Category Archives: Strategic Planning

When Should Your Construction Company Add Services?

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One question I’ve received often over the years has been, “Brad, how do you know when to add another service?” This question, or some form of it, has come from young business owners who are desperate to find some other income stream or from the more seasoned owner realizing that to become a bonafide pavement maintenance “specialist” they would need to expand their vocabulary and offerings to customers.

Let me share a few thoughts and observations that I’ve made over the past fifteen to twenty years that might aid you in your own evaluation of growing your business. Certainly, the lessons learned by others might prove helpful to you.

When NOT to Add Service

It might be helpful to quickly address some poor times to add new services.

  1. When your primary business is experiencing increased amounts of customer call- backs and rework. This strongly suggests that your own focus on quality is in need of correcting. Fix your quality problems first and you might not be tempted to expand your company.
  2. When an employee says to you… “I’ve done that before.” There is always an employee, usually a new hire that can be quite convincing on what they’ve accomplished in previous companies. In most cases this type of worker may be a new hire for a reason.
  3. When you notice increased competition. Just the addition of new competitors shouldn’t send you packing for another service to provide. Competition, especially new competition, can be good for you. Such competition often adds pressure to getting things done right the first time, can force better attention to details, and generate a more creative mindset for marketing and sales.

Now, there are certainly more reasons why you might want to think twice before adding new services but let me provide you some proactive and positive reasons to add new services. [pullquote]Add a new service when it will compliment and further expand new business opportunities with existing clients.[/pullquote]

When to Add New Services

  1. When adding a new service will compliment and further expand business opportunities with existing clients.    This is the primary reason to add a new service. If your current and paying customers are asking you to take on additional pavement maintenance services this is a good sign that you and your crews are doing a good job on meeting customer needs and consistently providing quality.
  2. When your profitability is running consistently higher over the past season or two. It’s doubly difficult to acquire additional equipment, add another crew, and learn another service if you are not making much money.       Profits are good and they should be used to reinvest into your own company. Expanding into new services is made easier when you’re profitable.
  3. When a specialty contractor is technically proficient but has little to no business savvy. It is just amazing how many technical experts get into power washing, curb and gutter, Infrared application, seal coating, etc. who can’t run a business. Offering to purchase one of these contractors out might be a “win-win” for both you and the business challenged owner.
  4. When there is a new geographical opportunity available and it could be getting your foot in the door. Pavement maintenance contractors have begun a new service where they have little to no current business at and then use this new addition as a lead in for their existing services. This is sort of coming through the back door but it can be a strategy to add a new service that ironically opens the chance to do more business with current services.

Certainly one or more of the four reasons to add a service should be in place before expanding. It is important to also note that if you are seriously looking at adding a new service, develop a business plan. This plan should address such topics as: market needs, competitors in the market; cost of needed equipment; suppliers and their locations; and, type of customers to name just a few considerations.

The last consideration perhaps is that you really to have to have the proper attitude and mindset. Expanding a new service will renew your commitment to be patient and consistent. Prepare to have the needed capital needed to keep the new service moving ahead while you and your workers are learning the business.

Adding a new service should be a positive and profitable experience. If you’ve never added a new service you are in for a real challenge to your old policies and approaches. Be open to new lessons and best practices that you can learn and even pass on to your existing services. You might just end up adding a new service that becomes the new profit leader for your company in the future.

Brad Humphrey Founder & President Pinnacle Development Group

Brad Humphrey
Founder & President
Pinnacle Development Group

Strategic Planning, , ,

Building Value for an Exit Strategy

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Jack had owned and operated his pavement maintenance company for almost twenty-nine years and with the exception of a few lean years in the early eighties had witnessed his company’s growth each year. He and his wife, Jerri, had put two kids through college, one that had joined them in running the business after they graduated. After two years the “kid” was beginning to get a feel for the financial aspects of the business. Jack and Jerri were beginning to wonder if this wasn’t the right time to start thinking of turning the reins over to their son.

If you are a little gray around the temple this scenario is probably all too familiar. If you are just beginning your upward path in ownership this same scenario will become familiar, maybe earlier than you might imagine. For a business owner, the second most important objective to accomplish after running a profitable business is to insure that their exit strategy from their company is done seamlessly, without even a faint dip in production, loss of invaluable people, and profits.

There are three simple “laws” to building value for your exit strategy that I want to present in this article:

  1. Clarify Your Life’s Purpose/Mission
  2. Define Critical Roles & Responsibilities
  3. Entrust Your Company to Knowledgeable People of Character

1.  Clarify Your Life’s Purpose

It is extremely vital to your own mental health that you are clear about what you “want to do with your life.” Having a plan for the next part of your life is smart and life saving. Many contractors go crazy when they finally leave their business think that retiring to golf, fishing, traveling, or taking care of grandkids is going to satisfy their thirst for satisfaction. I know because I’ve been engaged with many pavement maintenance contractors who have struggled with letting go of their business.[pullquote]It is extremely vital to your own mental health that you are clear about what you “want to do with your life.” Having a plan for the next part of your life is smart and life saving.[/pullquote]

Before you ever begin to plan a transition you must come to grips with what you will do to occupy your time once you’ve really exited your company. You can always fish, travel, etc. Heck, you can do that before you exit. No, you must begin to consider what more with your life do you want to develop. Let me share a few brief examples of what some of my retiring friends have done once they left their construction business.

  • Served on boards in a consulting position.
  • Provided business advice to small company owners.
  • Joined a ministry that engaged their business knowledge or construction experience.
  • Acted as a trainer for their company of new employees.
  • Moved into a “business development” role for the business.

Now, not all of the possible roles to move to require a full week of work. For many owners they want to keep the taste of competition fresh in their spirit without knocking themselves out for forty to sixty hours of work each week. Based on my observations of many pavement maintenance organizations having an experienced veteran around for advice giving or simply just listening can strengthen the overall productivity of the business.

If part of your purpose is to remain connected to your company it is just as important that you realize just what role you will play and the contribution you intend to make. That leads us into the second law to consider enforcing upon yourself.

2.  Define Critical Roles & Responsibilities

You will do more harm than good for those left behind to lead your company if you do not define the critical roles and responsibilities of those individuals. Even if it doesn’t appear that there will be much of a turnover of people it is still good business acumen to sit down well before you exit and clarify who will be doing what, when, where, and how.

If your son or daughter will be taking over the reins of the business then it is very important that you assist them in spelling out what their job will require. Likewise, it will be helpful to your child that other leadership positions in the company are well defined. This effort is especially beneficial if many of the other leaders in the company had been hired and led by you over the years. These employees will only naturally feel some remorse with your departure about having to deal with “Jr.”

Once you have defined critical roles and responsibilities for the company it will be good to have the people represented by the roles to meet and discuss openly. This will facilitate a better understanding as to what the new chapter in their life will read like. It will also assist your son or daughter in positioning what they will want and need from those individuals in the positions defined.

Should you remain in some capacity for the company then you need to be very clear as to what your role and responsibilities will be. For example, if you had developed good relationships with bankers then perhaps you might continue to operate in this capacity for a period of time. If you handled relationship control with material vendors but feel that your successor should handle this important duty then you must be clear in your role going forward not to allow the material vendors to complain to you when your son or daughter do something they (i.e. vendor) do not like.

If your spouse has been the book-keeper and intends to exit with you then you will also want to tighten up their new role. It is very common to have the spouse, who for twenty-nine years made the deposits, called on late payments, corrected payroll mistakes, etc. find it difficult to walk away. This must be clearly defined as well or there will be a quiet rebellion brewing by those left behind to take over book-keeping tasks.

3.  Entrust Your Company to Knowledgeable People of Character

Our third law seems obvious yet often the exiting owner is blinded by old ties or quite fears that their son or daughter may not quite lead the business as they once did. This can lead to the owner entrusting key positions to individuals who might have the best interest of the exiting owner in mind but not necessarily that of the owner’s replacement.

[pullquote]It is vital then that key positions, including that of the actual replacement for the exiting owner, be filled with people who are bright, knowledgeable, a good “student,” and one of unquestionable character. [/pullquote]It is vital then that key positions, including that of the actual replacement for the exiting owner, be filled with people who are bright, knowledgeable, a good “student,” and one of unquestionable character. This effort must also be just as strictly followed for the selection of the owner’s son or daughter.

One of the most difficult decisions a parent might make as a business owner is recognizing their son or daughter for the strengths and weaknesses they possess. If the son or daughter simply lacks the needed skills, knowledge, or worse, questionable character, the parent/owner has no business positioning their child in the chair to run the business.

As challenging as this situation might be the parent/owner would be better off dealing honestly and upright with their son or daughter about their decision to hire or promote a non-family member to run the business. The child, or children, might yet work in the company but with clarity of purpose and commitment to being a positive contributor to the future success of the company.

Building value for your exit strategy certainly involves additional components than the three we addressed here. For now however, realize that it is often the people side to the exit strategy that often causes the greatest heartburn or hard feelings. Be clear about your direction, purpose, and set out a clear path for those who will be taking your company forward.

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Brad Humphrey, President & Founder, Pinnacle Development Group

 

 

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Review Construction Processes to Get More Results in Less Time

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TCBF

This article originally appeared on ForConstructionPros.com.

I had a former football coach many years ago who once told me, “Brad, you can’t coach speed.” Since he was doing more than his share of coaching of me at the time it was safe to assume that I wasn’t the object of his observation. In football you might not be able to coach speed, but in construction you sure as heck better be able to develop speed or you will be passed up by your competition. But what is the speed that we are to address here?

Speed, for many of today’s construction companies, is clearly due to the expectations of today’s customers. Consider that most customers:

  • Want everything in a shorter amount of time
  • With the same or better grade of quality
  • And for less money

For the many construction leaders who have lived the improvements and advances in construction technology, material composition and delivery systems, the reality of seeing schedules compressed is overwhelming. General contractors have seen projects shrink 30%, 40%, even 50% or more in time allowance. Every specialty of sub-trade contractor specialist has likewise had to drive completion times to new (shorter) records or face elimination.

So how do we really increase our “speed” without sacrificing our quality or suffering greater safety losses? It’s not an easy topic to address for all people and applications. However, let us look at speed through two different forums: process and personal. While some principles might work for both forums, I’ll try to focus on what is more applicable for each forum. This article focuses on speeding up process. We’ll tackle the personal aspect of speed in another article.

Recognize the entire scope of work

As easy as this should be to do, many contractors still fall short of really seeing the entire scope of work that they will be fulfilling. This first principle is not just reviewing prints, drawings and the projected building phases but instead digging deeper to clearly see the impact of other contractors, assessing associated risk in the project, and recognizing the intangibles needed to pull off the project.

Look for potential built-in “wastes” and work you can eliminate

This principle is actually right out of the “Lean Construction” manual. “Lean” directs us to assess the seven or eight potential wastes that can hamper your project in terms of time, extra steps, same efforts being completed by multiple people, and anything that might cause us to “pay for ground twice.”

Wastes can include your purchasing more material than is needed or “over manning” a job just to be safe. Such decisions when made all lend themselves to demanding time from you and others to correct. Every effort not dedicated to your schedule does, in fact, slow you down.

Plan and prepare to do everything right the first time

Mistakes cost you time and money. Correcting a problem (no matter via poor planning or execution) can cost you upwards to three times the amount of having completed the same effort “right the first time.” Thus, the cost for an electrician to wire one wing of a building might be $15,000, if completed right the first time. However, if that same effort is found to be grossly wrong and must be completely replaced, the overall cost to correct that problem may well be closer to $45,000.

With such clear savings (and greater profits) by doing EVERYTHING right the first time, why do so many contractors still fail to spend the extra time in planning and preparation? I think the problem, in part, lies in the pressure felt to meet the tight time schedule in the first place. The sense of urgency that drives us to work faster (the need for speed) challenges our realization that planning and preparation can actually increase our speed.

Work to get all contributing parties on the same page

This principle is not new. Yet, too many contractors continue to get by with a nod and wink while all the time not fully understanding what others, before and after their own work efforts, are doing, and what the needs of others might be.

Every project you win should include an internal and external “partnering session.” The internal version of this brings every employee in your company together who will be contributing to the success of the project. Roles are clearly defined and assignments are discussed with time commitments.

The external partnering session builds on many of the same efforts but obviously focused on the many perspectives that will be working on the project in scope. Needs and expectations between contractors must be honestly identified and discussed as well as agreed to processes that will be followed when things do not go as planned.

Revisit “party commitment” throughout project life

Getting all contributing parties on the same page is a must; getting consistency from each of the contributing parties throughout the project life is where the real money is made. No matter your part of the project, always be sure that you are regularly following up on your contribution with those who work before or behind you.

Periodically assess process effectiveness and improve as needed

Dr. Ed Deming, the “Godfather of Quality” of the 20thCentury, taught us his Plan-Do-Check-Actimprovement process. Briefly, we should always Planfor improving processes. We are then to execute our improvements (Do). This then requires us to Checkour efforts, making notes of adjustments we need to make and finally, Act on making such adjustments.

It was Deming’s contention that most work processes were “fat” and needed improvement. Mr. Deming’s observations about most companies were that process — that is, how things are completed — contributed to some 80% of our workplace problems. He found that only about 20% of workplace problems were directly the fault of people. Consider this for each construction project your company completes.

One point to remember regarding Mr. Deming’s observation: If you have an employee who makes a mistake, was the mistake the result of:

  1. Lack of knowledge or information about the needs of the effort?
  2. Lack of training or expertise to complete the effort
  3. A decision made by employee who willingly and knowingly chose to deviate from what is the proper action to take?

Both A and B above are process issues because education and communication are processes. However, the third possible result is a willful disregard for what is needed and expected and thus requires another process including either discipline or termination.

Require “look-ahead thinking;” reward and discipline accordingly

There is simply no excuse for any construction leader, at any level, to not think and prepare in terms of “look-ahead” thinking. There is just too much proof that planning ahead puts more time into your day and reduces the number of hurdles and speed bumps along the way. For a construction owner or senior leader not to require such thinking and practice is simply opening the door wide to mistakes, incidents and slow going…all resulting in less profit.

It doesn’t really matter whether you use a canned product (i.e. Day-Time, etc.) or software (i.e. Microsoft Project Manager, etc.) to line out your next week or weeks; the key is to use it consistently. Reward your people who consistently live by this effort and be quick to discipline those who choose not to. Build this mindset into every leader you have and watch your project success increase along with your profits.

Keep in mind that “look-ahead thinking” is not only time based, but it also considers the identification and securing of needed resources and contact information. It also works to identify needed prep calls to make prior to scheduled activities, follow-up efforts and how one effort will positively impact future efforts.

Now, there are many other process-related issues impacting the speed of our projects including the impact on new technology, moving to a new accounting system and even just the orientation involved with assimilating new employees, to name just a few more.

The bottom line in leveraging your work processes for your benefit begins by first taking an honest look at each process and then determining how best to take away any distractions or hurdles. The same philosophy is needed when we take a look at increasing the speed of our entire workforce on a personal level.

 

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