Click Here To Read Mistakes 1 through 5

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(Mistake #6) Failing to Hold Field Leaders Accountable

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Who do you pay to:

Ensure your crews work safely?

Ensure your crews perform quality work?

Ensure your crews hit their production targets?

Your crew leaders, your foremen, and /or your superintendents. That's who.

What happens when your field leaders fail to perform their jobs correctly? 

They endanger employees, customer satisfaction, budgets, and schedules. That's a hefty price to pay for the poor performance of just a handful of people.

Let's be honest here, field leaders have a tough job. So hard in fact, they rarely do their job right. 

Contractors Tend To Be Excessively Tolerantof Poor Field Leadership

Most contractors are so afraid of losing the leaders they have, they are hesitant to hold them accountable for poor performance. That is a costly mistake to make.

Not everyone is wired to lead. Demote the incompetent. 

Your good crews and your good field leaders will thank you for taking action and weeding out the weak leaders.

Once you find a good to great field leader, don't risk losing him:

Pay him a little more than the competition.

Set up a bonus program. 

Make sure he has the tools and information he needs to succeed.

Remind him how much you appreciate his efforts and commitment.

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(Mistake #7) Not Knowing the Cost of Work

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It never ceases to amaze me how few contractors really know their cost of work or the speed at which their crews move.  The problem usually shows up the first time they bid on an out-of-the-ordinary scope of work.  As the contractor gets deep into the job, he suddenly realizes he is woefully short on man-hours. Has this happened to you?A highly successful excavator/land developer once told me “you don't know what you don't know.” This man was virtually obsessed with tracking job costs and labor productivities. That obsession helped him generate well over a 10% net income on $20 million of sales. He knew how much work each of his 10 crews could and should get done daily.  His crews rarely ran over budget. He was a rarity in the industry. Let's face facts. A contractor must be able to predict how long his crews will take to complete their work. Otherwise, projects will consistently run over budget and year end results will be less than expected and desired. Here are a few suggestions to save you a lot of headache with your job costing.

• Find the middle ground. You can mess up your tracking by being too general, assigning all hours to the job without further breakdown, or too detailed, assigning every hour to the cost codes used by your estimator. 
• Have your crews assign their labor and equipment time to the four to six tasks that account for 80% of the work.  Have them throw the rest into an “other” category. 
• Do not lump equipment costs into overhead and spread them across all jobs based on job price. That approach typically leads to horrible job selection decisions. Know the average hourly cost of owning and operating each piece of equipment and charge it to the job based on hours used.

The People Problem

Few people in your company will happily embrace the data collection process. Data collection annoys field crews. It annoys field leaders. It annoys support staff. Some of your employees will never stop complaining about the job costing process. Tell them to buck up because the process isn't going away. Proper cost tracking is a non-negotiable part of their job. Stay committed to your data collection process. 

Storing & Analyzing Your Data

As if the data collection process wasn't enough of a headache, you've also got a data storage headache.  Did you know that financial accounting systems are the second biggest barrier to knowing your costs? Financial accounting and tax accounting procedures are in direct conflict with proper job costing techniques. Unless you are running one of the high-end accounting packages (Timberline, for example), you may need to run two separate accounting systems: one for financial accounting and one for job costing.  For contractors generating less than $5 million in sales, the easiest solution is to use spreadsheets for tracking and analyzing job costs.

Is Your CPA Up-To-Speed?

Unless your CPA has built his or her practice around construction accounting, it is unlikely he or she can guide you through the set-up of a usable job costing system.  I've met only a handful of CPAs who truly understood construction cost accounting.  Give yours a try but realize you may need to find an outside expert to get your job costing system working properly.Remember, not knowing how long it takes to put in work will lead to massive financial losses.  Make sure your job costing system is producing the information you need.

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(Mistake #8) Accepting High Turnover

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Construction workers are nomadic by nature. Guns-for-hire if you will.

Not Realizing You Are Fighting A Recruiting WarIs An Expensive Mistake To Make

In order to be profitable, your crews must perform up to expectations; they won't if you are constantly changing personnel. Turnover is a killer.Turnover leaves you running in place. You wear yourself out yet end up where you started. All pain, no gain.Turnover takes time away from sales and marketing. It takes time away from people development. It takes time away from your family.

Do Not Consider Turnover To Be A Cost of Doing Business

Finding and recruiting good workers is not easy, especially if your firm gains the reputation for being hard on employees. Research shows that 70% of employees who change jobs do so because they don't like their immediate boss (this touches on Mistake # 6, failing to hold field leaders accountable). You'd better create a management team (including foremen and crew leaders) who knows how to get the most out of its people without ticking them off. The construction labor market is a sellers market. The good workers have the power, not you. If they are hard working and skilled, they will always be in demand and can therefore choose who to work for. The best you can do is become known as an employer of choice. Become known for:

• Having plenty of work (hours for them to work)
• Treating workers fairly and respectfully
• Being straight forward and honest
• Listening to workers' opinions and advice
• Sharing financial success
• Not placing unrealistic demands on them
• Providing them with the tools they need to do their job right
• Treating them as if they were partners in your business

High turnover is a warning sign that your management team needs to make a few changes in its approach to managing the personnel. It really doesn't have any choice.

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 (Mistake #9) Pursuing a Foolish Strategy

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We've talked about selling, marketing, people management, cash flow, but we haven't addressed the big picture problem: trying to win with a losing game plan (strategy).

What strategy do most contractors use?

Hire me! I'll do anything you want. You got cash? I got the time.

Here is a list of the common strategy problems I see:

• Trying to do too much with too little office support.
• Taking on jobs they don't have the right equipment for.
• Taking jobs larger and more complex than their team is capable of managing effectively.
• Pursuing work they enjoy instead of work they can make money on.
• Putting the wrong people in wrong jobs.
• Trying to compete on low price (Mistake #1) when they aren't the lowest cost provider.

Very few businesses go through the strategy process systematically. When they don't, they are courting trouble. Your clients' expectations and your competition's aggression change yearly. Your must keep your business strategy current. You must keep it realistic.

The Key to a Successful Strategy

Find your company's core strength - the thing you do better than every other contractor in your market. That could me your understanding of a certain client (niche market). That could be your use of technology. That could be your ability to attract highly skilled workers. That could be your financial strength. It could be several things. Figure out how that core strength gives you an advantage that is meaningful to your client. Figure out a way to express that core strength persuasively to your clients (your Unique Selling Proposition).Build your lead generation and staffing systems around this core strength / Unique Selling Proposition.In order to win, you must pursue a strong, unique strategy. If you are adopting the same strategy as three or four other contractors in your area, you are fighting an uphill battle. Play by different rules.

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(Mistake #10) Running the Business Without a Plan

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As the old saying goes:When you fail to plan – you plan to fail.Contractors tend to take whatever work that comes along across and spend whatever money the mood strikes them to spend.  When they do, they arrive at the end of the year surprised to discover:

1. Their year was unprofitable. 
2. Their crews stood around a lot. 
3. Their equipment was often unavailable due to breakdowns. 
4. Most of the jobs ran significantly behind schedule.
5. Nothing about their business went the way they had expected it to. 

Any of this sound familiar? It comes from not planning.Few contractors plan well. Planning is a tedious and boring task to action oriented folks (like contractors). But, ask yourself this, “how likely am I to meet my business goals if I don't figure out exactly how I'm going to meet them?” Not very likely. 

Detailed Planning Is Essential For Your Business' Long Term Success

Two lists follow. The first list is a set of plans you must create if you want to run a consistently profitable business.   The second list is a list of plans that will free you from your daily firefighting.

Essential Plans:

• Sales and marketing plans for generating leads
• Annual plan for income and overhead
• Cash management plan
• Weekly work plans
• Master project plans
• Quality assurance and safety plans

Helpful Plans:

• Five year strategic plan
• Budget of monthly cash flow projections
• Daily and monthly work plans
• Equipment transportation
• Equipment maintenance plans
• Plans for equipment purchases
• Plans for expanding and staffing field crews
• Plans for growing bonding capacity

Planning is nothing more than making your decisions ahead of time.  Think through the tasks that must be finished in order to achieve the desired result. Document those tasks and set completion dates. There's really no trick to planning.Wait a second, I need to take that last statement back. There is one trick to planning – being willing to do it.Would you try to build a building, bridge, or parking lot without plans? You shouldn't try to build a business without them either.

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The 10 Biggest Mistakes Contractors Make - Resvisited

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Let's revisit the list of mistakes you must avoid if you are to reach your financial goals, stabilize your company, and live a less stressful life.Mistake #1:     Not selling aggressivelyMistake #2:    Not having an effective lead generation systemMistake #3:    Working for bad clientsMistake #4:    Signing bad contractsMistake #5:    Not Having a Large Credit LineMistake #6:    Failing to Hold Field Leaders AccountableMistake #7:    Not Knowing the Cost of WorkMistake #8:    Accepting High TurnoverMistake #9:    Pursuing a Weak StrategyMistake #10:   Running the Business Without a Plan

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Know Where To Start

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Not sure where to start? Go back to Mistake #1 and count down until you find the first one you are making. Start there.An easier, more bullet-proof way is to give us a call (913-961-1790) and tell us about your company. I'll know where you should start.

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Expert Guidance Is Right At Your Finger Tips

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Would you like to learn more business building tips and secrets? Sign up for our Contractor Best Practices Newsletter at www.FilthyRichContactor.com. Each newsletter presents a best practice for contractors. Have a question? Call us (913-961-1790). We enjoy visiting with contractors, listening to their stories, and helping them find the right path. Maybe we can help you find yours.