It really is decision time. Time to decide how you plan to grow your business as well as its value. Decisions need to be made about technology, tax planning and cash flow results. For many of you, the decision will be whether you are up to making the necessary decisions knowing that those decisions will take time and expertise to attain the results you are expecting.
If you are close to retirement, you may conclude that you do not have the time and money, nor the internal talent to manage a growth project that will keep you competitive and add to the value of your company. In that case, you need to adopt a program to clean up the operation to make it look good for potential buyers. I have seen way too many examples of contractors getting tired of the daily grind to the point that they just let the operation deteriorate, and they just walk away from the company, sell off their equipment and head south for the winter. I bet you have come across owners who have done this.
In either case, whether you decide to increase the value of your company via technology and productivity improvements and buying other operations that fit your customer base, or just want to improve what you have to ready it for sale, you have to start by adopting a marketing plan to get the ball rolling in your favor.
This is not rocket science. Many options out there are geared toward small contractors. They provide leads for new business as well as keep you in touch with current customers. For $300 to $400 per month you would be amazed at what you could do.
My son did this type of work with a system where he could see how many contacts were showing up on your doorstep, and he would give you a call if your sales were not moving up as a result. Do you know what he found out? He discovered (and already knew) that the calls and contacts were coming in, but the contractor was not answering the phone nor following up on other types of digital inquiries. Imagine that!
He would then provide contractors who did not have time to manage their leads the name of someone who worked from home and could answer your phone for you. You provide a little training so that they ask the right questions and get them to you for follow-up … and follow up with you if you don't.
This example leads me to Point 1 about business growth and company value.
Point 1: Do not try to manage this process on your own. Outsource all you can so that you only get involved when making decisions and providing follow-up. I am not suggesting that you hire a bunch of heavy hitters at the outset of this process, only a person or two who can assist with documenting and implementing the game plan.
On a side note, I know a gentleman who purchased a small contracting company from a buyer in walk-away mode. Guess what? He asked the seller to hang around for a year, implemented a marketing plan and doubled the volume in year one.
This brings me to Point 2.
Point 2: Buyers purchase cash flow and asset value. So, you must have a document explaining what you do, how you do it and how much you make doing it. It also helps you compare your results to industry metrics, which will provide insight as to what may be possible with upgrades in systems and marketing.
Again, it would be nice to have internal folks who could provide their data, but that means someone must instruct them as to what is required and when. But this process may also require a coach with knowledge of what buyers want to see and how your operation compares to industry standards.
In terms of asset values, you may need to obtain an equipment valuation to compare market value versus book value. If the market value is higher than book, the value just went up.
What brought me to this topic this month was a McKinsey article comparing the 2023 construction industry to 1930 when the Empire State Building was constructed. According to the article, things have not changed much. On the other hand, the industry is doing all it can to improve productivity, which means producing more with less. And if you think this will lead me to a statement about technology … you are correct.
Three events started my thinking this way.
- I sat through an advanced Excel class.
- I listened to a YouTube program about how to manage your iPhone.
- I had a friend who sells complicated equipment who had Chat GPT draft a sales letter to some new prospects.
After these three events, reality set in that told me that these types of actions, used properly, can improve my productivity immediately.
If you do not have someone who can manage your data using Excel, you will regret it. Again, if you do not, then find a person who can work with them.
During the iPhone presentation, the speaker instructed or asked SIRI to do about 15 different tasks, and they were taken care of instantly.
The sales letter was also quickly obtained. He reviewed it, made a couple minor changes and let it fly.
Talk about productivity improvement. These individual tasks probably took about 10% of the time to do the “old’ way.
Today’s comments are directed at contractors with 10 to 20 employees. Are you ready to embrace this technology? Do you think you can improve productivity using these types of tools? If you are not or do not believe you have the time to implement change, you may want to work on an exit plan so that you are prepared when the time is right.
And please watch the YouTube program about using the iPhone. You will never use paper and pens again.