Business is great
Business is great – until it isn’t. The construction contracting business is well known for its boom or bust nature. Using the boom to prepare for the bust is simply a matter of having good business sense. And, two ways you make the preparation are considering future financial needs and creating documented, sustaining processes.
This is the third in a three-part series dealing with growing an established construction business. Taking it up a level. Getting better at running with the big dogs. If you missed the first two parts, they can be found here and here.
Business is all about business
Getting better at doing business is how you position yourself as the owner of a growth-oriented business – a construction business that is in it for the long-haul. Now, we’ll take a look at the last two areas of importance in growing an established construction business.
Prepare for financial needs in advance
Access to capital is what makes the difference between owning a winning business and owning a business that limps along, never quite making it. One of the easiest ways to make sure you have cash to see you through the famine is to save it during the feast. Oh yeah, it is also one of the hardest ways. Like my dad used to say, if it was really easy, everyone would do it.
You can scour the internet and find a multitude of tips and tricks concerning how to save money. I even wrote one post about it here. Yet, reading about ways to save money without taking action will not get you to the end of the block, much less all the way to the other side of town.
Time to take action
Now it is time to buck-up. This is when, if you’re not a natural saver (and few are) you need to find someone to aid you in making the right decisions concerning spend or save.
So, I’ll go ahead and throw this out there. The folks here at Schulte and Schulte are good at providing financial reports and teaching you how to interpret them. Yet, we have even more than that to offer. We, ever so gently, guide our clients into the act of saving. OK, some would say we hold their feet to the fire. Whichever way you interpret what we do, we help our clients get into position to save for a raining day.
Saving is a strategic maneuver which takes guts, determination, and (sometimes) help from an outside source.
There is another way to have cash when you need it and that is to borrow it. I know, I know. There are those who say the only way a lending agency will hand over the funds is if you can prove you don’t really need it.
Truth is, there are a number of things you need to prove, but lack of need isn’t one of them – usually. 🤔
Your financial records and reports are key to being able to borrow the cash you need at any given time.
What lenders want
Here is a sampling of the things a construction-wise lender is likely to want to know about you and your business:
- How long have you been around?
- Have you run your business well so far?
- How much outstanding debt do you have?
- How safe are your jobsites?
- What is your credit score?
- What is the credit score of each of your clients?
- Is there collateral you can offer?
- What is the dollar amount of your annual sales?
- Have you experienced a bankruptcy or tax lien?
- How much do you need?
- What do you need it for?
Once again, having your financial reports at hand and knowing what they’re saying about how good you are at running a construction contracting business is essential.
Knowing where to go for the loan is also important. Check around with your fellow contractors for suggestions. Contact your mentor or other trusted advisor for his or her input. Look for a loan provider who is a member of your trade association – they often have insight into your trade’s specific needs.
If you’re interested in working with someone who provides Accounts Receivable Financing, we suggest Contractors Capital Solutions.
Create documented, sustaining processes
There may be a number of factors concerning how the “big dogs” in your sector of the construction industry made it to their status, but you can be assured that one of the things they did is create documented processes. They use documented processes in both the field and the office to maintain consistency throughout their organization.
Yet, most small to medium construction subcontractors overlook or avoid this step in building their businesses. Here at Schulte and Schulte, we think this point is so important we go so far as to say put process improvement before technology adoption.
The GPS of processes
Think of it this way; when you begin documenting your processes you’re creating what equates to an internal GPS. Rather than Global Positioning System, you can see it as your Great Processes System. While regular GPS gives information that helps people determine their location on a global scope, internal GPS gives information that allows you and your people to determine their duties (and actions) on a companywide scope.
Beyond consistency, creating and documenting processes gives you:
- Ability to analyze your processes
- Knowledge to make improvements in the processes
- Understanding for better managing your business
- Capability to monitor service levels
- Competence spread throughout your organization
Create a library of standardized processes
Creating internal processes (then implementing them) brings a real challenge. It is especially difficult for small companies with mostly operational staff who are very busy “doing what they do” to get this additional task done. That doesn’t even take into consideration that most people are unsure of what all should, could, or must go into the step by step writing of the processes.
That’s why we’re quite excited to let you know we’re working on building a system in which our clients will have access to the tools they need to build their own library of standardized processes unique to their subcontracting business. We hope to have the roll-out by January of 2019. How’s that for a cliff-hanger?
Want to know more? Get in touch with us here.