As essential as construction might be, 2020 has been a difficult year. COVID-19 and the resulting lockdowns have reduced demand for construction. People are hesitant to move from place to place, and with businesses often shuttered, there’s less demand for storefront changeovers. Even worse, supply chains have been disrupted by transportation shortages. Now that operations can resume, many construction business owners are trying to expand. This is especially true as the demand for single-family homes away from the city is rising quickly. In fact, general contractors catering to this market segment have more inquiries than before. Here are some actionable tips to help attract more business within three months.
Step 1: Determine Business Growth Goals
Before taking the first steps towards expansion, planning is critical. That means that it’s time to start thinking about your targets. First, consider how your current profit margin matches up with industry ideals. According to experts, the average profit margins are 10% for general contractors, 20% for most subcontractors or tradesmen, and up to 30% in shortage areas. If those are lower than average for your business type, then you will want to try and increase your profit margins.
Second, set a goal for total profit in dollars. For a relatively small construction business in residential construction, this might be $500,000. Commercial contractors might strive for $1M in profit each year. To reach that goal, it’s important to know how much you need in gross sales. You will then divide this figure between the typical contract price for your business to achieve a target number of contracts.
Third, think about your conversion rates during the bidding process. For example, you might discover that you bid four times to get one contract or a conversion rate of 25%. If your goal of $500,000 profit requires you to complete 20 contracts, then you will need to bid on about 80 projects. During your expansion, you want to regularly review statistics to ensure that you stay on track. Then, adjust your efforts as necessary.
Step 2: Identify Strengths and Weaknesses in Business Finances and Operations
Part of expansion planning is understanding how well a business is doing, both financially and operationally. Especially if you have a family business, there is a good chance you have done many things the same way for years. Family contracting firms tend to be less automated and aren’t as focused on the bottom line. Family businesses and specialty firms alike are accustomed to being just large enough to support their employees.
Planning a business expansion can be risky, especially if you try to expand too fast. However, done right, you can make a lot of money. One of the best ways to avoid the pitfalls is to consider which parts of your business are profitable. Ask yourself: do we make more money building a house or carrying out renovations of existing ones? Does upgrading a store rake in cash, or putting up a new office building? Doing a careful analysis of contracts will reveal which jobs make higher profit margins overall. For your business, this is often the type of job you should bid on the most.
Lastly, identify inefficiencies. For example, construction companies need back-office support, but it is possible to have more than is needed. Ask yourself if having all the nieces working in the office is cost-effective. In a family business, there is often a sense that people don’t need to compete with each other, and as a result, there can be complacency. Make sure that you are paying for the right amount of productivity. If not, there may need to be some family discussions.
Step 3: Increase Lead Generation and Nurturing
Of course, bidding on projects requires that you gather leads. One of the best lead sources is past customers, and most of us know how to leverage these. However, you also need to include traditional marketing methods. Consider sponsoring a youth sports team or community event. Placing yard signs and putting your logo on all the company vehicles helps increase name recognition for cheap. And, as the younger generation increasingly looks for information online, a presence there is a necessity. Be sure to choose a variety of marketing techniques so you can reach the most people.
Alternatively, if you are a family business, think about how you can take advantage of this. If you do residential construction, then an appropriate tagline might be “from our family to yours.” If you do a small-scale commercial, then consider marketing yourself as the small business that wants to get results for other small businesses. This “family” and “small” branding can help bring in customers who want to maximize the amount of money that stays in the local economy.
Finally, lead generation services are useful. Prices vary, but typically it is an economical way to find out who needs something done. Often, the information comes through web forms run by the company, as well as combing through information on the internet. Be sure to select the lead types which best fit your construction business goals.
Once you have leads, it’s important to nurture them. Keep track of past clients by letting them know what you’re up to as a company or checking in. Send out responses to any inquiries that result from marketing efforts, as well as any relevant leads generated by services. This way, you’ll have fewer people going elsewhere because “they just don’t respond.”
Step 4: Make Your Estimating Process More Efficient and Accurate
All construction businesses need a good estimating process, whether this is done internally or through outsourcing. Most potential clients need the estimates done quickly so that they can get the project underway. If you can’t meet their timeline, then there is a good chance the customer will go elsewhere. This might mean a small competitor that isn’t as busy or a larger contracting firm.
To produce estimates in the right quantity, it’s important to look at your operational structure. As a small, single-family contractor, you probably don’t have a lot of office staff. Estimating is often done by you as the owner, and your time is at a premium. Consider giving most administrative tasks to other people as possible, freeing you up to do more estimating. At the same time, make sure you have all the needed information, such as unit costs, at your fingertips. This way, you’ll spend more time writing those estimates and less time chasing down missing statistics.
Another alternative is to find an outsourcing company that specializes in estimates. These services will write an estimate for you at a flat fee per occurrence. You’ll have to give them access to all the information needed and then let others do the calculating. The advantage of this approach is that you’ll avoid all the hassle of putting someone on your payroll just for this task. You’ll also be able to spend more time running the business and spending time with your crews.
Whichever way you choose to increase estimating efficiency, it’s important to give accurate estimates. Clients building single-family homes often are on a tight budget because the bank has only given them so much money. Plus, everyone has housing cost pressures to deal with. Getting a bill that is much larger than expected can lead to their having less of an ability to pay. Worse, it encourages them to give bad reviews that will hamper your business growth. On the other hand, fair and accurate estimates encourage more people to give your business a chance of winning the contract.
Step 5: Increase Conversions and Reduce Stress Through Fair Pricing
One of the best parts about being a family business is that you aren’t the nameless, faceless corporation. Unfortunately, there are also people who will take advantage of your small size and cause headaches. These headaches can keep you from continuing to grow, both in the short-term and over time.
So, how do you avoid these headaches? By casting your company as a must-hire that treats both employees and customers well. The first place you should reflect on this is through fair pricing. As we said above, efficiency and accuracy are an important part of getting and winning bids, which is necessary for growth. However, you should always ensure that prices are fair. Price too low, and you’ll get the kind of customer who nitpicks about everything and doesn’t pay on time. Price too high, and people will simply go elsewhere.
By pricing right, you will show yourself to be a principled company. You will attract the right kind of customer: people who appreciate a job well done and don’t mind paying for it. By pricing a bit higher, you also get more profit that can be used for continued expansion. At the same time, higher profits and happier clients reduce employee stress at all levels. You will have more time to concentrate on what you do best: building houses.
Step 6: Use Project Management Software
One of the challenges of being a family business is knowing when to modernize. One way to do this is by using project management software. For instance, Buildertrend is a software and mobile app-based solution for custom home builders. This program helps you with bidding or estimating, customer relationship management, timesheets, payment processing, and more. It even integrates with Quickbooks and other business programs for smoother operations.
Another program we like is CoConstruct. Also aimed at the residential building and remodeling market, this program offers many of the same features as Buildertrend. However, it also helps communicate with clients in-app. Best of all, it helps coordinate operations with other contractors. This is especially nice if you are hiring several subcontractors to get the job done, as everything is simplified.
As with many other industries, technology is becoming an important tool to drive growth. Over time, you can reduce overhead and waste by ensuring that everything is done properly. You’ll also be able to make more accurate estimates with less work. Plus, during the project, you can track costs and payments, reducing the demand for support staff. This increase in efficiency can help with profitability and the ability to expand even faster.
Step 7: Hire and Retain Top-Quality Employees
As every construction business owner knows, it’s hard to recruit employees sometimes. Especially if you are working on single-family homes, the ability of your onsite staff to get along with the client is critical. Unfortunately, construction laborers have a reputation for being less professional. Being a small business, you must work even harder to find those exceptional employees who make everyone at ease and work well with others. Throw in the often-lower salaries of smaller businesses, and finding the right people may seem impossible.
Fortunately, there are ways to attract the best talent. Treat laborer hiring like you would someone for your office: look for good qualifications or experience, check references, and interview in person. During the interview, make sure that their personal values are consistent with company standards and goals. Having a “good fit” is the best way to promote harmony in a team. Then, make your job offers more attractive by highlighting the benefits of working for smaller contractors who build homes. These benefits often include a better working environment and onsite management that listens.
Once you have great employees, you need to keep them. One of the mistakes many corporate contractors make is treating employees as mere cost centers. On the other extreme, many family contractors overlook problems because the laborer is a family member. The solution is to treat your employees, even non-relatives, like family, but also expect them to work hard for you. These are the employers that people often like best. As you expand, you probably will be able to raise wages and offer more training or benefits. Finally, treating your employees well will help with recruitment as word gets around.
Step 8: Practice Excellent Customer Service
Providing great customer service is essential. Small construction companies, in particular, have a reputation for being hard to reach during the workday. Fortunately, combatting this problem is simple. If you can afford it, make sure you have a receptionist back at the office who will answer the phone. Alternately, have the office phone rerouted to a cell phone carried and answered on site.
Then, be prepared to address customer concerns or complaints. If a client asks for follow up on something, be sure to do this as soon as possible. Provide a guarantee for your work as appropriate, and be quick to make any corrections. After the work is done, check-in with clients to ensure they are satisfied and see if they need anything else. These small courtesies go a long way in differentiating your business from the competition and attracting more clients.
Step 9: Brag About Your Successes
Finally, expanding your business becomes easier as you brag about past successes. Why? Because talking about successful projects helps potential clients see the possibilities and understand why your company is a great choice for building their home. It shows that even though you’re small, you aren’t a fly-by-night operation. Best of all, it demonstrates that paying the slightly higher prices of a business that can’t buy things in bulk is well worth it.
Bragging can take several forms. First, ask your past clients for permission to include their home in a portfolio of past work along with their testimonial. If potential clients can see what you have done well in the past, it’s easy for them to see their project being successful with your help. Another way to brag is by getting awards from the local paper or Chamber of Commerce. Especially in smaller markets, there are often contests to identify the best business in each category. Don’t forget to apply for these awards, get your clients to support your application, and brag if you get one.
Bragging can be done through advertising, on social media, company-owned vehicles, and more. Over time, this boosts your sales leads and often increases conversion rates during the bid process. More jobs fuel growth and increases profits. By bragging, you will fuel current and future growth for little or no money.
Expanding your business may seem like a daunting task, especially with all the competition. Fortunately, with proper planning, you can expand your business quickly and easily. These nine steps will help lead your family business into the future through increased efficiency, better relationships with people, and continued success.