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Small- to medium-sized contracting businesses fail at a faster rate than larger firms; however, they are in control of their future.

The issues plaguing small business can, for the most part, be avoided so that the business and profits grow from the start. But it requires overcoming some significant internal challenges first.

Eight Ways to Fail

  1.  FAIL to implement business systems from the outset.

The use of systems is possibly the largest difference between contractors that flourish and those that fail. Business systems are the documented procedures and processes that enable companies to run in an efficient manner without constant attention. Systems include accounting, estimating, scheduling, ordering, onboarding, customer service and more.

Systems should be in place from the beginning to:

  • provide consistency and efficiency;
  • free up staff to spend time on more valuable things; and
  • enable the business to scale.

The consistency, efficiency and free time provided by systems are what facilitates scalability. Implementing proper systems from the beginning sets the foundation upon which the business can grow. When systems are in place, the business owner can focus on big picture strategy.

  1. FAIL to price services appropriately.

If contractors don’t understand what it truly costs to run a business, they will do a poor job of estimating and employ haphazard methods for scheduling. A common mistake made by new contractors is to simply apply the same mark-up onto every project, assuming it will bring in an even level of profits.

Keep track of the cost of systems, processes, overhead and other expenses for each project and apply that knowledge to future proposals. Superior project management is imperative: Take note of average change orders, schedule disruptors and backlogs (i.e., every detail that affects cost).

  1. FAIL to break free from 'I-can-do-it-all' syndrome.

Contractors love the work and they’re good at it, but they often find it difficult to make the transition from contractor to business owner. Instead of working on the business, owners end up working in the business.

When small business owners are running a company, making sure all systems are operating smoothly, strategizing and staying on the front lines doing the work, it results in a fast pass to burn out and a tendency to let things fall through the cracks. Shawn McCadden of Remodel My Biz found that when residential business owners added up the hours worked between running the business and working in it, most “admit they earn less per hour than most of their employees.” Contractors need to see themselves as business owners and lead, direct and delegate.

4. FAIL to spend time building a well-structured business plan.

Following leads and jumping into business to start the revenue stream is important, but shouldn’t trump the time required to build a forward-looking, well-structured business plan, which should cover the following:

  • Mission: Why start this business? Don’t lose sight of the mission.
  • Target market: Who will the business serve? This will help structure marketing and price services.
  • Finances: What are financial goals? What metrics need to be in place to determine success?
  • Marketing: How will the business be marketed and positioned for growth? Advertising? Referrals? Pay for leads? Think big picture.
  • Operations: How will legal functions take place? How will hiring and payroll run? What will enable the sales team to do their job efficiently and effectively?
  • Growth: What are company goals from the start and how will all of the above help them be reached?
Business plans should be considered working documents. Review on a regular basis and expect revisions. Business owners with no plan in place have nothing to turn to when things get off track.

  1. FAIL to differentiate the business from the competition.

Consider the competitive edge, and go after it. Keep it simple and do it extremely well. It could be a service with a small twist; customer support far superior to competitors’; on-the-spot, professional quoting. When providing the same core services as competitors, the lack of a competitive edge can easily make the business invisible in the eyes of consumers, leading the business to compete solely on price.

  1. FAIL to capitalize on flexibility.

A firm made up of 100 employees is not as nimble as a company with 15 employees. Consider flexibility as it applies to services, marketing and systems. If something isn’t working, revise and try again.

  1. FAIL to prioritize the customer experience.

Winning a bid is much more than just that. From the initial touch point with the customer to the very last detail, contractors that don’t consider the customer experience fail to impress. How is initial contact made? How timely and professional are proposals? Are customers kept in contact during the actual project process? How are invoices and bills handled? How is follow-up handled?

It’s imperative that business owners step into the shoes of the customer and walk through the process to understand how the customer can best experience it (and that all employees do as well). General customer service is no longer a differentiator when it comes to customer experience; good customer service is simply expected.

Successful contractors that want to capitalize on repeat customers and referrals know that going above and beyond to make the client’s experience absolutely spectacular will end up directly impacting future revenues and profits.

  1. FAIL to adapt to the labor shortage.

In a small- to medium-sized business, having everyone on board is incredibly important to serving a business’ growth. Inexperienced or unmotivated employees can cause even the best business owners to fail. With today’s severe labor shortage, it’s up to contractors to seek employment from a different viewpoint: hiring for attitude, not for skill.

Seek out the right personality and attitude, then put in the time to train for skill. With proper systems in place, onboarding and training employees shouldn’t require an inordinate amount of time on the business owner’s part, and can enable a workplace of likeminded, motivated employees who will help the business grow and succeed.

Three Key Priorities for Avoiding Epic Failure

  1. Put Solid Systems in Place

Systems provide consistency and efficiency and free up skilled staff to spend more time on the things that actually result in profit, such as sales. Solid systems understood throughout the business free top management up to focus on big picture items and facilitate growth in the long run and keep the business running smoothly.

  1. Measure the True Cost of Doing Business and Price Accordingly

Use data and experience to make smarter estimates and turn larger profits. Don’t forget to factor in overhead.

  1. Focus On Being a Business Owner First

Contractors that start their own businesses but love the hands-on work might consider handing over the management reins to someone who does enjoy planning, strategizing, hiring and focusing on the customer experience and overall direction of the business.


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