Three Tips to Survive the Next Four Years

By Doug Herbert

There is still a lot of uncertainty in the U.S. Economy.  It is important to develop a game plan, so that you’ll be in a better position to handle whatever comes your way.  And, if the local market does improve and you find yourself with a lot of work, the following tips will help you raise your profits even further.

1. Focus on Profitability
It is imperative that you make as much money as possible on each and every project that you complete.  If there are fewer projects out there for your company to perform, then each one has to make a bigger contribution to your overhead expenses. 

If raising your prices is not feasible, then reducing your expenses associated with each project is crucial.  The areas where this can be done are Labor & Subcontractors; Materials & Supplies and Office & Overhead.

Productivity is essential to overall profitability.

Labor & Subcontractors—Figure out ways to reduce your labor expenses.  If your employees are paid by the hour, visit the jobsite at the end of the day to make sure they complete the work and aren’t stretching out the clock.

If you have subcontractors that perform your work, look at how you get them the information that they need to do their job.  If you help them be more efficient and profitable, then they will be willing to work with you on reducing their pricing for you.


Materials & Supplies—Determine if there are ways to lower your material costs.  Look for waste within your day-to-day operations.  Are there materials getting thrown in the dumpster that could be reused?  Are there things that you and your employees do because, well, that’s the way it’s always been done? 

Here’s one example I can give you from our own concrete construction business. For years we used 2x4’s to form our footings.  A concrete contractor friend of ours showed us how he used reusable metal forms to form his footings, instead of buying so many 2x4’s every year.  After implementing that system, our labor and footing material costs dropped substantially. 

There are probably similar areas in your business that can be changed and improved upon.  Where can you streamline your systems to reduce your material costs?

Office & Overhead—Think of ways you reduce your office and overhead expenses.    Are you getting the best insurance and mobile phone rates?  Can any tasks be outsourced?  Outsourcing is simply paying someone outside of your company to do a specific task.  A quick tour on oDesk.com will get your mind going as to what you can have outsourced.  Hiring someone on an as-needed basis is better than having a full-time employee sit idle. 

How about giving that idle employee more things to do?  Put them in charge of calling past customers for referrals and testimonials.  Set up systems that reduce callbacks, repairs, and punch list items.  A return trip to a completed project to fix a small mistake can reduce or eliminate any profitability that you had in that job.

Stay as lean as possible.  The last five years has taught us how to do more with less people, equipment and resources.  If your work has picked up in the last year or so, resist the urge to purchase additional equipment unless it is absolutely necessary. 

2. Prepare for Governmental Changes
Regardless of which side of the political fence you fall on, there are upcoming governmental regulations that will affect your company.

How will ObamaCare affect your business?

The Affordable Care Act, for all the hype and discussion over the last two years, is still a relative unknown.  There is a plethora of conflicting, confusing information, but the rules and regulations are still being written..  Some information sites are recommending that employers stay below fifty employees.  The law won’t affect those companies until a later date.  However, even that advice is up in the air; there have been reports that the number of employees you employ will actually be determined by some unknown formula involving the number of hours worked. Work closely with your CPA to stay up to date on these regulations and keep your company in the best position to adapt to the changes.

Another regulation that may affect you is the federal employment verification system called E-Verify.  Employers are required to use the E-Verify system to confirm employment eligibility of newly hired employees.  The implementation dates of this system vary by State and company size.  Go to uscis.gov for more information.

E-Verify may impact your ability to get skilled employees.  What is your strategy to get skilled labor?  What are you doing now to keep good people?  In markets that are seeing an up tick in construction activity, construction companies are hiring good people to begin growing again.  Be sure your best employees stay with your company.

3. Improve Sales & Marketing Strategies
The most important sales-related task you can do is to keep every customer you now have.  We oftentimes get caught up in getting that next new customer.  However, it takes much more money, time and energy in chasing a new customer as it does getting repeat business from your current customers. 

Effective marketing is crucial lean times.

Take a good look at all of the places you currently advertise and where you spend your marketing money.  Determine where your leads are coming from.  If something isn’t working, get rid of it.  If something is bringing in new leads, pour the coals to it.

If the next four years proves to be a challenging time for the construction industry, it is essential that you put yourself and your company in the best position to weather the storm and come out on top.  With careful thought and planning in these three areas, you increase your chances of doing just that.



Doug Herbert is a regular contributor to Concrete Homes Magazine. The full version of this article will be featured in the February/March 2013 edition of that publication.