The Seven Habits of Highly Successful Contractors (Part One of Three)
What makes a successful contractor? The construction industry is a good barometer of the overall economy of our country. When the economy is good, construction is up and it is relatively easy to find work no matter what trade you are in. When the economy is bad, construction is down or at a near standstill and finding work can be difficult. We at Pantera noticed that there were some contractors who were not scraping by during economic downturns; instead, they were flourishing.
Thus, we got to thinking. What makes these guys so special? Anecdotally, it is easy to say that they were in the right place at the right time and, of course, they knew the right people. Let’s be honest, though, there is always more to it than that! There had to be a way to quantify the elements that enabled them to stand out and rise above the rest regardless of the economic climate. In order to pinpoint what exactly separated those at the top from those at the bottom, we developed a comprehensive survey and sent it out to a database of thousands of subcontractors.
Some of the results we received were expected. All of the high performers exhibited the obvious traits of quality workmanship, repute, and professionalism. The less obvious element common among the majority of high performers is what we refer to as, “below the surface.” Their internal processes, while not commonly thought of as primary necessities for the construction industry, were the overwhelming presence in the majority of high performers.
So, without further ado, Pantera presents the “Seven Elements of Successful Subcontractors.”
This was defined in one of two ways. The first as being in an area where there was work available in any of the trade categories. The second was defined as having the ability to broaden the scope of their offering or “reaching” to match up with opportunities that were most available to them.
We found that the specific contractors willing to reach out to new counties and consider doing work in segments other than their normal specialty (i.e. a commercial contractor going after a large residential development or a public works contractor giving the retail space a try) were rather successful. An electrical contractor shared a story about how he had bid a couple of retail jobs in the past and the feedback of the bid amount was ridiculously low each time, so he gave up on it. When work got extremely slow, he tried it again. This time around, he spoke with the estimator and explained that his experience had not been good in the past. This particular estimator took the time to tell him to give it a try and that he may be surprised at his profit. The estimator continued to tell him that these projects are done on such a compressed schedule that his costs are low due to the tight time frame and the organization that comes from the GC doing so many of these projects. The same electrical contractor ended up doing the job for what he considered to be “breakeven” at best. He was shocked to find that he made more money than he usually does on a similar job with a local contractor at a much higher price. We heard many stories like this from the contractors willing to reach a bit outside what they were used to. It pays to see all of the projects that are out for bid – not only in your immediate area but outside of your core scope as well. Subscribing to numerous project lead and construction news outlets is what facilitates this type of thinking.
This is defined as willing to make the market demand adjustments when times are tough and taking advantage of retaining key employees by doing so.
The most prosperous of the respondents spoke of their key employees as family. The number one objective was ensuring that the company had enough work to cover the overhead of key employees. Often times, contractors would take on a project that had very little profit but would guarantee that the overhead of his most important people was covered. Once that was taken care of, contractors would be more selective in their bids and the amount of the discount they were willing to offer in order to win a job. Another key element in regards to competitive pricing is relationship. The contractors had relationships with many General Contractors who would offer work if it could be done at a lower price than their competitors. We call this the “Last Look Offer.” If overhead was needed to be covered or the timing/location gave these contractors a particular advantage, then they would take the jobs knowing that as times got better or the season became busier they would have the opportunity for a profit. This area crosses over to numerous other areas of the 7 elements.