In the ever-evolving residential construction and remodeling market, construction businesses have faced numerous challenges over the past few years. Unfortunately, more hurdles are expected in the next 6-24 months, be it cooling trends, economic recessions, inflation, or market booms and busts. Fortunately, General Contractors (GCs) have the ability to adapt and thrive in the face of these challenges, regardless of their nature. Regrettably, many GCs find themselves stuck in their existing business models, unaware of the numerous strategies available to maintain profitability in challenging or changing markets.
In this article, we'll explore three essential strategies for General Contractors to overcome market challenges.
Implement Margin Management:
- Level up your construction business practices beyond simply chasing top-line revenue. Being busy isn't a sustainable business strategy. Aspire Coaches give you a solid financial foundation teaching you how to keep accurate financial records to both clearly understand your current cash flow as well as build accurate cash flow projections. As your construction business grows and changes, many decisions need to be made. Making the right decision (or the wrong decision) can significantly impact your business's future.
- Monitor key indicators:
- Know your Margins for each of your Job Mixes and have a plan in both estimating and production to achieve your target margin.
- Promptly answer all inbound calls during business hours and have an intake call script to ensure you have the right information.
- Follow up with promising potential clients in a timely manner.
- Ensure estimates are accurate and delivered on time.
- Analyze job margins to identify areas of excellence and underperformance within your team and adjust your process to refine.
- Regularly review your construction financials, not just your Profit and Loss (P&L) statement but a business management report that clearly tracks all production costs to avoid surprises in gross and net profit numbers.
- Effective margin management is the cornerstone of business success in the construction industry. Remember, your Job as the owner is to manage your margin.
Understand and Manage Your Job Mix:
- Not all construction jobs are created equal. Analyze your recent construction projects to find the job characteristics that your team is most efficient in and market to your strengths. Chances are not all of the projects you have done are the best fit in your area of expertise, construction clients you enjoy, or jobs that give you the best margin.
- If you can't manage your job mix during the busiest times in the construction industry, it becomes even more difficult to do so when market conditions change.
- Refine the staffing needed for each job mix and understand the true cost of low production.
- Move beyond traditional word-of-mouth referrals and repeat customers. Focus on a targeted marketing approach that identifies your ideal client based on the business model desired and how to differentiate your business to attract the right clients.
- Understand that price isn't the sole driving factor in your customer's decision-making process. There are four buying motives; it is your job to identify the client's dominant buying motive and sell to that. If you are working with two people, they each have a dominant buying motive you need to identify. Aspire Coaches for Contractors can help teach you the difference between reactive and targeted construction marketing leads and how to reach the right prospects at the right time for maximum sales success.
- Remember that your website is a messaging platform, not the entirety of your marketing strategy.
In conclusion, these three strategies — Margin Management, Job Mix Management, and Targeted Marketing — are vital for General Contractors looking to thrive in the construction industry. While you can do these on your own, a Construction Business Coach will hold you accountable, keep you on track, and challenge you to take action and step outside of your comfort zone. To delve deeper into these tactics and tailor them to your unique construction business model, join one of our upcoming workshops that will provide valuable insights to help you navigate the challenges and succeed in today's construction market. Click HERE for a list of our upcoming workshops.
To learn more about developing a meaningful strategy to succeed and prosper, watch our NARI Webinar "Is Your Business Prepared for a Recession" below.