In every business, some things we do eat into our profitability. Sometimes it’s the things we don’t do. Once you see them, you can either start or stop doing those things and improve your bottom-line.
Between now and the end of the year, we’re going to look at issues that eat into company profits.
Do you run your business or does your business run you? When you look over the past few work days, did you plan your day and work your plan, or did interruptions force you into reacting instead of acting?
When your business runs you, life can get frustrating. That frustration can show up in your relationships with your employees and your spouse.
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If, every time a problem arises, it comes straight back to you, maybe your business depends on you too much. If that’s the case, you’re limiting your company’s growth. If your business can’t run consistently and predictably without your involvement, it’s time to make a few changes.
You need a plan to review, revamp and, most importantly, revise. It’s time to stop being Superman.
A well-written business plan is a first step. A business plan provides a system or process to deal with the issues that arise in your business. Based on my conversations with thousands of contractors over the years, I’ll estimate only 4-8% of all construction companies have a business plan written down.
A business plan helps you get control over your business because it puts on paper what your business is and where it is headed. It doesn’t have to be fancy; take a sheet of paper and start listing what you want your company to look like in one year, then five years, then ten years.
What kind of jobs do you want to be building? What areas? How will you get those jobs built? If you have employees, how do you see those employees advancing? How will you advance your own business education?
How much revenue do you want to be producing, and what’s the profit percentage? How much will you have set aside for your retirement?
Goals that aren’t written down are just wishes. As Brian Tracy said, “Goals in writing are dreams with deadlines.”
Next, you need job descriptions. Sit down and write out a description for each position in your company. It doesn’t have to be long winded, just accurate and covering the job. If you have time and have thought about expanding your company, you might want to add a description for the next few hires as well. Don’t expect to complete this in one sitting; spend time pondering and come back to it every few days until you think it’s complete.
When you write the job descriptions, it should include responsibilities. When people know it’s their job to handle a given issue or make something happen, they’re more apt to get it done without your prompting.
As the owner, you need to check with your people on a regular basis to be sure everyone is doing their job. You’ll quickly find out if someone isn’t performing well, because you’ll see problems developing around their position. You’ll get calls from owners, subs or suppliers asking why or why not. You’ll hear rumors about things not getting done. You’ll know; if it happens, don’t ignore the warnings. Take action.
You also need to separate yourself from the daily flow, and the best way to do that is to have employees who are doing their jobs independently. If your employees are used to coming to you and asking questions they could answer on their own, you need to tell them to do their own thinking.
I believe some employees will do the least amount of work they can do to still collect a paycheck. It doesn’t apply to all employees, but those are also the employees who don’t want to do a lot of thinking, either. They’ll come to you and ask you questions about things they could have figured out by themselves if they’d put on their thinking cap.
My advice is to turn it back on them. “Joe, I am paying you to think. We covered that scenario the other day and now you’re asking me a similar question. If I’m going to do your thinking for you, then you’re going to pay me for my time. Can you figure out an answer to your question, or do you want me to deduct this time from your paycheck at $45 an hour?”
Now, when they come up with an answer, you better back them up on it. That will give them the confidence of knowing they can do it on their own. And the more they do on their own, the more time you have to do your part of the job.
Be patient. These things take a little time to work. You should start seeing more free time for yourself within a couple of weeks and it might take up to six months, possibly even a year to get everyone doing their job, but stick to the plan and enjoy your new freedom.
The knowledge and experience Michael Stone gained in his 60+ years in construction has helped thousands of contractors improve their businesses and their lives. He is the author of the books Markup & Profit Revisited, Profitable Sales, and Estimating Construction Profitably, and is available for one-on-one consultations.