Operating a business isn’t easy and if it was, everyone would be doing it. We select, crazy few who chose to operate a construction business need to have a few processes and systems in place to ensure success. I’ve outlined the most important five steps to operating a successful construction trade business.
1. Know your cost of doing business. Revenue – Expenses = PROFIT. If your’e not making a profit, you don’t have a business, you have a hobby. Revenue should be tracked and demonstrated to the entire company. There should be goals and employees should be held accountable if they do not reach these goals. There are Excel spreadsheets available online to help track expenses. There are two types of expenses: direct (specific to a job, changes) and indirect (not specific to any job, contractor responsible regularly). Expenses include, but are not limited to: Insurance, Salaries/Labor, Materials, Equipment, Utilities, Rent, Vehicles, Gasoline, Office Supplies, Postage, Marketing, Internet, Benefits, etc… The Customer pays for all expenses through collected revenue. The cost of doing business equation should look like this: Selling Price = Materials + Labor Cost + Overhead + Profit
2. Track EVERYTHING! Track what you make, what you spend, who is making money, where are leads coming from, where are customers coming from, who is booking calls and at what booking percentage? All of these questions should be answered simply by pulling a report. If you cannot answer these questions simply, you need to evaluate your tracking system. Most industry software programs will provide you with exceptional tracking features and reports. If you don’t have a software program, Excel is a great place to start.
3. Develop multiple streams of Revenue. Most successful businesses have multiple streams of revenue. The phone ringing with repair work is just one stream of revenue. Installations (Water heaters, water softeners, irrigation systems, water conditioning or HVAC equipment) would constitute another stream of revenue. Another popular stream for construction businesses – Service Agreements. Collecting for these agreements on a monthly basis brings in a good monthly sum of revenue that can be predictive and anticipated monthly. Any products you may sell such as: root treatments, toilet cleaners, drainer clearers, etc…
4. Utilize multiple streams of Marketing. While the phone book is a popular choice, it has been surpassed as the most important marketing source. The internet is the most popular and most expensive marketing stream. Internet marketing has two components: Search Engine Optimization (SEO) and Pay Per Click or AdWords (PPC). Both require their own campaigns are usually billed separately. Google is the most popular search engine and their AdWords can get pretty pricey. Other streams of marketing include: direct mailing, outbound calling, repeat and referral customer campaigns, Community/Church/School newsletters, TV and Radio (these can be very expensive and are best in small markets or for large budgets). Track all marketing to ensure you are reaching your return on investment goals.
5. Hire the right people. You should be looking for employees constantly and consistently. Create accurate job descriptions and update them regularly. Hiring the right people for their job function and the office culture can make your life easier and more enjoyable. These people should be punctual, organized and accountable. All employee issues should be documented and difficult employees should not be retained.
These steps could apply to most businesses. There are many other steps you could include as well. If you don’t provide exceptional customer service, none of these steps matter as you will not have a business for very long. Customer retention is important to a good business because it is cheaper to market to your existing clients than it is to market to new clients. If you notice you’re not committed to any one of these steps, make yourself an action plan to implement the step into your existing system.
Allie Perez is director of operations, Mr. Plumber / Mr. AC, San Antonio (http://www.mrplumbersa.com). Her interesting viewpoints on the trades can be found on her blog at http://www.mrplumbersa.com/blog. She also is founder of Texas Women in the Trades (TWIT). Visit texaswomenintrades.com.