This Podcast Is Episode Number 447, And It's About Why Getting The Leads And Doing The Work Are Still Not Good Enough There was a time when a contractor put a simple ad in the paper or a line listing in the Yellow Pages, and they would have more leads than they could handle. It was the only way to go, and the contractors who insist on that and "Word of Mouth" do not survive. Could those contractors have avoided failure? I believe they could have. This article explores the top reasons construction businesses fail and the three key questions that every contractor like you needs to ask to prevent failure. It would be best to answer these questions to provide a clear path to your continued and future growth and success. Contractors who did not move from simple ads that had always worked, and evolved a Marketing Plan made the same mistake other failed companies and brands made. They were unable to Innovate, Reinvent, and Evolve by having a deep understanding of what business they were in, who and what they were competing with, and by challenging themselves to understand their actual expertise. It's important to plan to give your construction business the best chances for success. Planning means anticipating challenges and developing ways to successfully address them, so they don't upend your construction company.
Here are the top reasons why your construction company could still fail:
Lack of market demand
You need to have a market to make money. That means there needs to be enough people who need your service and are willing to pay money to hire you. Without that, you won't be able to cover your costs or earn enough to survive. Before you spend your time, money, and energy starting a business, make sure there's a need for it.
Some ways you can identify needs:Look for competition. If no one else is offering the service, there's a chance there's no market for it. That might not initially stop you from moving forward, but if no one already offers your product or service—or anything close to it—you'll have to do more to prove there's a market.
Conduct market research. Studies and interviews help determine whether people in your target market agree with you that there is a need for your offering and that they would pay for it.
Lack of expertise
Contractors like you might be tempted to partner with or hire their friends or family—people they genuinely like and would work well with. That doesn't always translate to success, however. For your business to be successful, you need specific expertise, and you need people whose skills complement yours.
You also need people who are willing to discuss your decisions with you and make sure there's a business case to be made for each decision you make. Someone with a differing perspective provides a vital way to double-check whether your choices are best in the long-term for your business or whether other options are available.
Ensure you hire people with balanced competencies. If your roofing business involves installing solar panels, you might need a technical expert to ensure the technology runs smoothly. You'll likely also need a financial expert to help you with bookkeeping and possibly a manager to oversee employees.
It's OK to hire people you like, but make sure your team also has the skills to attend your business successfully.
Lack of finances
You need money to produce your services and ensure all employees are paid. It's not enough to know how much money you need month-to-month; you need to forecast your development cycle, how inventory moves through your supply chain and variations in seasonal income.
If your construction business doesn't earn as much in the first few months as you predicted, you'll need to bring in more money quickly to save your business.
Ask Yourself:
What are you offering? New construction, remodeling, or service and repair? Who is your competition? DIY, other contractors, money homeowners for a construction project? What is your real competency? Residential, Commercial, or both?The Truth Is Four Levels Deep! Challenging yourself is the key to answering these questions. Write your answers on paper or computer, sleep on them and then revisit them again and again until you get to the truth.
Getting The Leads And Doing The Work Is Only Part Of The Answer
Not answering them and acting on the knowledge is one reason why so many construction companies shrivel and die. They focus on the wrong areas to innovate or improve. They focus on the wrong enemy and threat. As a result, they miss what they could be doing to succeed and prosper over time.
Define The Type Of Contracting You Offer And Who Is Your Competition
It may not be the same form, structure, and category that you operate. For example, Home Depot does not see itself competing in the building supply business but for a share of the home and commercial remodel and repair market. Be that homeowner doing a weekend project, Handyman Contractors, Remodel Contractor, Trade Contractor, and other contractors and House Builders.
This approach and behavior across the organization, too, saw themselves as fighting for a share of the building supply market.
Final thoughts
It is straightforward to get caught up in the short term and what you have today. You measure your share in the particular segment you operate in and obsess about your immediate competition just as contractors who did not market effectively did years ago. But you need to step back and ask yourself the three key questions and make sure you answer them in a way that will define and liberate your construction company at the same time.
Also, keep in mind that you can significantly improve your odds of success by planning, being strategic with who you hire, ensuring there's a market for your offerings, and considering alternative funding sources.
P.S.
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About The Author:
Sharie DeHart, QPA is the co-founder of Business Consulting And Accounting in Lynnwood, Washington. She is the leading expert in managing outsourced construction bookkeeping and accounting services companies and cash management accounting for small construction companies across the USA. She encourages Contractors and Construction Company Owners to stay current on their tax obligations and offers insights on how to manage the remaining cash flow to operate and grow their construction company sales and profits so they can put more money in the bank. Call 1-800-361-1770 or sharie@fasteasyaccounting.com
