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How to Build a Successful Construction Business Without a Master’s Degree

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Building a Successful Business Doesn’t Have to be Slow and Painful

The majority of small and medium sized construction companies have the construction part figured out but get overwhelmed by the “business” side of things. Most of the people working at these companies learned a trade…not how to run a business.

Like me, most started doing business full of enthusiasm, having no clue what could go wrong. I had no clear plan or system for running a business.

Trying to balance construction projects and running the business can be overwhelming.

I had no idea how to do a proposal, a production budget, or accurately invoice a customer for progress payments. No one told me I should set money aside for things like taxes, tools, or emergencies.

One day I looked up and wondered how I got here. I liked building things…not necessarily running a business. As I built my business, I learned these things, but it was a slow and painful process.

The truth of the matter is…building a business doesn’t have to be slow and painful if you know how.

Think about it, a traditional trade school education will cost between $7,000 and $40,000. It’s been my experience that a real-world, hands-on education is worth even more. Often classroom education doesn’t translate well to the construction site.

Early on in my construction career, I was working for a local house framer. On a couple of different occasions, he hired some young men from the community college’s construction program, for summer help. After a few times of doing this, he stopped.

He said, “It took longer to unteach and reteach than it did to start from scratch.”

Looking back, I now realize how valuable that hands on education was. I just wish I’d had someone teach me the business part.

Instead, I got my business degree from HKU, also known as Hark Knocks University. And let me tell you, the tuition is high and it takes a long time to graduate. What’s an education like that worth?

Wouldn’t be great if you could get 40 years of experience without having to wait 40 years to use it?

You can!

This is what we’re doing a Solution Building. We are taking those 40 years of hands on, trial and error education and making it available to other contractors through programs, trainings and downloadable tools.

One of these tools is the Blueprint for Building a Better Proposal system.

This proposal system allows for the preparation of proposals that communicate clearly and accurately with customers, while allowing for increased profitability. It will give construction companies years of advantage over the competition for a lot less than the cost of a traditional education.

Currently this proposal system is available at a Holiday price of $497 plus some additional bonus templates through the end of the year.

How Do We Know the Destination if No One Has Given Us the Map?

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It’s a Puzzle to Solve, not a Predetermined Destination

As self-employed entrepreneurs this is the hardest question to answer. We constantly struggle with questions like –

  • Where am I going?
  • What should I do first?
  • How do I build a customer base?
  • What’s the most important thing?
  • How do I know if this is the right thing?

We know there is a destination, but we don’t know what it is or where it’s located. We don’t know which direction to turn.

We’re looking for a map, we expect one, but there isn’t any.

This is the biggest challenge for entrepreneurs. We know there’s a need for which we have to offer. There’s something that we’re supposed to do, we can feel it…but what is it EXACTLY?

What if I’m wrong? This sense of uncertainty keeps us from doing anything or incentivizes us to do less important things. Things that do nothing to move us toward our destination.

The question of “Every time I start to do something, it feels like something derails me. What should I do to move forward?”, came up in our mastermind this week. As we talked, it became glaringly clear that all of us in the group are looking for the answer to that question. We were looking for what to do and how to do it. We’re looking for a “map”.

We just want a map so that we know where we’re going and how to get there.

Everyone in the group is working hard to reach their business destination. And every one of us has the same questions. (See examples above)

As we discussed, it occurred to me…we knew the answers…we were all answering each other’s questions that are the same as our own. So, if we know the right answers, why are we still asking the questions?

The problem isn’t the questions or the answers…it’s a lack of movement.

We’re approaching our businesses as if there’s a map ready for us to follow…there’s not. As entrepreneurs, we’re going places where few or maybe no one has been before.  

Imagine explorers like Lewis and Clark heading to places unknown. They had no map or GPS to tell them where to go. They had no specific destination, just find a way to the Pacific Ocean. They were commissioned to explore and map the new territory and find a practical route across the western half of the continent.

If they had continually questioned themselves, they would still be in St. Louis.

Instead, they took the information that they had, made a decision based on that information and started moving. Granted, along the way they ran into obstacles that they had to go over, around or through.  

We are our own roadblocks.

The most important thing is to do something. Take that first step and move forward. You can make adjustments and recalculate as you go.

“Even if you’re on the right track, you’ll get run over if you just sit there.”

Will Rogers

“The most productive people start with purpose and use it like a compass. They allow purpose to be the guiding force in determining the priority that drives their actions.”

Keller, Gary; Papasan, Jay. The ONE Thing (p. 105). Bard Press. Kindle Edition.

The first step to reaching your destination is determining your purpose. It’s that thing you feel deep down in your core but have trouble figuring out.

You’ll never get to your destination if you don’t start moving.

What is Your Motivation for Being in the Construction Business?

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Having the Wrong Motivations Gives the Rest of Us a Bad Name

I’ve written before about situations where I’ve been involved in resolving issues between contractors and customers where they’ve gotten crossways with each other.

How poor communication leaves both sides with unrealistic expectations and sometimes ends in legal battles.

Once again, I’ve been asked by a construction customer to help them with a construction disagreement. They just want to get their home and their life back.

They’re in the middle of a dispute with a construction company that has been dragging on for more than a year. Their home has been left unfinished, damaged from rain leaking in, poor quality work, etc.

Why is it that they find themselves on opposite sides of this battle?

I’ve always advocated that poor communication between contractor and customer is the biggest problem. However, as I’ve been working on the current situation, I think there might be another deeper level to this issue.

Communication is certainly a part of it, but maybe communication would be better if the underlying motivations of both parties were considered. A skilled communicator can convince you that what their saying is true, even if it isn’t.

I think this is the underlying problem. It’s a lack of trust. None of us want to be lied to. Last week I wrote about competition vs. cooperation and how we can have both and everybody wins. It comes down to who we are competing against and who we are cooperating with.

Our motivation is directly connected to our why.

Contractor – Why am I in the construction business? Is it to help the customer achieve their dream construction project or to just make a lot of money? Don’t get me wrong. To stay in business, you have to make a profit, but if that is more important to you than serving your customer, it leads to situations like the one I’m currently working on.

Customer – Why do I want to do this project? Is it to improve the value, make it more functional, reduce maintenance, or to impress the neighbors? It’s your project and any of these motivations is fine.

The important thing is that both parties involved know the motivations.

Sometimes the motivations are hidden and not discovered until problems begin. Sometimes motivations aren’t clear, even to oneself. Knowing what the motivations are and being true to those motivations is critical to minimizing these kinds of problems.

Discovering motivations requires asking questions.

It frustrates he heck out of me that these kinds of situations happen…and they don’t have to.

We need to raise the bar of construction industry standards.

Dollars and Cents Are What Make a Construction Project Profitable…or NOT

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Having a System for Proposals, Is Better Than Just Guessing

It’s week six of learning the Blueprint for Building a Better Proposal system. As time consuming as learning new things is…John is beginning to see the benefits this proposal system will provide.

Just like building a house using a system that repeats routine actions prevents time being spent rethinking and guessing at how to do things. This system will do the same thing when preparing proposals.

As they settle in and begin the meeting, Gene tells John, “Let’s take a quick look back at what we’ve covered so far. We started by asking ourselves some foundational questions. Next, we discussed the common mistakes contractors make when bidding. Then we went over the system and it’s parts. The last couple of weeks we’ve worked on gathering information and turning that info into a Scope of Work. Today we’re going to start working on…

Pricing the Project

In this step we will determine the price for the project. Communicating a clear description of the project took place in the Scope of Work which is important in avoiding misunderstandings. Accurate pricing is equally as important.

Poor communication will cause heartache, poor pricing will cost you money.

Open the Worksheet template. This blank Worksheet is where you will paste the information from the Data Base as it relates to each of the specific tasks of the project.

The Worksheet template has six different options for overhead and profit ranging from 20% overhead and 10% profit to 40% overhead and 20% profit. You can use whichever of the six options works best for you on the specific project you’re working on.

Typically, larger projects, i.e. new construction, large renovations, remodels or large additions will use smaller percentages, while small projects will use bigger ones. You can use whichever works best for you. These percentages can be adjusted after you have finished the pricing if you want them to be increased or decreased. These documents can be modified with custom percentages as well.

Open the Data Base and prepare to copy the appropriate content into the correlating cells of the Worksheet of the project you are working on. Use the previously written Scope of Work, to determine which of the categories, specific to the project need to be used from the Data Base and copied to the Worksheet.

If more than one item for a specific task is needed, for example shingles, synthetic underlayment and metal edging, flashings. These individual items will be entered separately then added together to create one price for roofing.

You can add as many additional rows as you need, just be careful to keep the formulas intact by filling the content of the existing row to the new ones.

How to determine which tasks should be inserted into the Worksheet

Most of the tasks on the Data Base have options; determining which to use, will depend on the specifics of the project. For example, how is the excavation, trenching and landscaping going to be done…with a skid loader, mini excavator or by hand?

Once it’s determined which methods, actions or materials are to be used for a specific project, copy the pertinent cells from the Data Base and paste them to the Worksheet.

After the pertinent information from the Data Base has been placed on the Worksheet it’s time to…

Enter the quantities of the work to be done.

Fill in the quantity needed to do the work for each item on the Worksheet. This may be lineal feet, square feet, square yards, cubic feet, cubic yards or numbers of pieces. Once this is completed for all the categories, you’ll have prices for each task of the Proposal.

This system offers a constant repeatable process for preparing accurate proposals and is the difference between making money or losing money on construction projects.”

Gene looks at John and asks, “Well, what do you think?”

“Well, I thought my head was spinning before today. Now I’m getting dizzy.”, replied John with a grin.

“I know it seems like a lot, but it really isn’t, once you get started using it.” Says Gene reassuringly. “Experiment with it this week. Call if you have any questions. Next week we’ll bring everything you’ve learned together into a proposal ready to be presented to the customer.”

Guessing is not a good way to build a profitable business.

Previous posts in this series –

What is “business clarity” and how do you find it?

Learning How to Get a Construction Project Started Out Right

It’s Time for the First Meeting

Being Aware of the Common Bid Mistakes is the Best Way to Avoid Them

Constructing a Building is Better with a Plan, a Proposal is No Different

A Good Construction Proposal Starts by Asking the Right Questions

What is a Construction Scope of Work and Why Do You Need One?

It’s Amazing How Quickly Profit Can Get Sucked Up

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Missed Deadlines Are Like a Big Shop Vac to Profit

It’s hard for some of us to make money…for others not so much. I’m not talking about how businesses and lives look on the outside. I’m talking about the real and truthful hidden beneath the exterior profit. Borrowed money often makes things appear way better than reality.

On one of Donald Miller’s Business Made Simple daily podcasts, this past week he talked about the importance of hitting deadlines. Missing them can cost you a lot, in both money and reputation. Missed deadlines are too common in construction. I know missed deadlines are costing me and my business.

On the surface, a missed deadline here and there doesn’t seem like it’s a big deal. The problem is that those missed deadlines don’t ever go away, they just keep getting added to previous ones. It starts out like a little snowball rolling down a hill, problem is…when it gets to the bottom it’s big enough to wreck your business.

You can’t go back in time and change the past; you can only learn from it.

Let me show you how missed deadlines cost you money. Let’s say the labor budget for a siding project is $10,000. This translates into 167 hours or 24 working days. The cost for labor and length of time needed for this project was predetermined by a data base using the square footage of walls to be sided.  

Often production crews get to a stopping point mid-afternoon and rather than starting another section they quit for the day. This may happen a few times throughout the project. When they get to the end of a project, they happen to get finished at noon. It’s too late to start the next project so they wait until the next day to start.

If throughout the duration of the project the production crew stops 1 hour early each day, this adds 3 days to a 24-day project. These 3 days now pushed starting the next project back 3 days plus the half day at the end.

If this happens consecutively on projects throughout the year those 3 ½ days becomes 35 days. 35 days would be enough to do another project, not to mention the overhead costs that continue whether there’s work being done or not.

A 15% profit figured on the siding job would be $178.00 per day, times 3 days is $534.00 for that one project. Add to that the complete project missed is $4,798.00 lost to never be gotten back. Multiply that by 25 years of doing business that’s a lost profit of $119,950.00 sucked up by the “missed deadline vacuum”.

The problem isn’t the labor costs…it’s the never-ending overhead.

Every deadline missed in a company, whether production, sales, marketing, administration, or bookkeeping subtracts from the bottom line. Each of these little subtractions is like a little rock thrown into a pond. The ripples will inevitably spread throughout the whole company sucking up profit.

Meeting deadlines has to do with being intentional. Determining your priorities, getting them on the calendar and pushing forward. The only way I reach the goals I have for my life is to meet deadlines.

I’m going to make meeting deadlines a priority for 2021.

Here’s to a more profitable 2021!

How Can I Know What to Do?

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Guessing Isn’t a Very Good Plan for Making Business Decisions…

Or any other kind of decision for that matter. Over the past several months I’ve heard or asked the question, “What should I do?” This question gets asked about all sorts of things both big and small.

Some decisions are more critical than others…Should I start this new business? Should I ask this person to marry me? These are more important questions than, “Where do you want to eat?” Knowing what to do in any given situation can be hard, but not as hard as we make it.

I think Satan likes to keep us guessing.

The uncertainty of what we should do keeps us from moving forward and accomplishing the things God wants for us. Sometimes it takes a smack in the head to get our attention and give us clarity. If God gives you a direction to go then stop questioning.

We think it would be great if we knew exactly what it was that we were supposed to do all the time. If this were the case, we would just be robots. We were made to have choices.

Knowing the destination doesn’t mean there’s only one path to get there.

“Clarity starts with a decision.” This is something Ray Edwards said in his 7 Steps to Getting Clarity podcast. His point was that we won’t ever have all of the answers in the beginning. If we do something we never will.

Here are three components to making the best decisions we can. –

We need to listen to God – I believe that God has given each of us a specific purpose. Something that only we can do in the way that we can do it. After God got my attention with the board, I knew what mine was. This doesn’t mean that I don’t sometimes lose my focus and start asking questions.

This is when we need to go back to the Architect of our lives and review our life blueprint.

We need to know ourselves – We’ve been given an internal compass to direct us toward our purpose. Sometimes it gets misplaced or we forget to look at it. We’re moving along down life’s road and when we look up, we don’t know where we are or which direction to go.

Maybe we never knew that we had a compass or how to use it. This internal compass is who we are, what we like, what we dislike, what we’re good at, what we’re not so good at, etc. Every one of our compasses are different.

You just need to know your own compass and use it.

We need to take action – You may know what God wants you to do. You may know which direction your compass is pointing you. If you don’t do something, you’re doing nothing.

Making a decision and taking action can be scary. What if I make the wrong one?

As I think back over some of the big business/life questions I heard asked and the answers given, I ask myself…how would I know what is the right thing for that person to do? I don’t know what purpose God has given them, I don’t know what their specific gifts are, I don’t even have many details of their question.

I can encourage them, I can offer them opinion, but really a surface answer is the best I can do in this situation.

I know that when I’ve had suggestions or answers to my questions, they have been helpful (even though more times than not I already knew the answer.) Sometimes we just need some reassurance that we’re not crazy.

Ultimately the right answer is already there and comes from within.

Your Business Doesn’t Have to be a Scary Movie

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How to Avoid Business Disaster

Have you ever noticed how in horror movie’s people make the worst possible decisions? The Geico commercial where the young people decide to hide behind the chainsaws (while funny in the commercial) is way too real for most construction companies. In the commercial they choose to ignore the one running car that would help them avoid the catastrophe that is otherwise inevitable.

Why do so many businesses hide behind the chainsaws?

In most cases it’s written in the script. This is the way it’s always been done. Like in the movies, this will end in disaster. It’s time to rewrite your script.

In construction one of the root causes for disaster is not having a safe and secure method for doing proposals. A silver bullet is used for stopping a werewolf, witch, vampire or other monster. The Blueprint for Building a Better Proposal is just such a bullet.

Here are 7 common mistakes that cost contractors a fortune…but don’t have to.

  1. Your customer lacks clarity – Crystal clear communication is critical to your success. A clear scope of work avoids confusion between you and your customers.

2. Production crews lack clarity – Like the customer, the people working on the project need to know what’s expected. If the wrong things, too much or too little is done it results in losing money and/or unhappy customers.

3. Unclear production budget – If subs/employees don’t know what the budget is, how can you expect them to not overspend. This is a sure way to lose money.

4. Unsatisfied customers – Your customers have hired you to provide a completed construction project. If everyone isn’t clear about the expectations the customer is not going to be satisfied in the end.

5. Taking on unprofitable projects – Guessing at what your labor and material cost are going to be is a huge risk. Having a system that uses, cubic feet, square feet, lineal feet, etc. removes the guess work. Not to mention having predetermined overhead and profit margins.

6. Trying to do everything – In small companies your focus is on the physical construction. This doesn’t leave much time for doing bids. This proposal system allows you to delegate work to others. It’s less expensive to hire administrative people than construction personnel.

7. You don’t have a system that is customizable or scales – Most construction projects consist of a variety of different areas of construction, not to mention different markets and geographic locations. Add to that markups and profits that can be adjusted. You need to have a system that can be made to fit your specific needs.

Small and medium sized construction companies too often follow the same script that everyone else is. They hide behind the chainsaws, even though they know this is a bad idea.

Don’t hide behind the chainsaws!

Rewrite your script so that there’s a silver bullet to stop the proposal monster. At the very least…get in the running car.

Spinning So Many Plates at the Same Time Can Make You Dizzy

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It’s Up to You How Many You Spin

This title might seem familiar, and it should. I used a very similar one for a post in March of 2018. That post’s focus was on trying to run a business without a plan.

This post is going to address a different question that has been coming up in almost every construction conversation I’ve had over the past several weeks. These discussions have been with other contractors, sub-contractors, my team, customers, and even with people in other industries. This is not a new topic but seems to be reaching an increased ‘plate breaking’ point.

Most of us have seen plate spinning acts in some form or another. When I was growing up, I remember seeing Erich Brenn performing his plate spinning act on the popular Ed Sullivan Show. I remember him running back and forth, trying to keep all the different plates spinning at the same time. It was amazing. (Be sure to watch this video)

I’ll bet you’ve felt just like him.

Most businesses are operated in a way that feels a lot like trying to keep all those plates spinning at the same time. Just like the performer who keeps putting more and more spinning plates up on the end of sticks, we keep trying to do more and more.

There is a limit to how much we can do. We can only run back and forth keeping the plates spinning for so long before they start falling and breaking. This means there is a maximum number of people that we can provide service to, before things begin falling around us.

Why do we continually keep adding more plates?

That is the million-dollar question. There seems to be some inherent traits that self-employed people are born with that causes us to continually take on more. I believe that it is directly connected to having a servant’s heart. We have a God given talent that someone needs the benefit of. We instinctively say yes to help those in need of it.

The problem of course, is that there is a limit. A limit to how much we can do, to the amount of time we have each day, to the number of people we can help. And we instinctively know this. When we say yes to that next thing, the voice inside our head says, “How are you going to do that?”. We shrug our shoulders and say yes anyway.

Trying to do everything makes it hard to do anything well.

This is a problem that has been around as long as people have. The question is…What are we going to do about it? How are we going to get this plate spinning madness under control? I keep asking myself this question over and over.

The answer to this question is inside each of us and there are as many answers as there are people asking the question. The answer starts with realizing the problem and recognizing that we have control over it. We can choose to answer it or pretend it doesn’t exist and keep spinning more and more plates.

This is where things begin to get tricky. Looking for and figuring out your answer, the one that is exclusively yours, takes time. I know that you are already too busy spinning plates to add another.

If you don’t spin this plate you will never keep the rest spinning.

Learning How to Get a Construction Project Started Out Right

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John Gets Excited About His First Meeting with Gene

As usual John had been on the go, nonstop, trying to keep construction projects moving forward, collecting money, paying bills, meeting with new potential customers when he realized, he had six projects that needed proposals. As he thought about this, he realized it had been more than two weeks since he had talked with Gene about how to do proposals.

He picked up the phone and dialed Gene’s number. “Hey Gene, this is John, have you got a few minutes?” “Sure,” Gene said, “What can I do for you?” “I just realized that I’ve got six projects that need priced. This reminded me of our conversation a few weeks back when you offered to go through your bidding process with me. Does that offer still stand?”

“Sure,” said Gene, “when would you like to meet?” John thought for a minute realizing he wasn’t sure when he would have time to squeeze this in. “I don’t know Gene, as usual I’m booked pretty full.” Gene waited for a minute and then said, “I understand. Think back to what you said in our previous conversation. Do you remember how frustrated you were?”

“Your situation isn’t going to change until YOU decide to make it change.”

John rubbed his forehead. He knew Gene was right. “Okay”, John said, “I can squeeze in an hour or two Saturday. Would that work for you?” Gene shook his head and smiled, remembering what it was like to be where John is.

Then he said, “John I appreciate where you are, but the process of getting from where you are, to where I am, isn’t going to happen in an hour or two. I’ve been doing it for forty years. If you can commit to four hours Saturday, I will be glad to meet with you.”

“Realize, YOU are the only one that has the power to make this change.”

John sat there with all the things that needed done, bouncing around in his head. Then he thought about how tired he was of feeling out of control. Once again, he knew his mentor was right. Gene had taught him so much about construction and how to build things.

Now it was time to learn about the business part of construction.

“Okay,” said John, “How about we meet at noon on Saturday and I’ll bring the pizza.” Gene said, “That sounds great and we can get started, but that’s all this meeting will be…getting started. Like I said before I’ve being doing this for years. It takes work, it takes commitment, but the end result is worth it.”

“It’s more than just learning. It’s a lifestyle change.”

“John, most people in construction never learned the business side of operating a business. This is where they struggle until they get to a point where they give up. Bring an open mind and an open heart and be ready to have them both filled.”

“Nothing is going to change until you take action and do something.”

Now John was getting excited and looking forward to meeting with his friend and mentor and making some changes in his life. He was beginning to realize that a getting a construction project started out right, begins long before any construction takes place.

What is “Business Clarity” and How Do You Find It?

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A Lack of Knowledge and Inexperience Threatens Your Dreams

Once again, John was alone at the office late on a Saturday night working to get at least one more proposal done, before going home. He had promised four different customers their proposals this week. If all goes well, he’ll have this second one finished before midnight.

As John crunches numbers hoping he hasn’t forgotten anything, he asks himself, “Why am I doing this? I could go to work for somebody else and make more money and work less hours. This sure isn’t how I pictured it five years ago when I started the company.”

“I had no idea that running my own business would be this hard!”

John rubs his eyes and stretches his back and thinks, “I must be doing something wrong. When I was working for Gene at XYZ Construction he made things look easy. I wonder what he was doing different.”

John has been working like crazy all week long. Between production help not showing up, materials not being delivered on time, cost overruns and computer issues…projects are behind schedule, he’s losing money and even if he works tomorrow he’s going to have to disappoint at least one of the customers waiting on a proposal.

“How am I ever going to turn this around?”

When John finishes the proposal and looks at the clock, it says 12:40. It’s already Sunday he thinks and he still needs to proofread it, print it and sign it. Something has got to change! “I’ve been leaving home early and getting home late all week. I haven’t even spoken with my wife for days. I’m calling Gene Monday to see how he did things.”

First thing Monday morning John called Gene. After a few minutes of catching up, John asked Gene the question that he couldn’t quit thinking about. “Gene, I’ve been working day and night trying to keep up. When I worked for you it seemed like you had everything figured out. You weren’t stressed and when things didn’t work out as planned. Your customers understood what to expect with their projects and were happy when they were finished. What am I doing wrong?”

That’s the question that almost every business owner asks themselves.

“Know this,” Gene said, “When I started my business, I was just like you. I struggled to keep up, worked too many hours, neglected my family, was mad at myself for letting down my customers, my family and myself. I kept asking myself that same question. What am I doing wrong?”

“By the time you were working for me, I had figured some things out. It’s amazing what you can learn when going to the “school of hard knocks”. Keep in mind this is the most common process but isn’t the most effective.”

“What really turned my business around was when I found out about Solution Building’s, Blueprint for Building a Better Business.”

Think about how much easier and better a construction project goes when you have a plan. The same thing is true for a business. A plan gives you direction, keeps everyone involved working together and improves the odds for a successful outcome.

“John, if this is something you would be interested in, I would recommend starting with the, ‘Blueprint for Building a Better Proposal’. This is the most important and most neglected part of construction communication. If you’d like I would be happy to meet with you and go through the process and answer any questions.”

“If you know of any other construction companies that you think could use some help doing proposals share this information with them and they can meet with us too.”

“There’s a lot more to the ‘Blueprint for Building a Better Business’, but starting out, you should focus on the proposal system. After you get this part implemented, we can discuss which part of the business blueprint system would be best for you next.” After talking with Gene, John thought, “I’m sure glad I made this call. For the first time in a long time I feel like there might be a light at the end of the tunnel that wasn’t an oncoming train.”