I considered four topics for this month’s column, but after taking a closer look, I decided that every one of them is important to every contractor out there no matter what size they are or what product or service they provide. If your company is doing things regarding these four topics, you probably have a competitive advantage — unless, of course, your major competitors are adapting to available changes in the marketplace faster than you are.
The four topics are:
- Decisions about adding equipment during your busy season
- Best practices for tracking equipment utilization and location
- Managing risks in the age of technology
- Finding ways to attract and retain quality workers without going broke
We could spend a couple of days reviewing these topics, and I am positive most of you find them important. Yet, even if you believe they would make you more competitive, they are worthless unless you take steps to deal with them sooner rather than later.
Adapt or Risk Obsolescence
There is no doubt that every company out there must adapt or become obsolete. You come across this every time you read an industry publication or a business journal. Disruption is taking place at a faster and faster pace.
I started thinking about the “adapt or become obsolete” issue while listening to a radio show where the host asked: “Of the Top 500 companies in 1955, how many are left today?” The answer is 10%; only 50 of the Top 500 remain in business today.
Think about that. These were major companies with unlimited resources, qualified employees and a meaningful customer list — and they went out of business or had their products/services replaced by a cheaper, more efficient venue.
How can this happen when these companies had all that horsepower to help them adapt to the changes in their markets? I can make a guess: probably too much overhead and fixed costs to cover while trying to both operate the current business and at the same time transition into new business plans. My second guess would be the size of the organizations made them too slow to adapt before they ran out of money.
Where does this leave contractors who are part of this paradigm shift that is impacting all industries? Right in the middle of it, just like everybody else. In other words, if you are doing things the same way you were 10 years ago, you need to take steps now to adapt or find yourself on the outside looking in.
Tips to Help You Adapt
Adapting is not easy and can be quite costly. Obviously, larger well-capitalized contractors can prepare a plan to increase or maintain their competitive advantage. Larger contractors can also make these changes right the first time because they can hire the technical help they need to implement the changes and educate employees.
Smaller contractors fall into a high-risk category when it comes to making these types of changes. If they do not implement and train correctly, the result could be wasted front-end cost, as well as procedures being less efficient than they were before the changes were made.
Let’s think about how smaller contractors should handle this “adapt or become obsolete” issue. First, consider the two main challenges that caused the demise of many of the 1955 Top 500. They got too big and slow to adapt. So, you start your adapt process by making your company both nimble and quick when it comes to making changes. More specifically, I would:
- Clean up the balance sheet and long-term obligations: What this really says is rent more and sell off what you can readily rent. This also applies to long-term leases. Renting removes a lot of pain and transfers risk to a company that is geared to both own and maintain equipment. Cleaning up the balance sheet and debt obligations frees up cash and borrowing power should you need it to finance technology improvements.
- Select technology that can tell you what you’re doing on every job every day: You cannot wait until next month or when the job is finalized to figure out if you made money or not. You need operating data, as well as maintenance information to keep downtime to a minimum. I cannot emphasize enough the need for two or three twenty-somethings familiar with computers, the Internet and apps. You will be amazed at what they can turn out compared to those pushing paper around, and how comfortable they are with learning a new system and passing on that knowledge to us “dinosaurs.”
- Consult with peers regarding other forms of technology: I have mentioned performance groups before, and they are needed now more than ever. Also attend industry meetings, Association of Equipment Management Professional (AEMP) events, etc., and consider one of the George Hedley Boot Camps. You not only learn, but can meet owners of similar companies you can communicate with going forward. What better way to investigate new technology or systems for your business? But to get the most out of these programs, the CEO of your company must attend and decide what to implement.
- Prepare incentive plans you can manage to retain and attract qualified help: If you cut costs, free up cash flow, find technology to help manage business on a daily basis and get current industry data by attending peer group meetings, and then use this information to incentivize your employees, you are well on your way to being in the top 25% of those contractors with a competitive advantage.
Garry Bartecki is the managing member of GB Financial Services LLP and a consultant to the Associated Equipment Distributors. He can be reached at (708) 347-9109 or [email protected]. You can also find more of Garry's columns here.