Here’s the ugly truth

A recent international study showed that less than 4% of builders and contractors make it past the 10 year mark in business. If you’re reading this, congratulations you’re probably in that 4%. The hands down number 1 reason for failure is no surprise, poor cash-flow! When the money stops, the business ends.

Lets look at the six main reasons builders and contractors suffer from poor cash flow;
1. not charging enough for their work
2. failure to use or incorrect use of variations
3. failure to use or incorrect use of legal contracts
4. too many employees for the volume of work being produced
5. Too few payment schedules on their contracts
6. lack of profitable jobs

Now I could go on for days talking about the importance of having adequate financial controls, knowing your Breakeven Point, having the correct pricing strategy, eliminating inefficiencies etc. The reality is I’d be wasting my time if I didn’t first make sure you had the “Leadership Mindset” to make it happen. If you’ve found yourself going around in circles for years, perhaps its more about what’s going on in your head than anything else.

Most of the builders and contractors I’ve worked with have strong egos, are independent, and want to be self-directed in their business. I might even accuse some of being stubborn, myself included! This is neither good nor bad, it’s just the way we are. It gives us the go power that we need to make things happen. However, it can also work against us.
I had a builder come to me recently asking for help with his business, work was drying up and he wanted me to help him with his marketing and advertising. Before we got started I wanted to check in with him and see if he had the right mindset and an open perspective. If you’re not open to new information, you learn nothing!

The first sign that something was wrong was when he started debating everything I said. Now I’m not a genius by any means but having studied Marketing on three continents and worked with hundreds of builders and contractors 1 on 1 qualifies me to have an opinion on the subject.
For the duration of our conversation he sat there with arms folded resisting any new idea I put forward. Not surprisingly when I followed up two weeks later to see how he was progressing with the Marketing projects we’d discussed, he hadn’t done a thing. And of course when I asked him why, of course it was my fault!

Although Profit and Cash Flow are our highest priority with all our clients, without the right mindset or attitude its impossible to achieve a result with any business.

From a leadership perspective, you need to take ownership of your business and your business education. If you don’t who will?

This includes becoming more self aware and making the necessary changes to a become a better leader and businessman. Ultimately this is about thinking differently and developing new “habits”. The specific changes you need to make will differ depending on what habits you already have. When breaking bad habits or developing new positive ones you need to follow the 30 day challenge i.e. 30 days to break a habit and 30 days to form a new one.

Time management and financial management are two critical “behavior change” areas which we always looked at first. Everyone can improve their time management; the majority of builders and contractors in this industry need to dramatically improve how they manage their financials. If you and I were going to invest in a business together, here are the business basics that I would expect you to have:

1. An open mind and unyielding commitment to your own leadership growth and personal development
2. an understanding of “Sales process”
3. a commitment to education
4. an understanding of mark-up, gross margins and breakeven points
5. a readiness and willingness to do whatever it takes to get the job done

Make sure you’re not like the pigheaded bloke I met a few weeks ago and and stay “open” enough to enjoy the business success and lifestyle you deserve.

Could this be you?

Below is a transcript of a conversation I had with a builder who was comfortable enough for me to confidentially share our discussion with you. Have a read through now and look for any similarities in your current situation. If something strikes a cord with you, then drop us a line for a free 15 minute phone consulation to discuss your situation.

Kurt & Chris the Builder Conversation;

Kurt – “Hi Chris, what was the specific reason that made you decide to contact me?”

Chris – “I’ve been in business for 15 years now and it feels like I’ve got NO control, I’m like a hamster on a wheel. Every day I get out there and give it everything I’ve got but there’s always more that pops up in my face. Its too much for me. I can’t stand the feeling of being out of control, I am the business. I’ve got the typical cash-flow and profit problems and I’m sick of chasing money. I’ve got worked booked for the next six months but I worry about what happens if I don’t get more work booked in after that. There’s money in my account but Im not sure which is mine. I need to get the right structures in place so that I can expand the business and make a profit.

“I want to improve my sales and marketing so I don’t have to worry about work drying up and making sure my boys have work lined up and keep them busy. I’m not too proud to put my hand up and get some outside advice. I really need someone to give me some guidance and direction. I need to figure out what we’re doing wrong. It seems like there’s always problems.”

Kurt – “Ok Chris well it sounds like its worthwhile us catching up…… So Chris, tell me, what would you ultimately like to achieve with your business?”

Chris – “I’d like to get it to a point where I’m doing about 4 Million a year turnover, 20 jobs a year. I want some systems both on-site and in the office and a good supervisor who knows what he’s doing who can run the jobs. Then I can take care of the office and make sure the boys have got work. If I can do that, then I’ll be able to bring on bigger jobs and also check the profit on the jobs more closely. I just want to be able to take a small holiday in the middle of the year and then again later in the year as well. Once I get to a certain point I’ll do my own developments and use those profits to do more projects on the side. Once I’ve got the office and the sites running well then I can look at finding someone to take a leadership role and I can start doing developments for myself. I’d also like to set the business up so that my sons or one of the senior guys can take it over down the track.”

Kurt – “Ok, I understand. So Chris, what is your biggest frustration in your business right now?”

Chris – “Money, definitely the cash-flow and the lack of profit”

Kurt – “How is that affecting you personally Chris?”

Chris – “Well its definitely affecting the wife and kids, its not pretty. The wife’s even talking about me maybe going back to work. Something needs to change, we can’t keep going the way we are, that’s the bottom line. If I keep going on like this I’m going to burn out.”

Kurt – Ok Chris you’ve given me a good idea of where you’re at, what I’d like to do now is get more clarity on what you want to achieve and give you a better idea of how the coaching process works….”

If you can realte to Chris’s situation and would like to hear and see exactly what I covered with Chris next, contact us for a free 15 minute phone consultation

Your Price is Too High

Do you have clients tell you “your price is too high”? I have a lot of builders tell me they are getting this feedback even though they know they have cut the quote to the bone.

Do your clients really know one way or the other if your price is too high? “Your price is too high” is a tired old line that your customers have been trained to use to get you, the builder, to pull back on your margins. They have been told by the media, their neighbours, someone at work, their family, whoever, that if they tell you “your price is too high”, you will, in all likelihood, change the quote to some lower number.

I have a friend who does this regularly and says he’s surprised how often people do it, even the major chain stores. I decided to try it recently at a rebel sport store at our local Westfield and they asked me if a $30 discount would be ok? So I know it works and I’d recommend it IF you are the customer.

Lowering the price to win the job is exactly what most “order takers” will do. An educated builder knows better and does not lower their price, unless the client changes the job.

Now you might be saying to yourself, ‘but I know my price was too high because the client told me I came in above the other two quotes!’
“Your price is too high” (and that statement can come in a number of different forms) simply means that you have not done your job as a ‘salesperson’. Plain and simple, you have been lazy and have missed some very important steps in the ‘sales process’.

The number one rule for sales is to ‘qualify’ your prospect. You need to pin down the budget to the point that you know exactly what they want and are willing to spend.

Here are the four essential questions that need to be answered;

1. What do you want to do?
2. When do you want to do it?
3. Who will make the buying decision?
4. What does that person(s) want to spend?

If you get the answer to (at least) those four questions, you will get to a “yes” much quicker. Sticking to and getting the answers to those four questions will help you qualify your prospect and save you a world of pain in wasted time and energy down the track.

Over the years I’ve compiled a list of the most affective qualifying questions a builder can ask. Click here to download them now. Knowing the answer to these questions will take your sales conversion rate from 1 in 6 to 1 in 3 very quickly, without lowering your margins. Learn the technique, ask the questions, get the answers and watch not only your sales increase, but your profits increase as well.

To your ongoing success.