Built to Build: Blog
STOP GUESSING AT YOUR PRICE: HOW TO GROW A PROFITABLE CONSTRUCTION BUSINESS
MOST CONTRACTORS DON’T UNDERSTAND THE BUSINESS SIDE OF THEIR CONSTRUCTION BUSINESS
Most builders start construction businesses for two reasons: They love to build things and they want freedom.
Maybe you want the freedom to make your own schedule, or the freedom to produce your own high-quality projects. And let’s not forget about financial freedom.
You started your construction business to make your bank account grow with a simple formula for success: Be the best builder with the best clients building the best homes, and the money and freedom will follow.
But for many builders, there’s a problem: lack of confidence when it comes to the business side of the construction business.
This lack of confidence can lead to lost profits, falling behind schedule, working for the wrong clients and cash-flow problems.
(Listen to the entire podcast with Logan Shinholser of Contractor Growth Network.)
YOU ARE STUCK IN THE CRAFTSMAN CYCLE®
Lack of confidence will get you trapped in The Craftsman Cycle® – “the seemingly never-ending loop of urgent tasks and responsibilities that keep contractors from gaining traction toward their important goals.”
In my book, Profit First for Contractors, I describe what life looks and feels like for most construction business owners who don’t realize they are trapped in this cycle.
Here are the four phases of The Craftsman Cycle® in a nutshell:
Price Work: You guess at what you should charge.
Get Work: You waste time with clients who never intend to pay you what you’re worth.
Produce Work: You start spending money on the project and realize your guesses were wrong.
Find Work: You get desperate because money is tight and you’re running out of time.
And the cycle repeats…
If you don’t know how the math of your construction business works, then you will get sucked into The Craftsman Cycle®.
Growing your top line revenue won’t solve the problem. In fact, growing what you’re doing now will make things worse.
THE PROBLEM WITH GROWTH
You do great work, but you’re guessing at what your price should be.
This guessing means you’re underpriced.
When you do great work for a low price, you get a lot of work.
A lot of work feels like growth, but this type of growth will keep you trapped as an unpaid employee in a profitless business.
Getting more, unprofitable work will never lead to purposeful, profitable growth.
Because after you get the work you have to produce the work. This is when money starts flying out the door.
Producing work takes time and costs you money. If you run out of either of these before the end of the current project, not only will you have to delay the next project, but also you will have to use the money from the current project to pay for the current one.
It’s called “Robbing Peter to Pay Paul.”
So, you get desperate and do the only thing you can to keep cash coming in…
You go find MORE work.
But because your time is gone, your stress level is high, and you have slept in weeks, you guess your way through a new proposal and send it out the door.
Price work – Get work – Produce Work – Find work: this is a recipe for disaster.
YOUR 4-STEP PLAN TO BREAK THE CRAFTSMAN CYCLE®
Step 1 – Calculate Your Profit
Many construction business owners don’t pay themselves a regular salary. They don’t have enough money to pay their taxes on time, and they don’t make a profit.
But the solution to your profit is just math.
The math of your business won’t change. Everything else will, but math doesn’t change.
The math of your construction business is represented by your Profit and Loss Statement.
Step 2 – Say “No” More Often
When you apply the math of your construction business to your proposals, then you will have confidence in your numbers.
You’ll know when to walk away from customers who aren’t willing to pay you what you’re worth.
“No” can be one of the most profitable words in your construction business.
When you say “No” to unprofitable work, you are saying “Yes” to the opportunity to improve your business.
Saying “No” also gives you your time back so you can focus on your business instead of reacting to the day-to-day-work.
Step 3 – Create A Plan For Your Cash
The Profit First for Contractors (PFC) cash management system will transform your construction business from a cash-eating monster into a money-making machine.
Even if your books are a mess, this system is guaranteed to make you permanently profitable.
And the best part is, you don’t even have to crunch any numbers to get started.
Then enroll in this free training session: How To Master Your Finances.
Follow the PFC 4-5-3 Framework, and not only will you get a cash flow plan for the next year and beyond…
You’ll also become permanently profitable.
Step 4 – Sell Value, Not Price
No one buys your product or service.
People buy your marketing.
When you start saying no to the wrong clients and make space for the right clients, you’ll build a good reputation.
Put testimonials on your website, in your social media, in your email campaigns.
Show people why you’re the best option out there.
You aren’t selling prospects on your price. You’re selling your value.
GET THE STEP-BY-STEP SYSTEMS TO BREAK OUT OF THE CRAFTSMAN CYCLE
You can create a business that works for you instead of the other way around. But you must understand the business side of your business.
That’s why I created the Built to Build Academy®.
The Built to Build Academy® creates confident construction business owners through on demand business training and coaching programs so you can make more money, stop worrying, and get your life back.
If you want to break out of The Craftsman Cycle® and build a solid foundation of profitability for your construction business, then join the waitlist for the next cohort in the Built to Build Academy®.
When you join the waitlist, I’ll send you a free exercise from the Effective Time Management Program.
It’ll blow your mind.
You’re going to struggle until you have these systems in place.