A Brighter Way
A Brighter Way
"You've got to know when to hold 'em, know when to fold 'em. Know when to walk away and know when to run."
These lines from Kenny Rogers' song "The Gambler" were meant as sage advice for poker players. However, it probably never occurred to him that his entire song could equally apply to running a successful construction company. Yet, it does.
The following highlights how specific lyrics from this popular country song may just very well provide you with the insights you need to increase profitability.
First, you need to know what type of work you do well, then focus on those jobs you do best. It's very tempting, especially in today's economy, to bid on jobs that don't match your company's strengths. But when you win these types of jobs, chances are you won't be as efficient, and as a result, profitable.
When bidding a job, make sure you know who the other players will be. Who owns the project? Who are the design professionals? Who is the general contractor? After you know who they are, analyze their abilities. Have you worked with them before? Was it a good work experience? Did they pay timely? The answers to these questions have a direct impact on your success.
It can be difficult to say no, but don't be afraid to walk away from certain opportunities. Making a conscious decision not to bid on a project can actually save your company money, especially if the job doesn't fit your expertise. It doesn't matter how much money the contract will bring in if your business can't fulfill it efficiently and profitably.
You can't just coast along once you've won a job from which you are anticipating a good profit. Labor issues and unexpected conditions can cause profit to fade as the job progresses. Manage your jobs through to completion -- and don't count your profit until the job is done.
As soon as it is, conduct a post-project meeting to assess what went right and wrong. Include all staff involved, or you'll miss valuable input and ideas from your team while the job is still fresh in their minds. Look for those good things you can duplicate next time and the bad items you'll want to minimize on future jobs.
Review your processes to determine what you can be doing more effectively, and throw away practices that are costing your company time and money. Look for ways to reduce handling materials, improve delivery schedules and avoid over- or under-ordering inventory. If information is not communicated to your billing department in a timely manner so that invoicing can continue seamlessly, you may need to improve your office work flow.
Analyze your general and administrative overhead expenses, too. Each layer of overhead is meant to support a certain volume of revenue. Virtually every contractor experienced a severe decrease in volume in 2009, but those who made tough sacrifices in order to manage overhead in relation to volume of work will be the most successful this year. If you didn't cut back enough, you may have experienced problems managing cash flow over the winter -- and you may be in a hole before the year has even really started. Get overhead under control soon or the situation will only get worse.
If there is one thing you don't want to lose though, it's your gut feeling. You probably have a gut reaction to certain jobs that often turns out to be right. Trust your gut. Learn to identify what "doesn't feel right." If you can first identify what is causing that nagging feeling and then put a plan in place to correct it, your project will be more successful.
Unfortunately, contracts can go the same way as poker hands -- there are good ones and bad ones. Sometimes the contract you negotiated for a nice profit margin ends up being very tight. And other times the contract that looked very tight during the bid process ends up being the winner. Never leave your bidding to chance, but realize that not everything turns out as planned either.
There is one part of the song that doesn't exactly apply to your business. While Rogers sings that the best you can hope for is "to die in your sleep," the best you can, and should be, hoping for is a more successful and profitable company.
Those who play poker often refer to it as a game of calculated risk. Approach the current economy with the same mindset. Just like in poker, when the odds are in your favor, do everything you can to maximize the opportunity. When the odds are against you, do everything possible to minimize the loss.
Sage business professionals don't gamble when it comes to business. But following the advice in "The Gambler" will help put you in the winner's seat.
This article was originally published in ICCIFP Inside the Institute, March 2010 issue.
Note: This content is accurate as of the published date above and is subject to change. Please seek professional advice before acting on any matter contained in this article.
