When custom details begin to feel overwhelming, when pressure remains high, client satisfaction is an elusive target. And when the constant but subtle pressure of a down market is the headline every day, it is paramount that the CEO keeps the company focused on business basics.
Prioritizing your time and visionary abilities, striving for profitability and longevity and keeping clients satisfied in today’s economic climate are of utmost importance. You need to be running your business while planning on what you will be dealing with in the upcoming 12, 24 and 36 months. You should be allocating ample time weekly on the following five basic areas of business.
Prospecting for new work. Write and call architects. Ask for a 20-minute meeting to introduce your company. Take them to your recent custom job and then lunch. Ask to be put on their bidders list. Send direct mail postcards, letters or brochures to target mailing lists. If you commit to sending 500 pieces a month for one year, you can allocate $1 per piece including mailing and spend $6,000 in the next 12 months, plus overhead expenses to create and send the pieces. We recently sent out two postcard mailings to nearby townhome projects at a total cost of $400. We secured two bathroom renovations for $30,000 in work and a healthy 35 percent gross profit. In addition, keep your website current with updated photos so your prospects see your current portfolio.
Bidding. Basic supply and demand economics dictates that since there is less construction work going on then labor and material costs are coming down. It is imperative that your pricing of new jobs is competitive and reflective of lower trade contractor costs. The only way to stay competitive and win the new business is to bid more actively and aggressively than you are accustomed to — or your loyal trades would like you to. In the long run this will help you survive and prosper in this economy.
Funding requests. Stay punctual with your client funding requests. At one moment in the past few months, we were so busy with production on the completion stages of three custom homes that we failed to stay current with making client funding requests. In short order, my payables were way beyond my comfort zone, exposing my company to a potentially serious cash flow problem. Our contract permits us to ask for funding every 14 days. We are now back on track and staying focused on asking for funding on schedule.
Annual profit and loss projections. Review your projections monthly. If you are projecting losses, make a plan to reduce them. Cut staff, reduce salaries, negotiate lower costs with trades and suppliers. Do not reduce marketing costs, and increase spending on finding new business.
Cash flow reporting. Review cash flow reports monthly. It is critical that you anticipate cash flow problems so you have time to respond to a shortfall. You must price your assets to sell at today’s market value. It may be for much less than what you want or need, but unless you can afford to hold and wait, it may be the only chance you have to liquidate a lot or home you need to sell.
The current market necessitates a refocus on these core essentials of good business practices. The market is weak and will likely get worse before it improves.
Builders and architects understand that our industry leads both the upswing and the downswing of the economy. We have experienced firsthand the waning of the seller’s market and the cost of being deep into a buyer’s market. Now is the time to plan how you will thrive and prosper in tough times. Good luck!