For every business, the first five years is a critical period when they need to surpass obstacles in order for the business to thrive. There are certain industries especially vulnerable to failure in this critical period including construction businesses. In fact, the risk is higher than in any other trade. According to data compiled by the United States Census Bureau, nearly two out of three construction contractors won’t make the 5-year mark.
Every day, contractor business owners face a myriad of challenges that, if not handled correctly, could lead to financial meltdown and possible closure of the business. Customer complaints, unsatisfactory project results, equipment breakdown, shipping delays, employee issues, and more can all hinder the success and growth of your business.
To stay on top of the game, here are some contractor business tips to keep your trade flourishing amidst industry challenges. Being resilient and making smart moves will definitely give your business the boost it needs to preserve the longevity of your business at its finest.
Follow contractor industry best practices
Every industry follows a specific set of rules and best practices to maintain the quality of work, and the contracting business is no exception. They always say that there’s the right tool for every job, and there are certainly the best ways to accomplish certain tasks. In the contractor world, each person has developed a specific system that they think works best for their business.
It might not strictly agree with what’s considered “best,” but as long as there is basic knowledge and steps that your employees follow, your small business is in good hands. From bookkeeping to making schedules, invoicing, training, and management, there should be an efficient system in place to guide everyone. Keep in mind that you don’t need to be the biggest firm, as success doesn’t happen overnight, you just need to prepare and be ready to scale up when it’s time to grow.
- Don’t resist change but instead welcome new processes and ideas.
- Always document baseline data for easy comparison and to measure success.
- Adjust the learning curve to sustain as well as accommodate business growth.
Specialize your contractor business
It’s no secret that there are tons of businesses just like yours, and all of you do the same thing – provide materials or services for a specific job. Offering the same kind of services as other general contractors makes you no different, and customers will often choose either a trusted partner or the most affordable service provider. Cutting corners just to break even with other competitors will be no good for your business.
To avoid this from happening, offer a specialization or cater to a niche market. You might decide to concentrate more on doing office jobs rather than focusing on residential properties, for example, although you should make sure that there is a good balance between your specialization and general services. Always maintain your competitive edge to stand out without forgetting your larger audience.
- Being an expert in certain areas allows you to keep healthier profits.
- Working in a specific niche is far more efficient than being a jack of all trades.
- Discover what is lacking in other independent contractors and capitalize on this.
Choose your customers carefully
In the construction industry, as with any other businesses, turning away customers isn’t recommended. In particular when you’re just starting to build up a reputation, you don’t have the luxury to pick customers. But as the old saying goes, for every rule there’s an exception. It’s true that all customers contribute to the revenue of your business, but some are definitely better than the others.
You’re sure to have met a customer who was demanding and harsh to other people. Then there are those who hunt you down to do a project that’s only worth a few bucks. The time, money, and effort you’ve made and invested in these types of clients isn’t worth it for you or your business. You should learn how to spot these early and distinguish the signs of good potential customers.
- Great customers will always give you a solid return of investment.
- Solicit feedback from fellow contractors if they have past experiences with such clients.
- Steer clear of rude clients and those who don’t want to give down payments.
Outsource to a specialist
Next on these contractor business tips is knowing what and when to outsource. You can be the greatest business owner of all time but you can’t master and do everything from accounting to manually constructing. There’s only 24 hours in the day, and working 50-60 hours per week just to finish a bucket load of tasks is not efficient. It might be tempting to get your hands into everything but there are qualified people that can help you out.
Some of the tasks that you need to consider outsourcing include accounting and bookkeeping, human resources, marketing your business, IT, customer service, maintenance, and office cleaning. The amount of time you save on doing these things can be allocated to what you do best: running your business.
- When properly outsourced, work is done faster and is less expensive.
- Use the internet to search for qualified freelancers that have enough expertise to do the job.
- With outsourcing you’ll gain higher profitability and excellent results, and spend less time working.
Stay on top of the cash flow
Even the most successful construction companies have had cash struggles during the lifespan of their business. While cash may be king, cash flow on the other hand makes the trade go round. Tons of contractors have closed down companies due to insufficient funds, and you don’t want that to happen. The secret here is to always stay on top of your cash flow and make sure to cover the costs of your overhead.
Before accepting any jobs, be aware of the expenses they might incur. Likewise, create a budget to determine how much money is going in and going out. Most of the time it isn’t the amount of money that is disrupting your cash flow, but the spending pattern and slow receivables.
- If the cash going out is greater than what is coming in, cut unnecessary expenses.
- Keep up with your bills and send friendly reminders for faster payments.
- Offer incentives for customers that pay on time, and penalties for those who don’t.