Why Small Contractors Should Act Big
Are you taking the same steps big contractors take? Find out why creating processes, workflows, and structures like the behemoths pay off in the end.
Here at Bangert, Inc., we serve contractors from under $5 million in annual revenue to more than $500 million. That’s a big range for sure, and this post is for those of you at the smaller end of the spectrum.
Does Growth Fuel All Construction Companies?
I always make a presumption that all companies, regardless of size want to sustainably and profitably grow over time, I’m just an optimist that way. I’ve been around long enough to watch some of our clients achieve outstanding results, starting from scratch, and growing well past $100 million in annual revenue while some others soldier on at about the same revenue numbers for many years. There’s neither a right or wrong to either situation, and it’s up to you, the owner, to decide what you want your company to look like now and in the future.
Do You Want 10x Growth?
If you’re in the camp of “I’d like to see 10x growth” over a certain number of years, then this article is for you. You might ask, “What separates the companies that grow significantly from the ones that don’t?” Aside from the owner’s wishes, it comes down to one thing: systems; not just software systems, but also their methods of operation. It isn’t a situation where one comes before the other, both are important, and both can aid one another. Software alone does not constitute a system of operation, but proper manual processes without technology are just as hamstrung in today’s construction environment.
Act Like A Big Company
My advice, regardless of how large your company is, is to act like a big one. What do our larger customers have in place? That’s right, systems. There are defined processes for every part of the business, from business development to project closeout. These systems ensure a consistent outcome to projects and increase the odds of completing every project within your targeted range of profitability.
An Example System: Change Orders
Let’s take a look at one system: change orders. In many of the smaller companies I’ve worked with, changes to the plan get handled very informally. When the owner asks for something to be changed, the contractor takes a look, and they talk about what it would take to accomplish before the work proceeds. If they get lucky, everyone remembers and agrees to what they discussed, and the bill goes out and gets paid. All too often this doesn’t happen. Either the work doesn’t get billed, or the contractor’s and client’s memory of events don’t align – creating a billing dispute that not only takes time but also usually results in a reduction of the agreed price. The same thing can happen with submittals, RFI’s, contracts, and internal communications. The thought is, “I don’t have time to do these things.” I can’t disagree more – on so many levels.
The Lack Of Documentation Can Cripple You
Lack of documentation is a self-inflicted wound, and change orders aren’t the only culprit. A few years ago I had a small, one car garage demolished and rebuilt on my house. The contractor’s lack of documentation and systems made this little project a massive headache for both of us. In this case, it was a mix of communication snafus between him and me, but more critically: between him and his crew. Here’s a short list of the issues on this job:
- Main door framed in the wrong location
- Roof pitch at the wrong angle
- Siding material (unnecessarily special ordered) completely wrong
- Siding installed incorrectly
- Shingles installed incorrectly
… and believe it or not, that wasn’t all!
Think About Your Long-Term Success
It goes without saying, he didn’t win me as a long-term client. His lack of systems not only made this job unprofitable, but it also created an unhappy client that is not referenceable, something that is critically important to all our businesses. You might think this was just plain ole’ incompetence, but I would disagree. He was an experienced contractor that was growing and had new personnel on his crew. If he had systems in place and trained his crew on them, it’s likely that none – or certainly a lot fewer – of these issues would have come about. I asked him after the fact why he didn’t have better systems in place, his response: “I don’t have time, we’re too busy.” I’m sure you see the irony in that statement. The person-hours, labor and material costs for just re-framing the roof would have gone a long way in implementing and training on simple systems that would avoid these issues. The bottom line: He was operating in small contractor mode.
The Role of Technology
Interestingly – and not unsurprisingly – many of our larger, long-time and most successful clients have been early adopters of technology and implementers of systems. They have made consistent investments in software systems and the services required to have them operate at optimum productivity. They know the right software can help create, support, and make systems practical in their companies. You may think that this is purely a self-serving statement – after all, I’m in the construction software business – but here’s the thing: if our systems did not consistently provide value over their cost, we would not have been in business for 35 years.
What’s Stopping You From Implementing A System?
So, what keeps small to medium-sized contractors from creating systems and investing in software? That’s easy: the perceived lack of time and money. Neither of which is true. I argue that if there is time and capital to correct and pay for mistakes (that you can avoid with systems), there’s more than enough time and money to invest in systems up front and on an ongoing basis.
What Can You Do?
If you are an owner who wants to grow your company, you have to take this view: that the short-term pain of developing systems is well worth the years of long-term gain those systems deliver. When it comes to software, I see way too many owners thinking like small companies rather than taking the big company approach. They use Quickbooks, Sage 50, Excel, and similar generic software applications for far too long. If you’re a startup, it’s ok for a year, but once you get 2, 3, 5, ten years in, you are stunting your potential, creating huge inefficiencies, and incurring significant and easily overlooked costs by their continued use.
Don’t Let Cost Fool You
Do you think an $80 million revenue contractor runs Quickbooks? Not hardly. If it’s not good for them, why is it good for you? This is where the money perception (or misperception) comes in. The prevailing thought is that an $80 million contractor can afford construction-specific software systems, the idea being that good software is expensive and out of reach of smaller companies. First, that’s flatly untrue, and second, you can’t afford to delay investment if you want to reach your goals.
Is Construction Software Too Expensive?
This “too expensive” perception is a myth that needs a permanent debunking. The fact is that with modern cloud construction software you can easily afford to operate on the same platforms the big guys do. How? It’s simple: cloud software is scalable both up and down and doesn’t require any internal IT infrastructure. The bottom line is that your company could be operating on both construction specific financial management software (Acumatica) and integrated estimating software (ProEst) for less than the cost of hiring someone to answer your phones part-time. These products will support profitable systems and drive growth and efficiency in your operations – regardless of company size.
Find A Partner You Can Trust
Here at Bangert, Inc., we love nothing more than to see our customers grow and build their companies into what they envision. We’re here to help drive your growth and peace of mind. Spend a minute and get to know some of the products that I would recommend to accomplish your goals.
First, take a look at Acumatica’s scalable, cloud construction software. It can scale from $5 million to $500 million and is the most modern construction software on the market, by decades.
If your company has a significant service work order component, Sage 100 Contractor with Service Operations will gain you a considerable advantage.
Also, if you’re not running dedicated estimating software you need to, the two top choices are Sage Estimating and ProEst, ask us about them.
I’ll also recommend a book to you: “Traction: Get a Grip on Your Business” by Gino Wickman. I was introduced to this book by our very first construction customer, and I am confident that it will help you operate your business in a way that will allow for scalable, profitable growth.
I’d love to know your thoughts. Let me know how you plan to scale – or have successfully scaled – your company in the comments below. You can also connect with me on LinkedIn, where I’m most active and respond quickly!