Contractors are notorious for leveraging tomorrow’s money to pay yesterday’s bills…” robbing Peter to pay Paul.”
We can look around and justify the practice, and yet we know deep down that it is a dangerous line to walk; a bit like an expensive game of musical chairs. Eventually, the music does stop… or at least pauses.
The most dynamic way to prepare for any event moving forward, whether it be growth, recession, boom, or bust, is to know your numbers.
As you know your numbers, you also know there are two primary ways to affect cash availability in your contracting business; increase revenue and/or decrease expenses.
Actually, I like to think it a better practice to increase revenue and manage expenses.
If you want to grow, you will likely have to spend more for that growth in the form of hiring, or increased investment in tools or resources to generate and deliver on that growth.
Here are a few methods for controlling costs in your Construction business.
First, stop spending on things that don’t align with your mission.
Construction businesses will usually have access to large sums of receivables at any given time and if not carefully and subdivided at the time that receivable comes in the door, you will start paying Peter what should be Paul’s.
Many times what Peter wants are just that…wants. Using the cash as downpayment to leverage debt onto a new big shiny truck, the fancy office, or perks that make us seem just a little bigger than we actually are.
That leads to what is a better decision; to watch your dollars closely.
Every single construction client we have, subdivides their bank accounts into at least six accounts following closely the model set forth by Mike Michalowicz in his important book Profit First.
When that dollar is subdivided by pre-defined percentage (not by hunch), it naturally resists being used for anything other than what it was intended.
If that dollar is not subdivided, it is easier for that dollar to hide and slip out as payment for something that does not align with the mission or values of the business.
A third way to control costs in a construction business is to be mindful of tax opportunities.
There are elements in any tax code that promote the movement and utility of money towards certain activities that stimulate economic growth.
Many times, elements of the tax code are value-adds to business owners if they are intentional and thoughtful in their planning.
Request more from your CPA. They are smart people who are worth far more to your business than just an annual tax return. A thoughtful CPA will lay out some basic opportunities for you to conduct legitimate transactions and deductions with your resources in order to gain tax benefits.
For advanced planning, it may not be a bad investment to hire a Tax Strategist as well for higher-level tax planning.
Finally, pay attention to your compensation models and structures.
The common method we have found for construction owners to compensate employees is to make it up as they go.
For an additional 30 minutes of thoughtful work and modeling on a simple spreadsheet, you can create a compensation model that is mindful of your cash flow, your growth, and the opportunities that lie ahead.
Too often we bow to the market around us, or to hostage demands in compensation instead of first asking our business what it can afford and what it needs.
The easy choice is to read this article, close it out and keep doing what you are doing. The hard choice is to read this article and begin taking action working ON your construction company by being mindful of your costs…and your revenue.
You can do this…if you make the time!
Recession chatter is at a continuous buzz due to the identification of predictive recession markers in the same way that hurricane preparation chatter would be abuzz if weather forecasters identified the predictive markers of a hurricane.
Where I live in the lowcountry of South Carolina, we went through a four year stretch where we were either brushed or directly hit by severe hurricanes.
The storms were no fun, and in some cases deadly. In advance of those storms weather forecasters and government officials worked overtime to ensure readiness.
They were not able to influence or avoid the storm, but they were able to provide a helpful forecast based on predictive and principles markers that allowed for thoughtful preparation; the ability to make ready prior to the storm.
Oxford Dictionary defines a recession this way, “a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.”
The markers of a recession seem to be swirling out off the coast and the winds of economic dis-ease have picked up substantially.
The barometric changes of interest rates, pricing volatility, fuel increases, supply chain disruption, and a historic personnel shift have all been mixed into an economic cocktail that certainly has our attention.
We can be naive and try to stop the storm, or we can diligently prepare for a potential storm strike and greatly increase the likelihood that we navigate tough conditions that will set us up for what I recently heard Dr. Tim Elmore describes Post-Traumatic-Growth; the hopeful idea that for the majority of people, trauma leads to growth.
How do you make your business and your team ready for the storm strike of a recession?
Here are four categories that you can invest in giving you a better opportunity to endure.
First, to weather any storm, your team must be aligned around written and re-visited purpose.
The three primary elements of purpose are a vision story, a succinct and memorizable mission statement, and 3 to 5 unique core values.
Your vision story is a detailed snapshot of the future of your business…a long description of what is “out there”.
Your mission statement is a less-than-ten-word, power packed punch explaining to someone why you are doing what you are doing.
Your unique core values are curbs along the side of the highway towards your vision story. Stay away from cliche values like excellence, integrity, respect, etc. Those should be values that are standard. What are the decision-filtering-values that are unique to you?
Next, your people must have access to culture they believe in and will compel them to remain locked into the mission.
Culture is not a native business term, it is on loan from biology. It is literally “to maintain the conditions for growth”.
Most business owners want to grow whether it be the top line, bottom line, product development, etc. Just in biology, the conditions must align with the growth you are hoping for.
To ready your business for the threat of a recession is to take the written purpose you have committed to publishing and sharing above, and ensure there is a recurring mechanism tilling that purpose into the soil, the people of your business.
For us, we read through our 5 page vision story together as an entire team once every two months. We review our mission and values at minimum during our weekly team meeting, and during our weekly 1 on 1 check-ins with team members. We are obsessive about them and constantly revision so we are ensuring the soil of our business is properly hydrated, fertilized, and tilled.
Third, a pending storm demands that each process can continue in the case of a disruption setting in.
If prices continue to remain volatile, schedules continue to be thrown off, people continue down the great resignation road…do you have your processes documented, communicated, trained and deployed so that the business can continue to deliver on your mission?
Or is it “all in your head?”
Finally, cash profit and retained cash earnings (actual EXTRA cash available in your bank account…we’re not talk about money you can borrow) are crucial during a storm in the same way provisions, fuel, and a means of generating energy are must-haves.
In short, being cash-heavy gives you options and opportunities.
If you do not have cash, you will struggle.
If you do not know how much cash you have, you will struggle.
Know your numbers by knowing your cash runway.
The true measure of profit is not the number that sits on the bottom of your profit and loss statement…that is just ink on a page.
The true measure of your profit is the actual cash you have sitting in a separate, designated account that is being continually filled up where you can see it on your online bank portal…and where you could withdraw it if you had to.
Purpose, people, process, and profit.
You intentionally build a store of those four elements and you will be able to look back from the other side of the storm and say, “we prepared well”...regardless of what the storm does to you.
You have a choice, weather a storm with courage, or wither away in fear.
Every time we dive into our delegation roadmap with a heroic business owner, we get a bit of pushback when we tell them they only get 3-4 items that are off limits as far as delegation goes. So how do you delegate the impossible? Well, let’s dive on in… Happy Monday friends, Thomas Joyner with BoP here.
It never fails, the excuses go on and on and on! That’s impossible to delegate. You don’t understand! I can’t let go of that, I can’t train someone to do all of that! We’ve heard it all.
And yet think for a moment, about some of the biggest businesses you know of. The big boys. Did they start out as multi-billion dollar businesses? Heck no! Most of them were mom and pop 1 location businesses that figured out the magic to scaling their business, delegation, and training. That’s it! They created and implemented new job roles and equipped their team to do the jobs they were asking them to do.
So, if you were to write down all the things you do on a weekly basis. What’s that one thing that came up in your mind that you would love to delegate, but you’re thinking…”There’s just no way!”
Just last week, examples from our clients… one business owner letting go of estimating, for the first time in 6 years of running the business. Another, letting go of the entire back end and hiring a virtual bookkeeper and CPA for the first time. Life changing! Still, another, offloaded a huge piece of their operations and scheduling to another team member for the first time in almost 5 years.
Time after time, day after day, business owners are doing the unthinkable and offloading serious weight in their business and making time for what only they can do in the business.
So how are they doing it? Well, we call it the systems mindset. The next time you do an undelegatable task, record the process. Newsflash, this will take time. Record it with a screen capture technology or grab an admin, your spouse, a kid, whoever, and dictate to them as you do every single step. And I mean every single step. As if you were going to grab John Smith off the side of the road and hand this over to him.
From there, communicate to an employee that they are going to begin to own this task. All of it, by whatever date you decide. Now, this may mean they have to delegate something from their task list. No problem, the same steps apply.
After you’ve communicated this, schedule a time to train them on the process. Walk them through every detail and figure out where they may lack clarity or may struggle. Then push them to have a first attempt. Do it alongside them and help them through it.
After you do a couple attempts, it’s time for them to try it on their own. Resist the urge to jump in and save it. Let them struggle through it. Just like in exercising or lifting weights, if someone helps you lift the bar, you never get stronger. It’s the exact same with job roles. The struggle helps in the long run.
Set up a series of follow-up meetings to check-in and answer any more questions and support them after the initial training meeting. This may be the most important step. They should own 80% of it at this point and just lean on you for the nuanced points.
Lastly, let them own it and then hold them accountable to the standard. Periodically check on progress and continue to support them, but don’t micromanage. Expect them to own it and expect them to be proactive in accomplishing whatever it is.
This is another level of business owner. One who realizes what only their role needs to be and spends hours preparing and delegating the seemingly undelegatable, to free you up for what only they can do.
So, go back to that one thing you hesitated on. Start putting a process together…make it bulletproof. Train, hold accountable and offload it so you business can keep moving forward.
Don’t make it more complicated than it needs to be or drink the excuse Kool-aid! Imagine if Wal-Mart or Amazon or apple just one day, years ago just decided things couldn’t be delegated… they wouldn’t be who they are today.
Take the time and believe it can be done.
Thanks for listening today… go ahead and send us what you are in process of delegating and send us the success stories! It’s what gets us out of bed in the morning.
Take care!
We spend a lot of time here at BoP figuring out who our ideal client is. We think through what their frustrations are and how they spend their day. We look at what motivates them and how that meshes with what we offer. Is it a fit? No? How can we make it a fit? Because here’s what we know…for every person we spend an hour with who is NOT our ideal client, equals an hour that we’re not spending with someone we need to be working with. It’s that simple.
So…who is your ideal client? How do we figure that out? Well, let’s talk about that today, Thomas Joyner with Business on Purpose here.
We really are serious about our ideal client. For a series of reasons, but 3 quick ones.
So, if I asked you who your ideal client is, would you even know where to start? What do they look like? Dress like? How do they spend their time? Where do they congregate for business meetings and how do you get in front of them?
What phrases come out of their mouth and what do you hope to hear come out of their mouth so you know…YES, we can solve that problem!
Many of us go, “Oh we can work with anyone!” While that may be true if you’re selling bottled water, I would push back and say, yes, you CAN work with anyone, but why not put your energy towards an ideal demographic? Your ideal client! Your marketing and sales has to be focused. Because those will become your raving fans and the ones to help grow your business organically. Not the ones you just, “Made it work” for.
So…spend some time today diving in on this. Get incredibly detailed. We have a 2-page document simply outlining our ideal client. That way when we go to a former client or current client and ask for referrals we can tell them exactly who we’re looking for and know that we will be able to deliver on our promises.
It’s worth spending the time to do this now…right before everyone jumps back in this fall. Figure it out, look for them and watch your business do what it is designed to do!
Thanks so much for joining, have a great day!
You just completed the relentless and methodical work of recruiting and hiring a new team member, and you are still left with that big, expensive question, “is this new person even going to work out?”
Hiring new roles and new team members always seems to be an obvious and easy solution to everyone except the person whose time, attention, and bottom line is most on the line. It’s day one for that new hire…how does the mission get the most out of that new person, and how does that new person get the most out of the mission of the business?
American style football is a very set-play-specific sport. All eleven players on the offensive side of the ball must be in lock step technique choreographed in unison. Each position targets a specific direction and technique because the other positions are depending on it. The right guard trusts that the center has the other guy. The running back trusts the right guard to block that huge human being coming straight for him. The quarterback trusts that the running back made the right decision to run right instead of left.
We are under the misconception that the game of business is simply a collection of random events that all seem to work out in the creating, buying, and selling of products and services. And in some rare cases, people can get by on that mantra…but for most that is not the case.
For most, haphazard play leads to haphazard results. For most, a lack of preparation, of making ready before hand, has led to a life of chaos, frustration, and regret.
Most American football teams are known to have a written, published, playbook. That playbook is expected to be studied, reviewed, and re-reviewed.
A Bleacher Report article reveals an example playcall from future Hall Of Fame quarterback Aaron Rodgers, “East Right Flop, V Right all the way outside, Y Left, Fake 396 Bag, V Hinge, Z Puck.”
Huh?
In order to understand the various formations, routes, and directions, each player must spend a lot of time in the playbook.
The moving parts in your business can be as complex as the moving parts of an 11 person football team, and yet many business owners do not make the time to create a playbook.
For most, the idea is too intimidating, for the rest we hide behind the excuse of a lack of time.
Imagine a football coach interviewed for a job and had no playbook to show and instead boasted, “I make it up as I go!”
Let’s not follow suit.
Instead, let’s make time to build a playbook for all new employees.
Here are a few elements you can use to build a great, thoughtful, intentional employee initial training book.
First, start with a welcome letter. Make time to sit down and ask yourself, “If I were being hired by a business, what would I want to hear from them on day one?”
Whatever comes to mind…write that down no matter how long or how short.
Second, give a broad overview of your business. We encourage all of our clients to build a Master Process Roadmap…this is your entire business on one sheet of paper.
A great roadmap is made up of at least four columns representing the four systems found in every business: Administration/Accounting, Operations, Marketing, and Sales.
Underneath each column are a list of every known process that is required to make that system run effectively and towards the mission of the business.
The third element of a great initial training book for your team, is a technical overview of the elements they will need for their role. Your team member needs to know who to ask and where to go find direction and answers to help them fulfill the role they are committing to.
Who does what within the organization (Org Chart)?
How do I get access to the important elements of that role (Checklists)?
How do I learn the nuances of each process (docs or video training)?
If you don’t know where to begin, just begin. Sit down in a quiet space for a dedicated time (start with 30 mins) and just begin to jot down bullet points of everything you believe this person will need to know.
Creating the outline is actually the HARD part…once you know what they need, it is easy to fill in the gaps because you (or someone else) have done those little tasks thousands of times up till now.
Make time to outline…the content will follow.
Finally, your initial training book should come with a simple scorecard, or expectations sheet. This answers the question for the new employee, “how do I know if I am doing this right?”
Whether your initial training book is five pages or five hundred pages, your new employee, and you, will feel a sense of clarity knowing that they have a place to start when they have big questions.
Don’t be the coach without a playbook…an initial training manual will help your team flourish!