What if I told you there was a “copy and paste” formula that any construction business can follow and be successful?
Seriously…. there is…
Before I started I AM Builders, I helped grow a Commercial Construction Company from a $0 to $7,000,000 per year company.
I initially started I AM Builders to be an estimating firm. But as time went on I realized there was a big problem in the construction industry…. Contractors know how to build, but no one teaches them how to grow a company.
Every entrepreneur wants to write a business plan. And yes, in most businesses you need a business plan to get financing, venture capital money, etc.
But construction is the only industry where you can start a business with zero financing become a million-dollar business almost overnight.
And guess what….. it doesn’t take a fancy business plan.
When I walked into Caroni, they were a drywall labor company and were first starting to get their first General Contractor jobs. Paolo and I didn’t know how to grow a construction business.
We started trying out different ways to get leads, estimating strategies, negotiations strategies….
We tried it all….
And after all was said and done, the secret to growing a construction business can be summarized in these three steps….. this is your business plan….
The Proven System
1. Develop a System to get a Ton of Potential Projects and Client Leads
2. Develop an Estimating Team That Can Bid Jobs Fast
3. Develop a Follow-Up System to Negotiate and Close Sales
4. Build Your Field Team and Perform an Outstanding Job on Every Single Project
I’m going to share with you the details of each step.
As a side a note: we specialize in estimating projects for busy contractors. If you ever need help estimating projects, we can prepare your entire estimate and bid for you and we can walk you through all strategies to help you close. Learn more about our estimating service for Contractors and Subcontractors.
Brainstorm Ideas to Build Company
This is the idea phase, which is most people’s favorite. It’s also the most dangerous phase in creating a successful construction business plan.
The issue is that people are really good at coming up with their own ideas but lack the drive to make it come to life. We have a solution to this issue later in this piece.
This phase is all about creating ideas and thinking about what to include in our blueprint to success.
Here are some questions to ask yourself:
- What is your reputation? What do you want it to be?
- How do you want to handle your bidding process? Look for estimating services or keep it in-house?
- How much time do you have for your construction company?
- Do you want to hire a marketing agency for your company? A lead generation service?
Answer all of these and make sure to go deep. Get to know what exactly it is that you want.
Next, it’s time to get some specific goals.
Make Your Goals Completely Clear
This is the first step.
Too many contractors are only caught up with their jobs and the busyness of their daily schedules that they never sit down and think, “what am I working toward?”
Get into the specifics. Have clear goals on what to achieve. Here are the questions you should be asking yourself, borrowed straight from our most popular blog post, Grow Your Construction Business in 3 Months.
- How much revenue do you want to make?
- What is your profit margin?
- Average project value?
- Average close rate?
Take a minute and answer all those questions. Check your company’s records if you have to. Once you have all of those answers it’s time for the next step in this goal-making process.
Get your target number of revenue and divide it by your profit margin and you’ll have your company’s target revenue. Take your company’s target revenue and divide it by the average project value and that’s how many projects you need to sell. Divide the number of projects to sell by the close rate and that’s how many you need to bid.
Here’s what that looks like:
In this example we estimated numbers based on if we were a GC with 10% profit margins that wanted to make $300k/Yr, your numbers are most likely going to be very different; regardless, if you’re unsure of the direction your company is headed, take 5 minutes out of your day and complete this exercise, it’ll bring a lot of clarity for you and your organization.
Because how much easier is it to have a goal of “1 project every 2 months” than to have a goal of “as many projects as I can”?
After you shed a light on the numbers of your goal, and you have some ideas to put to the test, it’s time to create a plan.
Create a Detailed Plan for Execution
We work with over 800 clients and after consulting with many of them about how to improve their construction company, we concluded that there are 5 steps to creating a detailed plan for your construction business.
Let’s get into each one.
1. Determine Your Lead Generation Strategy
How are you getting your leads? Are you getting as many as you want to be getting? Why aren’t you getting enough work? How do you want business to come in?
Before doing any work on the field, before estimating the job, before even getting the job, you need to capture the lead for the job.
That’s why it’s the first step in this list.
So the question is, how do you capture leads? Well, the first thing you should probably do is educate yourself deeply on this specific topic alone. Lucky for you, we have an article on how to get more jobs for you to dive into.
Next, you need to sign up for lead generation services like iSqft and Bluebook to consistently get the opportunity to bid on jobs. They both serve as the lead generation tool and the bidding tool as well, so it’s a 2-in-1 deal.
If you want more details on these lead gen services and a few other ones, check out this article.
After investing in these lead gen services you’ll have potential jobs coming in guaranteed, but there’s also another strategy you can take to get more leads.
It involves building a Select 12 Cluster (S12C). An S12C is essentially a list of 12 potential clients that you handpick and focus on that will provide you with a steady stream of business.
For example, if you’re a general contractor you would do a quick Google search for developers in your area,
Then you would pick 12 of them and either send out personalized emails, give them all a call, or visit their offices.
But you’re not just going to introduce yourself, remember that goal is to let them know you exist. Not any other contractor… but you. Stand out from other contractors, display authority and give value by helping them with their jobs, or by giving potential clients advice. This goes a long way in developing a relationship with everyone in your S12C.
The main idea with the S12C is to put your horse blinders on and laser focus on 12 ideal clients and develop relationships with them so they can start using you as the go-to when they need work with your trade.
So just to recap:
- Invest in lead generation services
- Set up and develop a S12C
After securing leads consistently and reliably, it’s time to have a specific plan to bid and estimate those jobs.
2. Establish Your Bidding and Estimating Process
The second step after getting leads is to have a system that bids and estimates those jobs for you at lightning speed so you can focus most of your time on selling the job.
There’s 3 options for you to consider:
- Hire an in-house estimator to work full-time.
- Hire an estimating service to handle each individual project.
- Do the whole thing yourself.
If you choose to do it yourself, it will prove to be really tough to expand your business when you’re so deep in it all day. Plus, imagine working for 1 and a half days straight to estimate a project, only to find out your potential client just used you for better pricing (they really do this). Successful contractors are ones that know how to build a team, how to lead them, and how to sell jobs to bring in business.
In other words, delegate as much as possible so you can focus on the thing that really brings in revenue, selling jobs.
So if you’re estimating jobs yourself as a one-man show, then delegate that task as soon as possible, otherwise, you won’t ever be able to effectively grow.
Let’s say you finally decide to hire an estimator to work in your office. The average salary of an estimator is $81,219/Yr, according to Indeed. Then after payroll taxes and insurance (26%), you’re looking at over $102,000 a year!
Which translates to about $8,500/Mn and $2125/Wk. If you want to bid 10 average-sized projects a month, that means you’re paying your estimator $850 per project!
To save money, time, and effort to manage an extra employee(s), the best option is to outsource your estimating to a reliable firm that can produce accurate pricing and only work on a per-project basis, so you only pay when there’s a project to bid, instead of having to pay an estimator full-time whether they’re hard at work or not.
|This is how the process works for our company.
First, submit your project plans. This can be either through email, or by submitting them on Dropbox.
Then, click “Choose from computer” and submit your plans. It should look like this.
After submitting your plans, you’ll receive a reply and a free quote for the project.
Then if you decide to move forward with the estimate, you’d just pay the invoice and have an entire estimate ready for you in 6-9 business days. If you have special circumstances and need it sooner, you’d call our office and we’d work out something that works best for our firm and your company.
3. Create a Sales Team that Closes
After you have leads coming in and you’re bidding those jobs at lightning speed without doing the tedious work, it’s time to dedicate most of your time to sell the job.
There are many strategies to closing jobs, but as a whole, it involves investing in the client.
Investing in a client means giving, being patient, and then asking when the time is right. You can give to the client through automatic follow-up or manual follow-up.
Automatic follow-up means using a Customer Relations Manager (CRM) to systematically contact specific people at specific times. It’s a software you can also use it to send mass emails with similar pitches to different clients in your area.
Manual follow-up involves a lot of calling and talking to people. This is on your own time, that’s why it’s called “manual” follow-up.
Before bidding a project, be sure to meet your potential client in person to:
- See if they’re someone you want to work with
- Get them to know who you are and what you bring to the table
If someone knows who you are, gets calls from you now and then where you genuinely help them out with any problems or ask how they’re doing…
Who do you think they’re most likely to pick for the job?
This is why it’s critical for contractors to have a S12C where they focus on 12 specific clients and get 80% of their work from them.
It’s ideal for the owner of the construction company to be the main salesperson but if there’s just not enough time in the day (we understand), then hire 1-2 Account Managers who’s entire job consists of talking to potential clients, following up with previous ones, and being the main form of communication between your company and the outside.
4. Set Up Project Management Systems
At this point you’ll have leads pouring in, you’ll be estimating those jobs on autopilot, and you’ll be selling the projects. It’s only a matter of time before you suddenly have a couple projects to work on, and the hard work really begins.
As stated above, the owner of a construction company, or any company for that matter, should focus on leading teams and selling. That’s it. Being on the job site all day stressing and pulling your hair out is not going to bring in new business. Unless you truly love being on the field, you need to delegate everything to seasoned professionals.
But before you go running around and delegating everything, you need to set up a system to manage all your projects so your contracting business can be a coordinated, smooth-oiled machine that pumps out only quality work.
You’re going to need 3-4 software to help you manage your fieldwork:
Bid Management Software
This is what you’re going to use to bid out jobs and keep track of your bids. It’s quick, it’s easy, and it’s a whole lot better than handing people estimates all day and having to remember due dates off the top of your head. If you want to check out some bidding software go take a look at SmartBid and Quick Bid.
Project Management Software
This is software for people on the field to be in constant communication with one another. One of the first steps in professionalizing a construction company is to get a project management software that helps all the workers, supervisors, project managers, and superintendents all be on the same page all the time. Some great P.M.S are CoConstruct, Buildertrend, and Procore.
It always helps to have all your finances done automatically and as hands-off as possible. Let an accounting software manage all your finances so you can focus most of your effort on bringing in revenue by selling jobs. QuickBooks is the cream of the crop here but Zipbooks and Stripe are also great alternatives.
Estimating Software (optional)
This is optional because if you outsource your estimating to qualified estimating firms, then spending money on estimating software won’t be necessary. But if you want to hire estimators in-house or want to do a mix of in-house and out-house estimating, then you’re without a doubt going to need a takeoff and estimating software that can help you be as accurate and as quick as possible. We use Planswift in our office but Bluebeam is also great as well.
You can find software packages that include all-in-one packages like Procore, Corecon, or Buildertrend that include everything you need to professionalize your construction business. The pricing will reflect that, but it’s a necessary investment for your construction company.
5. Found a Field Operations Team
Now that you have project management systems set up, it’s time to create a field operations team. Keep in mind this is only for people in the field, not in the office.
Every construction company is different, some may choose to subcontract work instead of hiring workers and training them, and then others may lease workers from other companies.
So first understand how you want your company to operate, then the next step is to understand the roles of a steamrolling field operations team and how to find the right people for the job.
This is the main field operations manager. He/she is the one overseeing all the projects a company is currently working on. A general superintendent needs to be comfortable under pressure, an effective leader that gets people to work, and able to raise their voice from time to time.
There are the overseers of single projects. They put all their attention on a single job to make sure it runs well. They need to have a deep understanding of construction, their workers, and be on top of their game even when under pressure.
This is the next subdivision in the field. Larger jobs typically get broken up into multiple sections and while they’re all being managed by the project superintendent, the foreman is the one managing specific sections or trades.
Skilled laborers are the true engine behind the construction job. These are the people on the field doing the actual work. Hiring workers is relatively simple but be sure not to fall in the trap of hiring cheaper labor to save money because the reality is all the mistakes they make end up costing more than if you would have hired workers a bit more expensive.
Hire people, train them, and let them train other workers.
We’re not going to have a project manager on the list because they’re not typically on the field but a good project manager will be in the field often to help the superintendent run the job.
That’s how you set up a strategical business plan that set’s you up for success.
Construction is a very cutthroat industry, but a great plan on how you’re going to run your business and even better execution on that plan can make your life a lot easier.
We hope you enjoyed this piece and got some real value from it. Feel free to comment below your $0.02.