Practically every owner of a construction company wants to rip their hair out from time to time.
And I get it. The industry is a tough one to be in.
It’s tough because most contractors are so busy working in the business they neglect the one thing that matters most in business…
As everyone who’s read a business book will tell you, revenue is the oxygen to any business. Without it coming in steadily and predictably, a company will eventually die out.
That’s why I created this 3-month calendar that details exactly what contractors need to do to grow their business the right way. And it’s all here for you, completely free of charge. I hope you get a ton of value from this piece, and without further ado…
Let’s get into it.
Here’s the Schedule
To start off, let’s get an overview on the entire strategy we’re going to apply to our construction business.
The first month of our process is going to involve a lot of “foundation building.”
It’s here we’re going to create our lead generation and sales process, and then begin to make it as revenue-producing and as optimized as possible.
Then we’re going to delegate what needs to be delegated (more on this later).
Month 2 is about fine-tuning our sales process. We’re going to go all-in on following up with potential clients and building relationships.
At the same time, the estimating and bidding system in your company will get finalized and automated.
The third month is mainly going to revolve around client communication and having you become the company’s best salesperson.
Having the project management, estimating, and lead generation all handled to the best of their ability, your biggest duty as the owner of a construction company is to be the Head of the Sales Department.
Just like the overview above says, this month is all about building a foundation to our overall sales process.
We’re going to establish our goals and create a Select 12 Cluster (S12C) of potential clients.
Set up Short- and Long-Term Goals
Most people who start any company in general don’t have clear goals in mind that they plan to reach.
Before we dive in to how to grow a construction business, let’s go through some questions for you to really think about.
- How much revenue to you want to make?
- What is your profit margin? 10, 20%?
- What is your average project value?
- What is your average close rate? What do you want it to be?
After answering these questions, you should have a good sense on where you want your company to be. Now, let’s see what exactly you need to do to get there.
- Determine how much revenue you want.
Let’s say I want to make $100k in profit every year.
- Divide revenue by your profit margin and that will give you your target revenue.
The average profit margin for GCs is 10%, and for Subs it’s around 20%. So if my goal is $100k a year, dividing that by 10% or 20% would give me $1M and $500k, respectively. That’s how much money my company needs to generate.
- Divide target revenue by average project value and that will give you how many projects you need to sell.
Just for the sake of simplicity, let’s say my average project is worth $200k and I’m a GC. The number of projects I need to sell is $1M divided by $200k which is 5. I need to sell 5 projects this year to hit my goals.
- Divide the # of projects by your close rate and that’s your “Target Volume of Bids”.
So, to see how many projects we need to bid, let’s divide our target number of projects to sell (in this case, 5), and divide it by our close rate. If my close rate is 15% that means I need to submit around 34 bids to reach my goal.
Target Salary: $100k/yr
Target Company Revenue: $1M
How Many Projects to Sell: 5 projects
How Many Projects to Bid: 34 bids
By going over this for you and your company, it suddenly becomes a lot clearer what needs to be done in your organization.
Once we know how many projects we need to sell, let’s start getting invited to bid on projects.
Make a List and Start Visiting Potential Clients
Right off the bat, exposure is key. People need to see you, meet you, shake your hand.
To start off, get a cluster of 12 potential clients to make those your focus. These are going to be your main clients that you’re going to get work steadily and predictably from.
The goal is to visit hundreds of people over time, but if you focus on a select few (the best ones), you’ll see results much faster.
To start filling up your list, I recommend reaching out to 5 clients per week, preferably every Thursday or Friday morning. If you successfully meet 5 clients per week, that’s 20 clients per month. After meeting everyone, contact the people you like the most and ask to be put on their bid list.
For more info on how to find people to visit, check out our visiting method.
Remember that the goal when you email, call, text, or visit potential clients is to display authority and give value. This gives you a better chance to successfully be added to bid lists and also be remembered.
IMPORTANT: Since it’s important to like who you work with, be selective about who you want to include in your S12C, if you can’t fill it up through visiting clients, don’t worry because we’re also going to use lead generation services to get more potential clients.
Once you have your S12C, create a touch-point once per week with everyone through an email, phone call, text, or a visit.
By keeping connected with people who’s bid list you’re on (but not annoying them with emails every day), you’re showing that you’re a reliable contractor to work with.
When you do this for long enough, you begin to create a reputation among potential clients in your area that eventually leads to getting invited to projects.
After doing all this, you can expect to get invited to 5 projects by the end of the first month (from people you reach out to).
That’s 1 way to get more projects, here’s the other way that’s going to allow you to get a steady stream of projects to bid on.
Lead Generation Services
Investing in a lead generation service is non-negotiable if you want to grow a construction company.
iSqft is $75 – $150/month and The BlueBook is $150 – $800/month.
Next, reach out to 10 new potential clients per week through email, then set up a meeting for the people interested in your services to determine if they should be part of your S12C.
Try to batch this into 1-2 sessions if possible so you can focus more on the company and be in prospecting mode most of the time.
This is a powerful way of getting your S12C list finalized with both leads that came in through lead gen sites and leads that you manually searched for and visited.
If you want to bid for them, add them to your estimating queue (which we’re going to professionalize soon).
This month is all about building up the relationships with people in our S12C, and also managing the list to make sure we always have an inner circle of clients that know, like, and trust us (and that we feel the same way about them).
Here we’ll also create our estimating machine that will be used to pump out bids quickly and accurately so we can start winning jobs.
Fine-Tune the S12C List
By now you should have a solid list of contractors who know you well and are inviting you to bid on projects. Now the priority is to fill those relationships up to their peak capacity, so you can become the go-to for every single company on your list.
We’re going to do this by giving them value. Always remember that when it comes to business:
The key to building up any business relationship is to give value.
At least once a week, get every contractor in your S12C list and call them one-by-one asking how they’re doing and seeing if you can help them with anything they’re struggling with. You may not notice it, but by doing that you’re providing value and positioning yourself as an authority they can trust.
Make sure to email, call, or visit everyone in your S12C periodically to always stay in front of them and to further your mutual partnership.
If You’re Ambitious (optional)
If getting a steady stream of projects from a group of core clients to your business isn’t enough for you, then feel free to get another list of potential clients from one of the lead generation services you’re paying for and calling them one-by-one to ask to get on their bid list.
Cold-calling people like this may have a lower success rate, but it’s a direct way of getting the opportunity to receive more bid invitations.
Something else you can do is increase the number of contractors in your S12C, just keep in mind that it does take time to create and maintain positive partnerships with this core group of people. So if you’re going to scale the size of your S12C make sure you’re equipped to handle the extra work.
By the end of Month 2, you’ll be on more bid lists, so you can expect to get around 15 projects to bid. Anything more is a great sign you’re doing something right.
So we’ve spent the bulk of our time so far getting our lead generation and our sales process right, but now it’s time to make the most of our bidding process.
Let’s organize that.
Set up your Estimating Machine
To get straight to the point with you, if you have an estimating department, make it a goal to overload them with bids.
The average closing rate for most people is 10%, so if you’re currently working on 10 bids you can expect to only win 1 of them.
I don’t know about you, but that’s a lot of work (and payroll) to pay for such a small chance to get work. Lucky for you, you’re about to see how we have clients closing 30-50% of their jobs.
How? By focusing on their sales/marketing and delegating literally everything else in their company to people qualified to handle it.
Starting with the estimating and bidding process in your company. You need to create a machine that pumps out estimates for you so you can focus most of your time on selling the job without sitting at a desk measuring walls all day.
If you’re searching for someone to outsource it too, we’re a highly-rated estimating firm that’s estimated over $800M worth of projects for over 850 happy construction companies around the US. We provide free construction consulting, a complete budget for your project that’s easily modified as needed, and pricing that’s based on your own zip code, so it’s as accurate as possible.
Outsourcing also makes sense in that it’s cheaper than having an in-house estimator. Now, don’t get me wrong, having an estimator in-house that spends all his time on your construction business has its advantages, but it’s much more expensive.
The average estimator in the US makes $66,439/year, which is $5536 monthly, and $1384 a week of payroll, that you’re paying whether there is a project being worked on or not.
Compare that to outsourcing your estimating to an estimating company, where an average project could cost around $300-$600. Remember, that’s per project so if you want to bid for 5 projects a month it would cost about $1500 – $3000. So by outsourcing your estimating you can end up saving thousands of dollars in the long run on your estimating machine.
Not to mention all the time you save that can be better spent meeting with potential clients, visiting project sites to make sure everything is running smoothly, and being the CEO of a real construction business.
So we’re now at Month 3 of our construction business growth plan, and it’s time to become the main salesperson and the face of our construction company.
And to also set up a project management team that can dominate your local market.
Set up a Project Management and Supervision Team
At this point we have our lead generation and sales process set up and we’re reaching out to our S12C every day, and we also have created an estimating machine by outsourcing it that allows us to pump out bids at scale and focus on the selling of those projects.
All that’s left is to tackle our team on the field. Our project management is the final piece of the puzzle.
Remember that the ultimate goal is to build up a team to manage the project and supervise the field activities. The making of a winning CEO is not that they can do the work the best, but that they can create and manage a team that can do the work the best.
Here’s a list of the people needed to have a superstar project management and supervision team:
- Project Manager: This is the person in the office who handles all the change orders, RFI’s, and all other office work. From my experience, a good project manager is someone who can talk to architects calmly, and then switch it up to bark orders at workers on the field. Get someone who can do both.
- Superintendent: This is the guy on the field making it happen. Look for someone who’s very knowledgeable about construction and knows how to lead people who are tough to manage.
- Administrative Manager: This is the go-to for bookkeeping, accounting, payments, and miscellaneous paperwork.
- Purchaser (optional): Mainly for bigger companies. Buys materials and submits purchase orders to suppliers. Look for someone very responsible and attentive to the needs of the company.
If you’re a bigger company, then consider branching off the roles of those positions into separate jobs, but for the average construction business that’s all you need to have a project management team that makes you proud.
JUST IN CASE: If you’re a smaller company and you don’t have the funds to hire project managers and superintendents, you may have to handle most of the project management yourself. But try to at least hire an assistant that you can develop into a project manager for your company.
Get Some Project Management Software
In terms of project management, you’re going to need software to fully modernize your business, and for that, I personally recommend Procore or Corecon.
Procore is one of the more popular construction software out there, it allows everyone on the job site to be in communication with one another, set up a schedule, and manage financials. It’s a tool that lets people in charge (you) organize the entire project. It starts at $375/month.
Corecon is also a great software that handles lead tracking and estimating, project management, and job costing. It starts at $60/month.
There are much different construction software out there, but to help you out I narrowed it down to the 2 best ones to choose from.
You can do your billings, contracts, change orders, RFIs, and more using these programs so in order to let your project management team be as efficient as possible on the jobsite, you must use these in your organization.
Train and Equip your Team
After getting the project management software for your team, now it’s time to train everyone.
If you have money to play with, strive to hire people that are better than you at the specific role they’re looking to fill. All that’s needed for them is adjustment and refinement into your organization.
If you’re early in your process, then I recommend hiring someone cheaper, and younger, and training them up to become who you need them to be. This costs time, money, and patience but if done right you can have a solid team that knows, likes, and trusts you 2x as much as hiring an expensive pro outright.
You can read as many books on business management as you want, but I’ll give you the 5 core principles to follow on how to treat your team:
- Pay People Based on the Value They Bring
Not everyone is worth the same in the business world. If someone brings a lot of value to your construction business and is killing it, don’t shy away from giving them raises. Be a company where helping the business succeed is rewarded. On the contrary, if someone isn’t producing and there’s little hope of a turn-around, it’s best to just remove them from your team.
- Be as Patient as Possible
Let’s be real, everyone messes up. Especially if you’re not a hyper-experienced construction professional. Yelling at people on the jobsite can be necessary sometimes, especially when it’s about something dangerous, but when it comes to the people in the office? Keep your inside voice.
- Genuinely Care About How They’re Doing (keyword: genuinely)
This is the first step to creating a positive culture in your business. Just by caring about your employees you instantly make your company a much better place to work. Simple.
- Keep an Eye Out for Talent
When you’re on the job site, be sure to occasionally identify potential supervisors from your crews and start training them up. You’d be surprised how many hidden gems there are in working crews.
- Balance of Kindness, and Authority
This is very basic, be as kind and respectful as possible, but don’t be a pushover.
Don’t Stop Following Up
Always keep in touch with your S12C, because it’s through them you’ll be getting the bulk of your bid invitations.
By the third month you should have solid relationships with your S12C so all that’s left is to continue to reach out to them as you please and do the best possible job you can on the field.
By the end of month 3, you should have at least 15 bid invites. That number will grow in the following months.
Remember to consistently add potential clients to your S12C lists. Having S20C or S30C lists will make you a real force to be reckoned with in your local market.
That concludes this over-sized construction business guide.
I hope this piece truly helped you realize what you have to do with your construction business.
Remember that if you need any estimating done for all the projects you’re going to receive; I AM Builders is here to help!
Now what are you waiting for? Go execute and make it happen.