Make more than a million

Want to add ‘multi’ before your million-dollar building business? It takes more than simply winning new contracts – you need to update and reshape your business model, if you want to take it to the next level

The first step many builders take after establishing themselves is to grow their business into a million-dollar company that employs five to eight builders. Done properly, it can return a decent income.

It doesn’t matter that the business demands the owner’s full attention and that it’s busy – it feels good to be in control of your own destiny. What’s more, given the right support, a builder can get to this stage quite quickly.

Many make a lifestyle choice to stay at this size, but others want to go to the next level, where they are completely off the tools.

To get there, you can’t just keep adding jobs and builders. There aren’t enough hours in the day to do everything required – a new business model is necessary.

Below are three things to consider prior to expanding, plus two models to consider when you’re ready to go to the 12-15 builder level.

Three things to consider

1. Get a clear estimation of your own strengths:

Just as a sports coach allocates players to their areas of strength, you need to allocate yourself to the area of the business where you’ll achieve the best results.

Essentially, there are two options in a small business – getting work in and doing it. While you can do both when the business is small, you can’t as it grows.

Decide if you are better at getting work in, or getting work done.

Are you better in the area of sales or project completion? Do you enjoy following up enquiries, selling, estimating and getting contracts signed? Or do you prefer running and managing jobs on time, to budget?

Both are essential for the success of the company, but it’s likely you will be more effective at one.

2. Evaluate your team:

Take a good look at the character and skill level of the people in your team. Are they able to work unsupervised? Do you have foremen (or site managers) able to make the technical decisions required as the build progresses, or do they need your expert input? Are they able to manage the performance of other team member(s) and keep to schedule, or do they need to be hurried along?

Knowing the make-up of your team now is a good indicator of the people you’re likely to attract in the future. It makes sense to think about structuring your business with this in mind.

Of course, you also need to look at areas where your team is lacking and consider how to evolve your structure as you add these skills to your team.

3. Step up your reporting systems:

As your business grows, you have to delegate more, while relying on your team’s ability to work without your immediate supervision. This is the natural corollary of delegation.

You can’t delegate without knowing precisely what is happening in the company at any time: eg, how close to schedule/budget is each job running?

You need this information quickly and routinely to make informed decisions – the kind of immediate information you had when your company was much smaller.

“To get there, you can’t just keep adding jobs and builders. There aren’t enough hours in the day to do everything required. A new business model is necessary

So, before racing to grow, check that you have procedures in place that give you accurate information. If you don’t, you can start by using paper forms. It’s a good idea to scope out a decent reporting programme and install it early, so you don’t need to make system changes as the business grows.

Two Main Business Models

Model 1A: Owner on sales – employ a qualified project manager

In this model, the owner is focused on getting the work in and the building work will be delegated.

The current team members are not highly skilled and aren’t experienced enough to be left in charge of the whole job; they require direction and help with:

• Scheduling work.
• Making strategic technical decisions.
• Organising and supervising subcontractors.
• Arranging material deliveries.
• Dealing with clients.
• Recording and pricing variations.

Employ an experienced builder as a project manager, who can:

• Manage schedules.
• Manage subcontractors and budgets.
• Deal with clients and give technical advice.

An added attraction is that such a project manager is able to upskill team members.

Model 1B: Owner on sales – employ a project assistant

In this model, the owner focuses on sales. But the team contains leaders experienced at:

• Running their own jobs.
• Organising schedules.
• Liaising with subcontractors.
• Staying on target.
• Managing variations.
• Dealing with clients.
• Understanding budgets.

What is needed is someone to support and assist them in managing start dates, collating new job information and preliminary coordination. They need not be building qualified, but should understand a build process.

An added benefit is that they may be able to assist you with other office duties.

Model 2: Owner works as project manager – employs a salesperson

In this model, the owner delegates getting work in to a professional salesperson. It helps immensely if the salesperson has building knowledge, since they will often be asked to give advice on what is possible. An older, experienced builder with sales skills can be a real find.

However, it is essential that they faithfully represent the company. There is nothing more detrimental to a company’s reputation than a salesperson who over-promises.

Many professional salespeople prefer commission selling, and become a direct expense rather than an overhead.

When you’re ready to punch through the multi-million barrier, give serious thought to drafting a model that best suits your company.

 

About The Successful Builder

Graeme Owen, based in Auckland, is a builders’ business coach. Since 2006, he has helped builders get off the tools, make decent money, and free up time for family, fishing, and enjoying sports. Get his free ebook: 3 Reasons Builders Lose Money and How to Fix Them for High Profits at http://TheSuccessfulBuilder.com.