How To Make Your Construction Company More Profitable in 24 Hours
I saw a construction business owner the other day and asked him how things are going. He said "Going pretty good, things are super busy."
Staying busy is a good way to not get distracted by things that will hurt you (drugs, bad business deals, stealing, etc). They say that idle hands are the devil's workshop.
But busy is a stupid yardstick.
I know plenty of "busy" people who can't stand their life. And it's not just their work, it leaks into their family and relationships and how they treat their siblings and the cashier at the gas station.
So after 8 years of working in, listening to, obsessing over, and trying to help construction companies in my own tiny way, here's what I've learned about how to make your contracting business profitable (or *more* profitable) almost instantly:
A) Stop working
Most of the small contractors I talk to are owners who started with nothing but a truck and a couple of tools they bought at an estate sale. Maybe you're the same.
You've clawed and scratched and worked and postponed dates and vacations and missed your brother's wedding to get this thing off the ground.
Now you have 5 or 30 employees but it seems like it's more work than ever because now you have to deal with finding people to work for you. The problem is, your competitor already has all the good people and even if you do find a gem, he's expensive and then he leaves in two years and starts his own business to compete with you.
From what I've observed, the problem is that owners don't give their employees enough rope. They are involved in every single decision. They ask "hey, why was Lance late this morning?" or "what was this $30 on the company card at Walmart all about?"
So their would-be great employees suffocate because they get little autonomy or trust that they will make the right calls.
My old boss learned to do this the right way (and I still applaud him for it). When I was 21, I managed 8 guys while he was able to take five weeks off the grid to tour Europe.
Then I put a trailer hitch through the tailgate of his brand new Cummins. But that's a story for another day.
Point is, if you stop working on stupid details that are far below your pay grade, you will free up a lot of room to think more clearly.
Then you have more mental real estate to make better decisions that will make you profitable.
B) Do some math
I coached a small business owner who told me in our first meeting: "We make $30k/month and we make around 10% profit."
But when we pulled out his profit + loss, he only made $18k/month at a 0% profit. That's a big difference! And he didn't even realize it.
If you follow the previous step, you'll free up a few hours to go on YouTube or meet with a CPA and figure out how to read your profit + loss statement.
Once you face the truth, you can aim at something better. You can fix your pricing or efficiency issues or your spending. But if you just assume you know and turn a blind eye, you'll lose. I've done that with personal finance and it made me go broke.
C) Stop spending money on dumb stuff
One time I talked to an owner of a big construction company and he told me the first thing to do in the quest for profitability is to print out the business credit card statements for the past 60 days.
Take a red pen and circle every expense that was taking away from the bottom line.
Trade magazine subscriptions, Dunkin Donuts (blech), unused cell phone data plans, stupidly huge truck payments, swag, a round of golf, lunches, Pandora Premium. Add all of those up and then stop them immediately. Not forever, but for now.
Maybe you'll find out that your company is spending $1000/month on dumb stuff and you don't even realize it.
I hear people say "I shouldn't have to worry about those little expenses, we do $3M/year!"
This isn't an article about how much you do in sales. This is about how to make your company more profitable in 24 hours. So I'm telling you what I know.
Plus, money is energy. It moves around in circles.
When you have zero money, you can't even think of an idea to make $20.
But when money is coming in strong, you start to see new opportunities. That's why I love going to garage sales.
I bought some things for $6 at a yard sale last Saturday and I sold them on eBay this week and made $32.
It's not about the $32. Money is energy.
So when you cut some things that are adding zero value to your quality of life or your bottom line, it feels like you're back in control. Even if it's only cutting a $20/mo magazine subscription.
D) Read Profit First for Contractors three times
All this said, my best advice is to order Profit First for Contractors and immediately implement the basics.
In it, my friend Shawn Van Dyke makes the point:
"Profit is not an event, it's a habit."
The problem is, most of you probably won't actually order the book (even though it could change your life forever) so let me get you started.
Go to your bank and ask them to open a new savings account for you. Tell them to label it "Profit"Starting today, every time you get a check from a project, put 1% of it into the Profit account.The last day of every quarter, pull out 50% of the accumulated funds. Spend it on a nice date or a new rifle or something fun.
(Key: It has to be something fun for you, not "reinvesting" into the business. We do this with our personal finance and last quarter we took the kids to a nice hotel and swam and went out for BBQ and watched airplanes.)
Tada! Now you are profitable. And your business finally works for you instead of the other way around. Now, increase it to 2% this quarter.
I worked with a small construction company who was making zero profit and had been for five years. He took putting his profit first seriously and got disciplined.
Twelve months later he sent me a picture of a wad of cash. He had just taken his quarterly "fun money" out and it was $5,000.
E) Fire bad employees
One thing that most construction companies seem to be terrible at is letting go of bad employees.
They say to themselves "No one out there wants to work these days so if I fire this guy we'll be hosed."
That's probably the biggest story I hear these days. But it's a lie.
I'm not talking about firing employees who need training or guidance or some reprimanding. It's one thing if one of your people is like a chest cold to your business. You can (and should) fix that.
But what if you have someone who is cancer to your company?
They spread gossip about coworkers, they exploit their team mates, they don't communicate with you, you feel like you can't trust them or they demonstrate a lack of integrity or energy.
People are strangely consistent. So if someone is cancer in your company, you need chemo instantly. They aren't going to change.
Is there someone on your team who is cancer?
If you fire them, you can move faster because you'll have less stress and politics and anxiety.
My uncle had liver cancer and he was going to die but he got a transplant and now he's doing great. But he had to fire his liver or it would've eventually killed him.
F) Talk to people who are profitable
Don't take my word for it. These are just things I've seen. Go figure out how other people are being profitable.
Not people who seem like it.. You know, huge diesel pickups, a fleet of shiny new equipment, fancy office, blah blah blah. That's all status.
I'm interested in learning from genuinely happy, low-stress business owners who have figured out what they love to do with their time and make plenty of money doing it.
I don't want to write glib things that don't actually help people. I want to help tens of thousands of contractors.
Sometimes I feel like I just repackage what other, more experienced people are saying and take credit for it.
But some things are time-tested principles and I can't change that. And maybe you've never heard someone say it quite like this.
My hope is that even just one frustrated contractor reads this and it lights a spark and makes them think about what's possible in his/her own business.
Then I hope they do something.
Benjamin Holmgren with Console spends his time writing for, talking to, thinking about and meeting with contractors all over North America to help them make more money and stress less about schedule, tracking and dealing with paperwork. When he's not doing that, he's hanging out with his wife and kiddos, drinking great coffee and trying to come up with even more dad jokes.