It may seem counterintuitive to think of growing your business in a slowing economy. However, it is in lean times that the dedicated, qualified professionals take the necessary steps to improve their businesses for growth and prosperity.
When times are going well, there are an increasing number of people who become realtors, contractors, investors and inspectors. The boom times draw people into our industry with the lure of perceived “easy money”. This lure tends to draw in the less qualified and unscrupulous to take advantage of expanding demand. During lean times, if there is a silver lining, it is that poorly run companies and unqualified people abandon the industry to find another path to “easy money”. It is during these times that well run companies, with a qualified staff, rise to the top of the industry and expand their market share.
Here are some observations from nearly 30 years in the business to help you grow your business.
Know the business: A truly qualified professional understands all aspects of their business, thoroughly knows the markets in which they operate and is willing to step into any role that is needed to succeed. I believed my business success, depended upon my understanding of the responsibilities and skills of every one of my subs and employees AND that I was willing to step in where needed to get the job done.
Understanding the roles of all the participants in your project will allow you to keep the project running smoothly and efficiently. Consistent and efficient operations will lead to greater profitability and success. It also makes for happier customers.
Communicate, communicate, communicate: The most important piece to the success of your business is clearly communicating your company’s objectives and goals to your employees, subcontractors and customers. Provide the right tone and set reasonable expectations before the project begins. Clearly communicating objectives and expectations requires an understanding of the present day market and the direction of the market trends. Be realistic and honest with your customers, staff and your self.
Run lean and smart: Cut the dead wood. Find the best, most qualified and hardest working employees and trim the employees that are not necessary to complete the project. Many times a project can be completed faster and more efficiently with less people, when you have the right people to do the job. When cash flow allows, reward your best people with bonuses. Bonuses will allow you to reward top employees without giving a permanent raise.
Focus on the business’ real costs: It is the utmost importance to have a full understanding of the true costs of operating your business. Know the actual cost of a job (materials, labor, supervision, marketing, your time) and price a job accordingly. Tighter bids require tighter controls on costs, understanding the actual bottom line costs of a project will clearly identify the winners and the losers.
Learn and employ effective time management principles, targeted marketing plans and smart selling strategies. Invest in education, expand your market and have focused campaigns in slow markets to prepare for the return of a busier time.
Get control of your finances: The real estate industry tends to work from draw to draw, often times living off our own credit lines to keep the project moving forward. Learn and apply smart money management principles and keep a close watch on your use of cash and debt. Use debt wisely and control expenses. If you can, build into the contract faster draw triggers, even if they are smaller draws, in order to use more of the customer’s cash for the project and lessen the use of your credit lines.
Smart money management needs to be used in good times and lean times. Use the slower market to your advantage and get your financial house in order.
In lean times, efficiency in all aspects of corporate governance is a must. Use the lean times to improve your business, advance your education and capture market share. Taking steps to improve yourself and your business during slower market cycles will give you a clear competitive advantage in the boom times.