought he knew the full extent of his labor costs, but a detailed analysis revealed significant gaps in his calculations.

The Bidding Blind Spot

Mike’s first challenge was in his project bidding process. He based his labor cost estimates on easily visible factors, neglecting the deeper, hidden costs of his employees. This oversight led to bids that underrepresented the actual expenses, affecting the overall profitability of his projects.

Misleading Profit and Loss Statements

The second issue was in Mike’s financial reporting. His profit and loss statements gave an inflated view of his gross profit margin. The culprit? Rising employee benefits and a few other line items were not being allocated correctly. These should have been included in the cost of goods sold but were instead shown as overhead expenses.

Correcting the Course

To tackle these issues, we recalculated the labor costs in Mike’s bids to reflect the true cost of his employees. We then restructured his profit and loss statements to align these costs accurately under the cost of goods sold. This not only gave Mike a true picture of his gross profit margin but also guided him toward more accurate and profitable bidding.

Empowering Solutions

The below Video Tutorial and FREE Template I’ve provided here will guide you through the process of accurately calculating your fully burdened labor cost. Additionally, take advantage of the FREE Labor Cost Calculator template I’m offering. These tools are essential for ensuring your project bids encompass all relevant costs and your financial statements reflect the true health of your business.

Conclusion: Take Action for Financial Clarity

Now is the time to enhance your financial acumen. Watch the video, use the template, and start transforming your approach to project pricing and financial analysis. Share your insights with the construction community and let’s pave the way for a future of accurate costing and increased profitability!

Get your FREE Labor Cost Calculator Template and Watch the Tutorial Video now!

Embrace accuracy in your financial practices. Watch the video, apply the template, and join a community of savvy construction professionals dedicated to financial clarity and success. Your journey towards a more profitable business starts here!