strategy – Page 14 – Pinnacle Development Group

8 Tips to Finish Your Year Profitably

For many contractors the “4th Quarter” of the year is here and contractors need to be primed and ready to exert all that they can to end their year on a positive and profitable note.

Let’s look at eight “4th Quarter Tips” that just might add a bit more profits to your bottom line THIS year.

1. Refocus & re-energize your staff and crews

As you approach the final months of the year begin reminding and challenging your leaders to “reload” for a strong year-end push. This should include:

Each field leader should review jobsite plans and instructions prior to starting
Estimators should review their efforts and sharpen their pencils for more accurate bid work
Spend a few extra lunches on your troops to personally engage them with words of encouragement
Speak to performance goals that need to be achieved — even set new goals for the final quarter

2. Commit 2 to 3 weekends for equipment maintenance

Have you ever noticed that equipment rarely breaks down when you have time to fix it but always breaks down when you don’t? Early in the fourth quarter commit several weekends (however many you need) to assess, maintain or repair each piece of equipment, vehicle and all hand and power tools. Don’t take any chances!

While good contractors maintain their equipment and vehicles throughout the year it is not uncommon to have workers drive their equipment just a bit harder. As the year extends in the fall your workers are tired, and tired workers tend to be less aware (or less sensitive) to maintenance issues or to handling the equipment and vehicles with the same quality, safety and care that was practiced earlier in the year.

Remember, you want and need to finish the fourth quarter strong. Anything less than good working equipment will cost you additional dollars in emergency maintenance work, equipment rental costs or both!

3. Create incentives for all pending bids/proposals

This will require some discipline and strategy from you and your estimators. With work coming down to the final quarter many contractors tend to let their aggressive efforts fade a bit, instead focusing on finishing the work they do have under contract and scheduled. While this is needed an equal effort and focus needs to be exerted on every bid or proposal not yet signed and closed.

Creating incentives can include giving them another 2%, 3% even 5% discount on your submitted estimate to “act now.” Tie this incentive to your prospect making a decision by the end of the year — or earlier. If you are truly a seasonal contractor you might also offer the same discounts for signing the bid now for a commitment to begin work early the next year, thus building up some needed backlog.

Other incentive options include creating a situation where the customer buys the needed materials himself paying only your labor and equipment costs; or some contractors create or extend a warranty for the work proposed if signed prior to the end of the year.

Look, giving something away might not always be the answer, but you need to push every “open” bid to create some incentive to get your prospect to move now. Don’t be shy, timid or bashful about pushing this lever. Customers realize that you are in your business to make a living. Many customers might be a bit surprised if you don’t come back with an incentive. Don’t let them down!

4. Look to expand your services

Often, customers can be swayed if they feel like they are getting a bit more for their money spent. So consider another need that the customer might have and offer to include that service when you complete the original bid work. For example, a concrete or pavement contractor might offer to power wash a particular area of the existing parking lot or sidewalks for little or no increase in fee. Another example might be for the same contractor to offer to refresh existing landscaping.

Interestingly enough, I’ve personally observed contractors who actually developed new divisions of service that all started with this type of end-of-the-year effort. You certainly want to be careful what you add since you don’t want to perform less-than-satisfactory work on the new service (and thus cut into the profits you were scheduled to make on your prime work). However, don’t be blind to what might be a real need for service by the customer.

5. Practice a “Two-Minute Drill” to capture referrals and references

This should be part of your normal sales and estimating process anyway but way too many contractors fade away from this practice — especially late in the year when they are just trying to complete all the work on the schedule. Have someone in your office pull every completed project for the year, then go back and ask each of those satisfied customers for names of others who you might call on and inquire about work.

I would recommend starting with those customers who like you and who have already provided you with good leads. “Go back to the well” one more time. In fact, let them know that you will give them a “bonus” or some additional service if a referral turns into a sale. Many satisfied customers are only too happy to help those contractors who have provided quality work. Most customers like to have some bragging rights with their friends, and what better bragging right can a satisfied customer have then telling their friends, “See, I told you they were the best contractor!” [pullquote]Most customers like to have some bragging rights with their friends, and what better bragging right can a satisfied customer have then telling their friends, “See, I told you they were the best contractor!”[/pullquote]

6. Create a “Weekend Warrior” crew

While overtime hours tend to creep up late in the year it is also a time when quality tends to drop off and safety incidents become a greater possibility. So consider bringing on some part-timers who can work the weekends, giving your crews some much needed rest.

I realize that this is a hard call and finding the right “Weekend Warriors” might be difficult, but you might be able to tap into some local companies that do not work weekends: hire a few of their maintenance guys, drivers or mechanics, and pay them good weekend wages to work 10 to 30 hours over the weekend.

You will need to keep at least one or two of your key workers, perhaps a foreman, too, to keep your company’s processes and commitment to quality in practice. If you have more than a few crews you might be able to rotate easily with your better workers, allowing them to only work one or two weekends a month for the fourth quarter.

7. Call on larger contractors for additional work

Ok, before you think I’ve sold my soul, give me a quick read. Many of the larger specialty contractors and general contractors also have end-of-the-year closeout needs. Beginning in August and pushing into late October many of these same companies begin to realize, “We might not make it at our current pace or with our work crews.” When they recognize this they often are quite open to subcontracting some work to those who can provide additional firepower.

Working for a larger specialty contractor or GC has its own challenges, but when you catch them in this year-end crisis it is amazing how willing they are to negotiate. In fact, in many cases they can use you as leverage with their client to cough up more money to finish the project on time or to hit some important milestone before the winter months. No matter, it’s a real possibility for you and your company to pick up some more work and add to your profits.

8. Cut-out all wasted expenses

The previous seven tips have been offensive. I couldn’t leave this without one defensive tip that actually has a little offense in it.

Near the end of the year we begin to see what has helped us and what has not: What equipment we used a lot and what equipment we seldom used, for example. Even what services, advertising or marketing we used but didn’t get an ounce of benefit.

Make a list of such items and determine to reduce their financial impact or get rid of them altogether. I’m amazed how many contractors continue to carry insurance on equipment they rarely use or continue to subscribe to services that they haven’t used in years.

Get rid of your waste and do it NOW! Such things become obstacles to your performance and thinking. Clean house as this will assist you in preparing for next year.

Obviously there are countless other ways to finish your year strong financially. There is no room for the contractor who is too shy or proud to go on the offensive.

Remember, it is during the fourth quarter that companies, like football teams, really find out what they are made of! Go for it!

This article originally appeared on ForConstructionPros.com

Colby HumphreyNovember 10, 2015Strategic PlanningConstruction, planning, profits, revenue, strategy

Building Value for an Exit Strategy

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:

Clarify Your Life’s Purpose/Mission
Define Critical Roles & Responsibilities
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.