Driving Profitability in a Thriving Economy - Harding, Shymanski & Company, P.S.C.
Most contractors that are still in business were able to cut costs and right size their balance sheets throughout the recession. Now they are looking to take advantage of growth opportunities in an effort to increase top line revenues and bottom line net income.In order to do this, most companies are closely examining operational areas of their businesses, focusing on key employee retention and talent development, streamlining processes and driving successful opportunities through business development initiatives.
Even with all of the good news surrounding the economy, the construction market is still highly competitive in most sectors and in most areas of the country. In an era where public spending continues to decrease, causing more contractors to seek private work, it is imperative to have a strong business development plan in place. Businesses must find ways to differentiate themselves to get the upper hand. For many contractors, private work can translate into more negotiated work, which brings higher margins compared to most public works projects.
As part of any business development plan, companies should have a list of their most coveted customers from a historical basis—those that will bring the most revenue, highest margin and greatest opportunity. Companies also should have a list targeting companies that could lead to profitable opportunities in the future. In compiling this list, companies should focus on prospects that are in market niches that continue to see growth such as health care, office buildings, power and manufacturing. It is also good to look for owners that could lead to a recurring revenue stream.
Once the list is compiled, business development should be driven from all levels of the organization. he responsibility for business development belongs not only to owners and key management personnel, but also to estimators, projects managers and superintendents.
Each existing customer and prospective customer should be assigned to someone within the organization to “touch” at least quarterly. his “touch” should be a meeting or conversation, preferably face to face, in which to build goodwill. It also is an excellent opportunity to build great relationships and learn about issues the customer or prospect faces.
their employees, and they also track this activity throughout the year.
As relationships are being built, employees must understand and be able to convey what differentiates their company from its competitors. Project owners fully expect jobs to be completed on budget and to meet the delivery schedule. therefore, they want to see what sets the contractor they select apart from all of the rest.
It is imperative to train employees on the company’s competitive advantages, including significant experience in the client’s industry, a low call-back rate compared to similar businesses or the ability to perform work in an occupied building without disrupting its day-to-day operations. Every company team member should be able to communicate these advantages to current and prospective customers.
Contractors should not be afraid to ask for referrals from customers; it can be a great way to open doors to future projects. Customer testimonials and jobsite pictures can be added to the company website, as well as used in future proposals.
Employees also should be involved in the right organizations, not only for talent development, but also for relationship-building that can lead to referrals and future projects. Valuable organizations could include construction-specific groups, such as Associated Builders and Contractors, as well as nonprofit boards, economic development coalitions and financial management associations.
Last but not least, companies should look for various market opportunities based on what is occurring in the ever-changing economic landscape. This should be evaluated through continuous strategic planning. Companies might be able to take advantage of a new line of business that could easily complement their current niche or expertise. Companies also may find opportunities in a different region, but they should carefully evaluate whether they are a good it.
More projects across the country are being developed as sustainable or LEED buildings, so this may be something to consider if it is not currently on the radar. In regard to larger projects taking place, pay attention to joint ventures and public-private partnerships being formed. It is highly important to stay in tune with where the industry is going and to continue to evaluate opportunities, as well as technology, products and people.
When evaluating business development, it is also important to have a written plan in place. Implementation and follow-through are key to achieving successful results. Most organizations that struggle with business development struggle with implementation. Ensure that employees are held accountable to the plan and have written goals. Having a clear and concise business development plan in place can give an organization the boost it needs to help push great bottom line results over time.