What’s it Take to Build a Successful Construction Company?

Gene’s Excited About His Meeting with John

As usual, Gene had been on the go, nonstop, trying to keep construction projects moving forward, collecting money, paying bills, and meeting with new potential customers when he realized he still had six projects needing proposals. As he thought about this, he realized it had been more than two weeks since he had talked with John about how he did construction proposals.

It’s so easy in business to get caught up in fighting daily fires.

Gene picked up the phone and dialed John’s number. “Hey John, this is Gene, have you got a few minutes?” “Sure,” John said, “What can I do for you?” “I just realized that I’ve got six projects that need priced, this reminded me of our conversation a few weeks back, when you offered to go through your bidding process with me. Does that offer still stand?”

“Sure,” said John, “when would you like to meet?” Gene thought for a minute, realizing he wasn’t sure when he would have time to squeeze in anything else. “I don’t know John, as usual, I’m booked pretty full.” John waited for a minute and then said, “I understand. Think back to what you said in our previous conversation. Do you remember how frustrated you were?”

“Your situation isn’t going to change until YOU decide to change it.”

Gene rubbed his forehead. He knew John was right. “Okay”, Gene said, “I can probably squeeze in an hour or maybe two Saturday. Would that work?” John shook his head and smiled, remembering what it was like to be where Gene is.

Then he said, “Gene, I appreciate where you are, but the process of getting from where you are, to where I am, isn’t going to happen in an hour or two. I’ve been doing it for forty years. If you can commit to four hours Saturday, I will be glad to meet with you and we can start the process.”

“YOU are the only one that has the power to make this change.”

Gene sat there with all the things that needed to be done, bouncing around in his head. Then he thought about how tired he was of feeling out of control. Once again, he knew his mentor was right. John had taught him so much about construction and how to build things.

Now it was time to learn about the business part of construction.

“Okay,” said Gene, “How about we meet at noon on Saturday, and I’ll bring the pizza.” John said, “That sounds great, and we can get started, but that’s all this meeting will be…getting started. Like I said before I’ve being doing this for years. It takes work, it takes commitment, but the end result is worth it.”

“It’s more than just learning. It’s a lifestyle change.”

“Gene, most people in construction never learn the business side of operating a company. This is where they struggle until they get to a point where they give up. Bring an open mind and an open heart and be ready to have them both filled.”

“Nothing is going to change until something gets done”

Now Gene was getting excited and looking forward to meeting with his friend and mentor and making some changes in his business and his life. He was beginning to realize that a construction project started out right, begins long before any actual construction takes place.

It takes the right tools, training, and action to build a successful construction business. It requires you to do more than just talk about it.

If you or someone you know is feeling out of control like Gene, there are tools and training available to help get control of the business. The Business BUILDing Toolbox is filled with construction business tools.

If you would like to dive into the Blueprint for Building a Better Proposal, we’re hosting a free 90-minute workshop for Building a Better Proposal on Saturday, January 6, 2024, at 10:30 CST. Register for the workshop here.

If you have questions about the workshop or business systems, you can schedule a free 30-minute construction company consultation here.

Why Understanding is Critical to BUILDing a Successful Construction Business

Because Your Company is Too Important to Just Roll the Dice

Why is it that people operating construction companies are willing to gamble with their business? This random hit and miss business model is an all-too-common practice in the construction industry.

Somewhere along the way as we grow into the routine of life and business, we stop asking questions.

As kids we’re expected to ask questions. In school we’re taught to ask the five Ws (who, what, when, where and why) and how. These questions are considered basic to information gathering.

UNDERSTANDING starts with asking questions.

Asking questions is the first step to understanding success. The questions are more important than the answers. Asking questions is necessary to break out of routines. Questions cause us to dig deeper and ask more questions. If we don’t ask questions, we will stay stuck in the mundane habits of doing the same old things over and over hoping for a different outcome.

It’s like people in horror movies. If you’ve ever watched a horror movie then you’ve seen this. Teenagers are in a dark scary place and instead of getting out when they have the opportunity, they continue to hide in a basement, an attic, a cemetery, etc. The GIECO “horror movie” commercial is a great example of this.

If you don’t want your business to be ‘chopped up by a chainsaw’ you need to BE AWARE and start asking questions.

Asking questions leads to UNDERSTANDING.

Like any tool, if you don’t understand how to use it, what its purpose is, and how it works it won’t be any help to you when you’re doing construction. The same is true for tools used to build a successful construction business.

  • Sales tools like Proposals and Contracts
  • Production tools like Change Orders and Payment Applications
  • Financial tools like Job List and Savings Account Transfer Sheet

Understanding how these tools work, their purpose, and how to use them can be just what you need to build that business of your dreams.

Understanding is the mental grasp or comprehending of something. It is the knowledge about a situation, how something works or what it means. Understanding is also an agreement between two or more people. It is the sharing of thoughts and ideas of others and willingness to listen with an open mind. This kind of understanding leads to trust.

If you’ve been in construction for very long, you’re aware of problems like –

  • Balancing construction projects and paperwork
  • Feeling like your business is out of control
  • Keeping projects on schedule
  • No money for bills, taxes, or emergencies
  • Keeping projects within budget
  • Disappointed or upset customers
  • Communication breakdowns

You can either ignore these issues and keep doing things the way you have, or you can start asking questions and figure out what to do about them.

Questions like why…

  • Why should construction contractors do proposals? –

This question is the one that baffles me as much as any. How can contractors expect customers or production crews to know what work is going to be done and what it’s going to cost without some clear communication? I don’t think you would buy a truck without knowing what you were getting. I know I would be disappointed if I ordered a new $70,000 truck and when I got it, it was a 1999 ½ ton pickup missing a wheel and the driver’s door.

  • Why don’t contractors do proposals? –

The most common answer to this question is that they simply don’t know how. This is something that just isn’t taught. Most contractors start out doing construction, not paperwork. They figure out some guesstimation process and then wonder why customers are upset when they get a bill that is higher than they expected for less work.

  • Why does this customer want to do this construction project?

This should be the primary question that a contractor gets the answer to. It is more important than what. The “what” answer has a “why” answer behind it. The why question doesn’t have to be asked directly, but regardless, needs to be answered. The why is the foundation for the customer’s dream. A foundation is critical to building construction projects and dreams.

  • Why do we do the same things over and over expecting different results?

We all do this to some degree. Why? Why do we continue to repeat things thinking it will be different this time? We shouldn’t do things just because… “we’ve always done it this way”. The more we walk back and forth in a rut, the deeper it gets and the harder it is to get out. I heard it said that a rut is just a grave with both ends kicked out. Stop walking and determine if this is what you want and if it’s the best plan. If not do something different.

These questions are a starting point to understanding how you can BUILD a better construction business.

Like so many things out there UNDERSTANDING can be a scary thing. It may take us outside of our comfort zone and we don’t like that. We would prefer to be like the people in scary movies…and just go hide behind the chainsaws.

At Solution Building we’ve developed a 5-step BUILDing process to make stepping out of your comfort zone a little less scary. If you would like some help knowing which questions to ask or answering questions you have, schedule a free 30-minute consultation here.

What Do You Need to Know to Run a Successful Construction Business?

It Has More to do With Business and Less to do With Construction

There’s something exciting about the thought of starting your own business. It seems like a great idea initially. The problem is that most people don’t realize what it takes to operate a successful construction company.

We’ve all seen construction companies get started and then go out of business.

 According to the Small Business Administration…

60 percent of US construction companies fail within the first five years of operation.

These companies reportedly blamed several factors for their failure, including labor shortage, politics, insurance, taxes, natural disasters, and subcontractor incompetence. While these things may be a part of the problem, if we look a little deeper, we’ll see…

The real factors that brought about construction company failures are internal and within the owner’s control.

The reasons are more likely poor planning, inaccurate scheduling, hiring the wrong people, inability to innovate, poor management, and bad or no business system.

The good news is, that the next generation of construction businesses can learn from their forefathers’ mistakes and avoid failing for the same reasons. 

Owning or managing a construction business is a hard thing to do. And to do so successfully is especially hard.

The solutions to problems that can put construction companies out of business may not be easy. It takes a lot of planning, production management, hard work, and discipline to keep the business running successfully. But at least…

Most issues faced in a construction business are controllable.

Finding out what challenges are likely ahead can help construction companies be prepared.

Here are some reasons construction companies fail –

Lack of funding and/or poor cash flow – One of the reasons construction companies fail is not enough funds or unwise use of funds.

The ultimate dream of any professional in the construction industry is to earn more by owning and running a business, rather than collecting a paycheck working for someone else. But keeping a business operating at a profit is never as simple as just doing construction work.

There are processes and systems that need to be in place for collecting from customers and paying the bills. Construction requires tools, vehicles, and equipment, and these aren’t cheap.

It’s critical to maintain positive cash flow, have a budget for bills, and money saved for emergencies.

Overlooking these things can quickly lead your company to failure.

Poor project performance – One bad project can lead to a construction company’s closure.

Project performance is more than the physical construction work. The internal business systems for proposals, change orders, project management, invoicing, etc. are often not thought off when thinking about construction projects.

Construction projects are about good results. This includes starting and completing projects on time and within budget. Meeting contract requirements and customer expectations.

Failure in any of these areas may mean the closing of your company.

Failure to plan – Just like good planning can lead to a successful construction project, the same is true for building a successful business.

In project planning, you define goals and processes according to the customer’s requirements. You are intentional and clear on where the project is going and how you’re going to get it there.

A good builder will do the same when it comes to their business.

Consistant clear communication with customers, production teams, and suppliers is one of the important pieces of a good business plan.

The likelihood of companies going out of business without a plan increases exponentially.

There are a lot of risks lurking on a construction site that can cause a project to go poorly. The best way to avoid these risks is through awareness, understanding, and preparation.

The same is true for your company. If you become aware that there’s a problem and understand it, you will be more likely to avoid it. Instruction and learning can lead to building your dream business.

The road to success in the construction industry may be long and rough, but it’s worth it.

Become more successful through improved processes, systems, and management; take it one step at a time, and soon enough, you can achieve your ultimate business dreams.

Let us know what your biggest construction business struggles have been in the comments below.

How Implementing a Plan Can Help Us Build a Successful Business

The Five Remaining Areas of the “Job List” Building Block

Back in December we started discussing the importance of building your business on a solid foundation and why people in the construction industry avoid doing it. Then we talked about how a reporting process like the “Job List” can be an important building block in a construction business foundation. Last week we looked at how the “Job List” can help us plan for the future.

A business won’t stand long if it’s not built on a solid foundation.

So far, we’ve discussed how…

  • Creating and recording project numbers can help you focus your attention on the right kinds of projects.
  • Tracking project bid amounts will give you a clear picture of where you are in relationship to meeting your financial goals for the year.
  • Tracking dollar amounts of signed proposals will give you the rest of the picture of where you are financially in relation to where you want to be by the end of the year.
  • Tracking dollars collected from projects will give you a clear comparison of your signed amounts with your collected amounts.
  • Percentage of jobs signed will let you know if your pricing is too high or too low.
  • Percentage of dollars signed per dollars bid will let you know how you’re doing in relation to reaching our financial goal for the year.
  • Percentage of dollars collected per signed simply lets you know if you’ve collected everything that was bid.

Now let’s look at the final five areas of this document and how they fit into a solid business foundation.

Average dollar amount of projects bid – This number (cell I-30) is just like what it sounds like. It’s the average dollar amount of all the projects you have done proposals for. It can be helpful to know what this information is. It can help you determine if you should make changes to the sizes of proposals that you should be doing.

Average dollar amount of projects signed – This price (cell J-32) lets you see what the average dollar amount of your projects is and how it compares with the proposed amounts. Like the average bid amount, this number let’s you know what size of projects you normally do. You can then make changes to what proposals you focus on.

Average dollar amount of projects collected – Like the percentage of dollars collected, this number (cell K-34) lets you know if you’re increasing or decreasing the dollars you collect after proposals are signed. This can be a critical piece of information about how accurate your proposals are.

These next two areas are instructive when it comes to production planning as it relates to achieving your revenue goals.

Projected timeframe for doing signed projects – This information (cells I-23 and J-23) tell you how long it should take you to do the work of the proposals that you currently have signed. This is determined by dividing what your gross revenue goal for the year is by 52 weeks. Then dividing the current total signed amount (cell J-22) by that weekly revenue target number gives you the number of weeks needed to do that work.

Projected date work should be done – Like the projected timeframe, this information (cell K-23) converts the projected time it should take to do the work of the currently signed proposals to a date. This is achieved by adding the number of weeks (cell I-23) to the starting date (cell H-23). This then gives you a target date on the calendar that the work should be done to stay on task and achieve your dollar goal for the year.

I find these last two pieces of information the most revealing and helpful when it comes to staying on target.

This information can increase the sense of urgency and focus, and this is something that is critical to building a successful construction business.

I hope you’ve found this series on the “Job List” as a foundational building block helpful. If you would like more information about this or other business systems and processes, go to SolutionBuilding.net or reach out us in the comments below.

Why It’s Critical to Build Your Business on a Solid Foundation

Because If You Don’t…It’s Likely to Come Crashing Down Around You

If you own or operate a business, I’m sure you’ve experienced the feeling of your world crashing down around you. There are a variety of different reasons this happens. A few of them may be due to things out of your control. But, more often than not…it’s because of bad decisions we made.

Most of us that are self-employed started out learning our trade as an apprentice working for someone else. This is how I got started. The problem with this is that while I learned how to build a building, I wasn’t taught how to build a business. This is a critical part of why so many businesses don’t survive.

It doesn’t have to be this way if the business is built on a good foundation.

The foundation of a building is made up of two parts, the footing and the foundation. The footing creates an attachment point between the foundation and the soil. The role of a footing is to support a building and help prevent settling.

The foundation is the base of any building structure. The foundation transfers the load from the structure to the footing and also provides resistance from loads exerted on it. If the foundation of a building is inadequate or not maintained, the building will collapse.

The foundation of a good business is the same. If your business isn’t built on a solid foundation, it will likely collapse.

The footing for your business is who you are. It consists of your purpose, core values and mission. These are the non-negotiables. The things that, when faced with decisions, will be rock solid.

Your foundation is three piers supported by the footing while supporting the business. This is the business systems and operations. These piers are sales/marketing, production/operations and administration/finance. 

  • Sales/Marketing – Searching for and finding customers that you can help by providing your service and/or product through word of mouth, advertising and awareness. Meeting with potential customers, determining what they want/need and preparation of estimates, proposals and contracts.
  • Production/Operation – Organizing, scheduling and maintaining the project or product. Determining who the right people are to preform specific tasks. Knowing the parts that are needed and making sure they fit. Maintaining communication between all parties involved. Upkeep and maintaining facilities and equipment.
  • Administration/Finance – The preparation of documents needed to communicate, track and record all aspects of the business. The filling out and filing of income, expense, banking and tax papers. This leg is one of the easiest for ‘trades-people’ to neglect and one of the most important.

For a business to be successful for the long term it is critical to have these three piers in place and to maintain them.

If one or two of these piers get neglected when doing the busy day to day work…the business begins to lean and if not corrected in time, it will collapse.

These three piers are made up of several different pieces. I plan to break these pieces down and explain how they fit together and serve their part in supporting a successful business.

I will start with the Administration/Finance pier, because it is the most often neglected by ‘trades-people’.

It’s up to us as business owners and entrepreneurs to build and maintain our business. If we do this well…everyone benefits.

How to Build a Successful Construction Business Without a Master’s Degree

Building a Successful Business Doesn’t Have to be Slow and Painful

The majority of small and medium sized construction companies have the construction part figured out but get overwhelmed by the “business” side of things. Most of the people working at these companies learned a trade…not how to run a business.

Like me, most started doing business full of enthusiasm, having no clue what could go wrong. I had no clear plan or system for running a business.

Trying to balance construction projects and running the business can be overwhelming.

I had no idea how to do a proposal, a production budget, or accurately invoice a customer for progress payments. No one told me I should set money aside for things like taxes, tools, or emergencies.

One day I looked up and wondered how I got here. I liked building things…not necessarily running a business. As I built my business, I learned these things, but it was a slow and painful process.

The truth of the matter is…building a business doesn’t have to be slow and painful if you know how.

Think about it, a traditional trade school education will cost between $7,000 and $40,000. It’s been my experience that a real-world, hands-on education is worth even more. Often classroom education doesn’t translate well to the construction site.

Early on in my construction career, I was working for a local house framer. On a couple of different occasions, he hired some young men from the community college’s construction program, for summer help. After a few times of doing this, he stopped.

He said, “It took longer to unteach and reteach than it did to start from scratch.”

Looking back, I now realize how valuable that hands on education was. I just wish I’d had someone teach me the business part.

Instead, I got my business degree from HKU, also known as Hark Knocks University. And let me tell you, the tuition is high and it takes a long time to graduate. What’s an education like that worth?

Wouldn’t be great if you could get 40 years of experience without having to wait 40 years to use it?

You can!

This is what we’re doing a Solution Building. We are taking those 40 years of hands on, trial and error education and making it available to other contractors through programs, trainings and downloadable tools.

One of these tools is the Blueprint for Building a Better Proposal system.

This proposal system allows for the preparation of proposals that communicate clearly and accurately with customers, while allowing for increased profitability. It will give construction companies years of advantage over the competition for a lot less than the cost of a traditional education.

Currently this proposal system is available at a Holiday price of $497 plus some additional bonus templates through the end of the year.

It’s Time for the First Meeting

And John’s Not Sure He Can Squeeze It In

It’s Friday and John’s in his normal state of overwhelm. He’s supposed to be meeting with Gene tomorrow afternoon to go over the Blueprint for Building a Better Proposal system and he doesn’t know how he can fit it in.

There are still so many things that need to be done.

“Maybe we can reschedule,” thinks John, I’ll just give Gene a call and see about moving the meeting back a week. “Okay, that’s enough.” John says to himself. “The whole purpose for this meeting is to change things, so that I don’t have to feel this overwhelmed.”

I’m tired of always feeling out of control.

John pulls up in front of the XYZ Construction Company office and admires the building. As he gets the pizza out of the truck and goes up to the front door he thinks, “I sure hope I can have a place like this someday.” As he walks through the door Gene greets him with a solid handshake and a grin as he says, “I wasn’t sure that you would make it.”

“I wasn’t sure either.”, John says with a smile. “I came really close to calling yesterday, to see about rescheduling. “I’m glad you didn’t.”, replies Gene. “You’ve taken the hardest in a series of hard steps.”

“The first step is the hardest. It requires a change of thinking and direction.”

“Bring the pizza and let’s go into the conference room.” As they make their way into the spacious comfortable room John thinks back on when they used to have their weekly production meetings in this very room. Looking back, he realizes how much he had taken what Gene has accomplished for granted.

Gene hands John a plate and they both get some pizza. “There’s water and soda in the fridge like always.”, says Gene, “Help yourself.” As they set down and start eating Gene asks John, “Why did you go into construction and start your own company?”

“Why do you do what you do?”

John sat there for a while chewing his pizza at the same time chewing on this question. “Why was he doing this?” He had asked this question a lot, but it was usually a question of frustration, not really looking for an answer.

After what seemed like an eternity, John answered, “I really don’t know. I suppose that seeing what you had accomplished, I wanted the same thing.”

“That’s the same answer I would have given when I started XYZ Construction.”, agrees Gene. “It wasn’t until I realized that to have a successful and profitable business, one that I was running rather than it running me, I needed to make some changes. One of those was to answer this question.”

“The WHY is more important than the HOW. Maybe your why is to make a lot of money, the enjoyment of building, the control that comes with owning your own company, something completely different or a combination of things.”

“Do you love what you do? In your current situation, do you even like it?”

Now John has another unanswered question to ponder. “Does he like what he does. Life sure was easier when he worked for Gene. What is it that prompted him to go into business?”

Gene interrupted John’s thinking, “John you probably won’t get the full answer to these questions today and we’ve already been discussing this for a couple of hours. I would suggest that you take some time to think about these and dig down deep to find the answers.”

“The answer to these questions are the foundation you will build your business on.”

“Before we run out of time today, let’s move on to the topic you came for, Building a Better Proposal. Just like the why question for your business, you should answer the why question about proposals.”

“Why do we need to do proposals?

“John, there is a huge gap between the construction industry and customers. The biggest portion of this gap is poor communication. Even when attempting to communicate clearly it can go badly. Let me give you an example.”

“Several years ago, when meeting with a customer early in the process of building a new home. The customer pointed out that the distance from the electric meter to the house was more than the 50’ allowance, as per the agreement. He asked if this was a problem. He was told it wasn’t a problem. Guess what…”

“It was a problem.”

“The problem didn’t surface until later when the customer was billed for the additional 100’. After some research, the communication breakdown was uncovered. The customer asked, “if it was a problem”. What he really was asking was…”is it going to cost more?”.”

“The response ‘in reality’ was, “It’s no problem to dig the additional 100’, but it will cost you more.” Neither party intended nor expected this to be a problem. It was a simple matter of misunderstanding…a lack of communication.”

The bulk of the communication responsibility is the contractor’s, we are the professionals after all.

“As we wrap up today John, I would recommend that we schedule some time weekly to work through the proposal system. I know that you don’t feel like you can spare the time, but I would point out that if you want things to be different it is going to require you to do some things different.”

John thought about this for a few minutes, “I get excited about the possibilities for my future every time we talk about this. Let’s do it. How does next Saturday, same time and same place work for you?

“If I don’t commit to doing something different, nothing will change.”

Gene got a big smile and remembered when he had made this same decision. He was encouraged about John’s future and excited to be a part of it. “Remember when you called me a few weeks back and how frustrated you were? And then in the next call we discussed the possibilities for your future? Think on these things and your why as you study the pages from today. When we get together next week, I want to hear about your why and we’ll go deeper into the Blueprint for Building a Better Proposal system.

“As you go through them write down any questions you have, and we’ll discuss them next week.”

(or send them to me in the comments below)

What Does It Mean to Be Successful?

It’s Not What People Normally Think

Success, true success is anything but normal. Dave Ramsey says, “If You want to succeed, you’ve got to be weird.” It is hard to be different. Standing out and being different opens us up to criticism and ridicule. It’s much easier and safer to blend in and go with the flow. To just be normal.

God doesn’t want us to be normal. He made each of us different and unique (Psalm 139:14) and put each of us here for a specific purpose (Romans 8:28). It is up to us to search out and learn what our individual purpose is.

Discovering our true purpose is success.

Normally success is seen as fortune and fame. Even the definition of success includes, “The attainment of fame, wealth, or social status.” If we see these things as success and don’t accomplish them, we see ourselves as failures. We are only failures when we stop seeking our true purpose. So, we’ve got to hang in there.

The world’s idea of success is short sighted and selfish. It’s about what’s in it for me. God’s idea of success is different. It’s about using the skills and abilities I’ve been given to help others. Specifically, in my case, to help others build their dreams.

So, how do we figure out what our purpose is? First, ask that very question. What is my purpose? And then we ask it again and again… Asking the question is the first step to success. The question is more important than the answer. Asking this question is necessary to start. Then we can dig deeper with more questions. If we don’t ask questions we will stay stuck in the mundane routine of doing the same thing over and over hoping for a different outcome.

These questions start with the most common question asked by kids…WHY.

Why am I here?

Somewhere along the way, in an effort to be normal, we quit asking why. As children we are naturally curious. If we want to be successful, we need to get back to that childlike curiosity.

The why question is where we dig down deep to find the solid foundation that our success will be built on.

After asking why, comes what, how, when, who, where. Asking these questions is hard. Almost as hard as reading the 5Ws out of their normal order. But then we are trying to be successful, not normal. The order I have them in is more appropriate when it has to do with success. The most important thing is to be intentional about asking questions in whatever order works. Asking questions opens our mind up to new ideas.

The answers to these questions won’t magically appear once they’ve been asked. Being successful and finding our purpose is not an end unto itself. Both are a process of seeking answers and should continue as long as we’re alive. There is not some point in life when we arrive at our final destination (like retirement). Success is the process of seeking our purpose and as long as we’re breathing, we should be asking questions.