Tackling Problems in Your Construction Business

Tackling Problems for your construction business

Tackling Problems in Your Construction Business

Last time, we talked about When Solutions Become Problems.  As promised, now we’re diving deeper into one proven method for finding and resolving problems in your construction contracting business.

The first step, Defining the Problem, is borrowed from the car manufacturer, Toyota,  and has proven quite successful for them. The other steps are:

  • Reformulate the problem
  • Devise solutions
  • Evaluate alternatives

Defining the problem

Now is a good time to borrow the method used by Toyota which identifies their manufacturing issues. It is called the “Five Whys.” Don’t let the number five confuse you. It may take only “Three Whys” to get to the bottom line, or it may take more than five.

In short, you begin by stating the problem, then asking why until you get to the real root of the problem. For instance, the general contractor tells you he sees your crew sitting around doing nothing for large pieces of time each day.

Ask, “Why isn’t the crew on task during working hours?”

The answer might be that not all the materials or equipment needed were on site.

Ask, “Why is that?”

You see how this is going. There can be several different responses.

  • The trucks were improperly supplied
  • the chosen vendor is often low on stock
  • the foreman frequently forgets to order the right materials
  • or we only send someone to get stuff when we need it

At each junction, you ask, “Why is that?”

When you get to the bottom line, you have the opportunity to fix the problem for good.

Rather than a lazy employee problem or a we-don’t-care problem you may have an organizational or time management problem that begins with management and drips down to the crew.

Remember, it is important to distinguish causes from symptoms.

Reformulating the problem

Now, it’s time to question the questions. One way to reformulate the problem is by creating “How might we . . .” statements.

Let’s look back at the crew, wasting time on the job site. And ask this question, how might we . . .

  • make sure the crew is on task most of the time?
  • assure the vehicles are properly loaded every day?
  • overcome low vendor stock?
  • better train foremen concerning their duties?
  • be better prepared for obtaining supplies?

Now you have some jumping-off points for devising solutions.

Devising solutions

Sometimes, depending on the original problem, this is a one-person operation. But more often, the devising solutions stage is better practiced in groups. Whether it is leadership alone, a group of stakeholders, or the entire crew, getting ideas from more people is often the key to finding the solution.

One way to get the group on board is to begin the session by stating the problem, then asking the “how might we. . .” question, and then saying, “Please only mention very bad ideas.”

Yep, bad ideas. The reason is twofold.

  • It takes the pressure off. You know. Who wants to be the crazy guy who, when asked for a great idea, comes up with the dumbest idea on earth? Sometimes the tension is palpable.
  • Putting a new lens on the problem (unlikely solutions) may indeed produce some quite likely and grand solutions. At any rate, once the ball is rolling, there will be many ideas to toss about and roll around to get to the great idea.

Evaluating alternatives

This last step may be the one most left out when tackling problems. After all, you found solutions in the previous step. You can pick one and run with it.

Or you can evaluate the alternatives.

While there are likely several ways to tackle a problem and many of the ways may achieve the results you would like, there are two important metrics that will aid you in choosing one most likely to succeed.

The first is ease of implementation.

The second is the potential size of the impact.

Using the example above, let’s say the problem you’ve found is that the foreman isn’t taking care of his duties properly. One solution would be to hire a different supervisor. Another might be to train the foreman better. Which is easier to implement?

While finding a mature and knowledgeable foreman would be nice, we all know there isn’t a line of trained men knocking on your door. Yet, if the present foreman isn’t up for the training . . .

When considering the potential size of impact in this scenario, you must keep in mind the big picture as well as the details. Does the crew have a good working relationship with the present foreman? Is there another foreman who is willing to spend time training? Are there classes or courses your present foreman can attend?

How disruptive will either solution be?

What secondary problems might be created by implementing one or the other solution?

Lastly

Remember, there isn’t a method, approach, or process that will achieve the results you’re looking for if you’re solving the wrong problem. Think about the five whys. Have you drilled deep enough? Most often, spending as much time (or more) determining the problem as solving it will allow you to generate truly valuable solutions.

 

We desire to familiarize you with business concepts, which will make it easier for you to be a better commercial construction business owner through our blog posts. Some are new ways of looking at things, and others are refreshers.

http://www.schulteandschulte.com/blog/ 

Schulte and Schulte Provides Accounting, Contract Document Management, and Advisory Board Level counsel for small to medium commercial construction subcontractors.

So you can Run With the Big Dogs! Call us 866-629-7735

Advisory Board for Construction Contractors

Advisory Boards help with key decisions

Advisory Board for Construction Contractors

Advisory Board explained

Before we go further, there is a distinction to be made. Don’t confuse an advisory board with a Board of Directors.

A board of directors is made up of people who manage the CEO and formally approve all key decisions of the company.

An advisory board, on the other hand, is an informal group of mentors, guides, or service providers who each have useful knowledge or expertise to bring to the table. So informal, they may never be in the same room at the same time. Generally speaking, these are the folks you meet with individually.

Advisory Board early stages

It isn’t as if you can put out an add which reads, “Board Level Advisors Needed.”

The development of your advisory board is a process – and it takes time. Perhaps in the early stages of your business you were developing an advisory board without knowing it. You looked close to home. A spouse, a parent, a friend, even a friend of a friend may have been where you turned.

Then your commercial construction business grew, and you realized there was even more you didn’t know you didn’t know. You had to widen your circle of trusted advisors.

And, when you get down to it, that is the best way to understand the concept of advisory board. These are the folks who you can count on to help you and your business grow and succeed. They are your trusted advisors – they become your informal advisory board.

Advisory Board brick-wall method    

Often, the way your board is developed is through the brick-wall method. You’re humming along just fine – then you come up against a brick-wall and are unsure of the next method or the next action to take. You go looking for someone who can give you the answer, solve the problem, or simply provide you a next-step alternative. The following is in no particular order, nor necessarily complete, yet provides you with a “possibilities” list of the types of individuals you may wish to add to your advisory board.

  • Attorney
  • Tax Preparer
  • Coach or Business Development Advisor
  • Outsource providers such as:
    • Human Resource Expert
    • Accountant (that’s us!)
    • Virtual Assistant
  • Operating Systems Advisor
  • Marketing Professional

Set your expectations

Your advisors help you in a number of different ways. They can guide you in a strategic direction and help with key decisions. Not only are they a sounding board, they can also be an excellent source of ideas. And, one hidden quality many overlook is your advisory board members’ ability to provide network connections.

Some qualities to look for

  • They’re available to you for continuing guidance or one-off questions.
  • They bring specific skills or knowledge you are missing.
  • They have know-how which increases your odds of success.

 

Wondering if you should include a construction-centric accounting firm as part of your advisory board? Check out this article to see if the time is right.

We provide Accounting and Advisory Board Level counsel for small to medium commercial construction subcontractors. So you can Run With the Big Dogs. 866-629-7735

It Costs to Live with the Lost Cost Fallacy

Lost Cost Fallacy can slow down the growth of your business

Cost is something we can all understand – or not

There is this interesting mindset we humans get caught up in known as the Lost Cost Fallacy, otherwise known as Honoring a Sunk Cost. David McRaney at You Are Not So Smart goes into detail concerning what is entailed in Lost Cost Fallacy.

What it boils down to is, it’s hard to abandon a person, a product, or a process once you’ve invested time or money into any of them. It is hard to give-up when you’ve spent so much. You don’t want to think that you wasted all that time or effort. Weird thing is, it’s hard to abandon some things even when the investment is minor.

Cost is cost, yet it can be funny

Here’s an example. A while back I went to breakfast with some family members. After eating most of my food, I decided it was time to call it quits. There were mostly just bits and pieces scattered on my almost empty plate. Yet, one of the breakfast party was horrified that I was leaving two intact pieces of bacon. She explained that the meat was the most expensive part of the meal and I was therefore under obligation to eat it.

Even when I explained to her that the cost of my meal didn’t vary depending on what or how much of it I ate (or didn’t eat,) she was insistent that I was making a huge mistake. No thanks, she didn’t want my bacon, she had eaten her fill from her own plate on which she “wisely” left only the toast. 😵

Lost cost fallacy in the construction industry

There are three major categories in construction which present temptation for holding tight to the Lost Cost. They are people, products, and processes.

People

Let’s say you have an out of town division led by a hand you’ve had around for quite a while. Suppose you think there is a possibility he isn’t pulling his rightful share of work. There even seem to be things happening which are not a part of the company culture you’ve worked hard to build and reinforce. Perhaps he tells you there are clients onboard because he brought them on. It could be you let yourself worry over the loss of clients as well as workers if you terminate this fellow.

Besides all that, you’ve spent a great deal of time and money getting this guy into the position he presently holds. Could you be honoring a sunk cost?

Overcome this lost cost fallacy. Think, “Am I sacrificing the opportunity to hire someone better because I am stuck with the sunk cost?”  Are you giving up the possibility of better relationships by sticking with something that is leading nowhere? What is the actual cost of your commitment to a past decision?

Product

You had a great project in the pipeline and at the last minute it fell through. In the meantime, you had ordered product for that “great project” and it doesn’t work on any of your real projects. Or, some excellent salesman convinced you to order a stockpile of the latest and greatest fixtures (or what-have-you) to have on hand for your service clients. And, a year later you still have most of that stock taking up room in your warehouse or yard. You can’t find the things you really want and need because that “stuff” is always in the way.

Time to liquidate the unused product. The cost of keeping it is too great. Think, “If I had the same opportunity to buy this product again (knowing what I know now) would I do it?” If something catastrophic happened and you lost that product would you go out and buy it again? Could it be that the benefits of your choice (it was on sale) decreased over time while the costs (storing it and searching past it) increased? Could it be that you didn’t have all the information when you made the initial decision, but now (with new information) it is clear this product is not serving you in any way? You aren’t saving money, you’re losing money in storage and wasted time searching for what you actually need.

Process

You know and understand that when you put together a process or a system it takes time, money, and effort. Perhaps someone talked you into purchasing and using their system for maintaining the tools and supplies on your service vehicles.

And. It. Doesn’t. Work. It just sort of limps along. No matter how hard you try.

You bought the software, you spent countless hours training your technicians, you spent even more hours on the phone trying to figure out why it wasn’t working.

Does the word, “groan” come to mind? Think, “My goal is to have a great process, not to own a dysfunctional piece of software.” Is it possible abandoning a sunk cost is a sign of good decision making? Are you over-estimating the importance of the sunk cost? Is it possible the lessons you learned while using the dysfunctional process will come into play as you move in a new direction?

Overcome Lost Cost Fallacy

Here are some ideas concerning how you can deal with the Lost Cost Fallacy which crops up in your life and business.

  • Are you trying to prove you made the right decision in the first place? Is being “right” more important than your business and your bottom line?

 

  • Realize that dumping a Lost Cost is in reality a sign of good decision making. It shows you’re good at knowing when to say no and when to move on.

 

  • Reflect on things from your past. Did you give up an item of Lost Cost? Aren’t you glad you got out while you could? What good things eventually came from dumping the Lost Cost item?

 

  • Ask others. Seek help from your mentors, colleagues, friends, and trusted advisors. People are usually much better at seeing the Lost Cost items owned by others. And some, like your lawyer, insurance agent, and accounting advisor (that’s us) are trained to see items you’re missing when it comes to lost costs and lost causes.

Here at Schulte and Schulte we specialize in accounting for construction subcontractors. We’ve seen a few people limping in with the Lost Cost Fallacy hanging on to them like a child wrapped around and clutching onto his daddy’s leg. When we show our clients that’s not their kid, but rather a naughty dog they learn how to “shake it off.”

5 Mistakes Construction Contractors Make When Trying to Scale

Mistakes construction contractors make when trying to scale

Mistakes construction contractors make when trying to scale

Trying to do it all

Superman you’re not. KAPOW! Nor are you Wonder Woman. SNAP! So, as we say in our office, DWI (Deal With It.) We also say LIF (Life Isn’t Fair) but, that’s another story for another time. Now, we’ll concentrate on the fact that if your intention is to scale your business, you must have key employees and advisors in place in order to think strategically and focus on growth.

From the back office, to the front office, to the shop, and in the field, having people in place who can help you carry the load is the difference between wishful thinking and decisively moving forward.

And, if you wear all or most of the hats in your construction business, your goal is to replace yourself one position at a time. Finding every task you presently perform yourself and delegating them to your employees and freelance advisors is a sound business tactic that will move you forward more quickly.

In addition to your lawyer, your insurance provider, your bonding agent, your tax preparer, and your loan providers you do well to consider having excellent freelance advisors on board. Everything from virtual assistants, to human resource experts, to accounting advisors, (That’s Us!) will free you up to find ways to work on your business rather than in it.

When you’re able to delegate, (in-house or out) you have the precious commodity of time. Time to spend judiciously planning for the next steps that are about to take place.

Chasing squirrels

Dug, the dog in the movie “Up” is delightfully fun, because he is the ultimate squirrel chaser. And, because he is so easily distracted he is the perfect example of what it sometimes feels like to be the owner of a construction contracting company. You know, there are squirrels at every turn.

It is downright hard not to chase idea after idea and change after change. Squirrels make it difficult to settle with one (good enough) option. Perhaps it is business objectives, marketing strategies, client types, or even (hold your breath) other business ventures.

And, the squirrels can be as subtle as offers for business trainings which seem attractive but don’t really push you forward in meeting your immediate goals. Another insidious squirrel can be found in the purchase of tools or technology that aren’t needed.

One way to deal with squirrels crossing your path is to take note of them. If an idea, thought, or offer attracts your attention, write it down. In other words, keep a squirrel list. Then quickly decide (use your leadership powers to be decisive) if they are good, mediocre, bad, or future squirrels. Sometimes the simple tactic of “sleeping on it” will help you decide. Other times you may wish to visit the people from the above section, (your in-house and outside advisors) before making a decision.

One last thought on squirrel chasing – don’t become befuddled by the off chance you should have followed that one “great” squirrel. You’re in the construction industry, there are tons of squirrels in the construction forest. Another will be along soon enough.

Neglecting to think like their clients

Clients focus on the end product, not the process. Construction clients don’t like the changes you force on them. They do not want to be disrupted. They simply want what they want when they want it. Yet the very nature of the beast we call “construction contracting” means you’re disrupting the lives of your clients, be it for only a day or for many months.

Try putting yourself in their shoes. Suppose when you went to buy a car you were told that for the next six weeks you would have to figure out another way to get to work, to the grocery store, or to the movies because your car would be out of commission. Not only that, you would have to spend some time daily watching as piece by piece your new car was assembled . . . in your driveway. Not a pretty picture. Yet, depending on your trade you may be asking your clients to endure something very similar.

And your clients who (remember?) want what they want when they want it, are probably not all that prepared to have you disrupt their lives. You can help them get over that hurdle through constant and honest communication before, during, and after the project.

Oh yeah, don’t forget this part. Clients HATE surprises. Clients will be more understanding of a temporary defect or delay if communication comes first from you.

It doesn’t matter if you’re a service provider, a general contractor, or a sub; it doesn’t matter if you’re on a commercial site or a residential site, there is always a client and you must always consider ways to think like your client.

Failing to document their processes

You may have heard someone joking on one of your social channels that if there are no pictures – it didn’t happen. That is fun and funny. Yet the truth is if there are no documented systems there is no scalable business. If you want your business to grow, you must have systems in place with written instructions concerning how the processes work in order to maintain the system. If it is all in your head, then by golly, it is all in your head that you own a viable construction business.

Wendy Tadokoro from Process Street tells Why You Need to Document Business Processes. If you don’t know, check out the article, it’s eye opening.

Now that you know why, it is time to learn a lot about how (and more about why.) Sam Carpenter wrote a book titled Work the System. You can find the book and other helpful information on his website. It is worth the time it takes to check it out. He offers insight into how to build a successful business through the use of documented processes. His story of how the business he was about to lose was turned around from the brink of disaster is captured throughout the book. If he can’t convince you how important the process of process capture is, then probably no one can.

Forgetting that trimming fat is part of scaling

Much like starting up, scaling up requires some belt tightening or fat trimming in order to make it through. It isn’t simply a matter of hiring more hands, finding more work, and making more money. If your additional labor, travel, or equipment costs eat up the additional money you make on a variety of jobs you’ll find all you’ve gained is more headache.

What scaling really means is finding a way to increase your profits. Increasing your profits means finding ways to earn more money while not spending more money.

Inefficiencies exist in your present organization. Some systems are in need of repair or should be eliminated. Other systems need to be developed.

You may even have some people who will no longer fit into your company for any number of reasons. Perhaps they don’t want to grow, can’t see your vision, simply don’t gel with the rest of your staff.

Focus on operational efficiency.

Then focus on motivating your team towards a common goal of scaling up and being relentless in achieving it.

Is your bookkeeper stuck in the old way of just doing the books? Then we would love to show you what modern bookkeepers do. As accounting advisors, we help you drive profitability. Give us a call to set up a consulting session. 866-629-7735

Building an Efficient Construction Office – Part 3

Efficient construction contracting planning.

Efficient construction contracting planning.

This is the third in a 3-part series dealing with efficiency in a construction contracting office. The first installment can be found here. And, the second here.

At this point you’ve begun to understand the importance of working in a pleasant atmosphere and having documented processes. You get that organized and standardized within your construction business means it will run more efficiently. Yet, there are still some issues to be dealt with.

How do you know where to start in developing processes for the systems?

There are at least three different methods to help you decide.

  1. Start with simple. Begin with the process which is likely to have the fewest action steps involved in order to get your feet wet.

 

  1. Triage your systems candidates. Which system is giving you the most trouble and needs to be addressed soon?

 

  1. Use the template associated with a particular system found in the SaaS you’re using for developing and documenting processes. (I know, that came out of the blue. So, hang tight, I’m going to give you more information about this really cool tool.)

There’s a SaaS for that

We, at Schulte and Schulte were blessed to find a perfect solution for our accounting business almost from inception. We use Aero Workflow (a SaaS product) to create, store, and use the documentation we need for many of our systems.  There is a bit of a learning curve involved with using Aero, yet it is a small hurdle to overcome when you consider the advantage we’ve achieved in being better able to serve our clients. There are a number of processing templates we can use. We can base a customized process off a standard template. Plus, we’re able to create from start-to-finish our own accounting processes to meet the needs of our individual clients.

Beyond that, we are also able to use Aero to designate tasks, to assign and track projects, to determine how long a task or project took to complete, and along with a host of other benefits we’re more efficient. Pretty cool, huh?

Some efficiency targeted SaaS platforms for you to choose from

There may be other similar SaaS platforms for you to choose from, but these four are all pretty well known, and all seem to have components which would be helpful for a number of different construction office applications. Plus, each of them offers a basic or starter level at no charge. That way you can look them over, play around with them, and decide which you’re most comfortable with. You can determine which would best serve your needs. Finally, none of them seems over-the-top expensive – although there is some difference in their pricing.  You can decide if Process Street,  Tallyfy,  Asana,  or Trello would be a good match for your office.

Develop a tech stack

A tech stack is the assortment of technical tools chosen to aid in the use of a foundational SaaS platform.

For example, Schulte and Schulte uses QuickBooks Online  for our foundational platform. And because we believe simplicity serves us well, our tech stack includes only Aero Workflow, Hubdoc, and GSuite. (We were recently invited to be part of a beta testing group for Client Hub and are looking forward to determining how well it will serve us as well as our clients.)

The tech stack we recommend for our clients includes QuickBooks Online, Hubdoc, and Knowify.

Knowify?

“Knowify is a SaaS platform for construction contractors that provides job management tools and real-time business intelligence to help them streamline their business processes, take on more jobs and ultimately run a more profitable business.” I hijacked the previous sentence from a SaaS comparison site because I think it pretty well describes Knowify. What it doesn’t mention is that Knowify is much more reasonably priced than its competitors. (By the way, our clients receive a discount on the Knowify pricing by virtue of our professional relationship with Knowify.)

Take a look at the construction-centric systems you’ll find housed in the Knowify SaaS.

  • Bid Management
  • Billing and Invoicing
  • Change Orders
  • Commercial
  • Contract Management
  • Document Management
  • Job Scheduling
  • Lead Management
  • Residential
  • Subcontractor Management
  • Submittal Management
  • Supplier Management
  • Task Management
  • Time Sheets

Did I just hear you breathe a sigh of relief? I know, because we’ve heard it time after time when we’ve introduced our clients to the robust system they can put to use right away in making their construction contracting business more efficient through the use of Knowify.

In conclusion

There you have it. By upgrading your surroundings, understanding the importance of systems and processes, and choosing the right Software as a Service (SaaS) you’re well on your way to becoming more efficient and better able to serve your customers.

We wouldn’t be any good at all if you need someone to paint your office, we’re pretty good at passing on what we’ve learned about running an office, and we’re excellent at helping you get a handle on your accounting needs.

Pick up the phone and give us a call Toll Free: 866-629-7735 or contact us here.

Job Close Out – Why it is important

What difference does it make?

Whether your job lasts a few hours, a few months, or a few years there is still always a Job Close Out to deal with before the final payout arrives. It doesn’t matter if you’re trying to please a general contractor, a home owner, or a building inspector there is still the bottom line – is everything done, finished, complete?

I’m not talking about a punch list, although a punch list will sometimes be a part of the process. I’m talking about the moment when all parties involved in the construction contract or service agreement are satisfied with the finished work. Closing out the job means your work is complete and you get paid.

Both the negative experiences (change orders, nasty weather, supply delays, and the myriad of other things which pop up during the cycle of completing your project) as well as the positive experiences will fade in the memory of your customer. Yet, there is a psychological tool you can use to enhance your chances of leaving a favorable impression on them.

How does it work?

Here, let me explain. Have you ever been given a list of items to look at for a few moments, then been asked to remember all the items on the list? Chances are you’ll be able to remember the first few things as well as the last one or two items. All the words in the middle are often lost to your short term memory.

This article explains why that happens.

Understanding this psychological circumstance makes it easy to see why not only the first impression you make on your customer, but also the last impression you leave them with are both important for the well-being of your company. And, it is best to not leave Job Close Out to chance or even to a good memory.

Putting this information to use

Systemizing your procedure for closing out your projects augments your customer satisfaction rate as well as saves you time and hassle. Whether you’re a one-man-show or have a large number of employees, making a Job Close Out procedure a priority is a must for scaling your construction contracting business.

This is the first in a three-part series. In the next part we’ll look at the importance Job Close Out plays in mapping a superior customer journey, and in the final part discuss ways to make the process work for both you as well as your employees.