What does a $100,000 business risk look like?

From my own experiences and stories I've been told

If you can nod your head "YES" to any of these HUGE money wasters, TAKE HEART. Builder Resources is developing systems to address each of these expensive issues, and offers them to you.

No real organization

Looks like: Employees cover tasks as needed, as best they can. No one in the organization specializes, and the owner thinks that's a good thing. The owner and all employees are always frustrated. Important tasks fall in the cracks. Items don't get ordered, subs don't get scheduled, job site quality falls apart. If more than one person is accountable for any one task, no one is accountable for that task. So the task responsibility falls right back on the owner, the backstop, the guy who can't get out of the office before eight at night.

Retrofits, special work, job site fixes = $100,000.

No market identity

Looks like: How is the company different from every other construction company? If the owner has failed to set the company apart as a specialist in something, the company is missing out on the opportunity to get involved in projects that fit the company's capabilities perfectly. The company doesn't stand for anything, so it stands for nothing. There is no statement -- "We are the best at .....".

Missing just two such opportunities per year could cost you $100,000 or more in operating profits.

Incomplete estimates with faulty pricing

Looks like: Estimates for work are based on hope. The company has not developed an accurate database and no one in the company tracks estimate-to-actual costs on a job. Therefore, profit, if any, is based on luck. Omitting an important item in a proposal can be very expensive. Having incorrect pricing for items on the estimate can add to those losses.

These omissions can add up to financial leakage of more than $100,000 per year.

Can't close the sale

Looks like: The sales process is all in the owner's head. There is no defined path for leading the customer from CONTACT-TO-CONTRACT. Even if the company has potential clients knocking on the door, unless the processes for leading them step-by-step from beginning to end are clearly documented and followed, the client never gets closed. The business has to learn how to capitalize on the enthusiasm of the prospect, and close the deal.

Lost Sales = $100,000

Customer runs rough-shod over the project

Looks like: There is elation when the contract is signed. Then the fear sets in. There are so many ways for a demanding client to hurt the company. If the basis for the proposal isn't clearly defined, the client can easily claim to have been confused about "budgets" and "allowances", about what's included or excluded. The company scrambles to finish jobs with the money left in the budget, trying desperately to keep the client happy, or at least out of court. Not controlling client expectations from the very beginning of a job can cost thousands of dollars per contract.

And can easily top $100,000 per year.

Subcontractors are playing "GOTCHA"

Looks like: Every construction company has experienced the pain of getting a quote from a subcontractor, and then realizing that a critical piece of work promised the client wasn't included, even though it was discussed with the sub. Confront the subcontractor, and he says, with a straight face, "That wasn't on my proposal", but he can "add it in for $XXXXXXX". You can't ask the customer for it...so you eat it.

Do that a few times on a few houses, and you can drop $100,000 pretty easily.

Subcontractors, not the Builder, are running the job site

Looks like: Incorrect materials are ordered and installed. Special orders are missed and have to be retro-fitted. Subcontractor conflicts affect scheduling. Pro-active production scheduling is non-existent. Quality inspections are not performed when needed, so expensive tear-outs and re-installs are necessary. Subs make their own schedules. Nothing is documented. Schedule falls apart so clients become unhappy and lose faith in the abilities of the company, fighting about extra costs, delay costs, costs... costs... costs for which they expect to be compensated.

Annual losses of $100,000 easy to attain.

Accounting, schmaccounting

Looks like: The builder can't manage what the builder doesn't understand. The accounting of the operations has no relevance to how the company is run because the builder doesn't understand how to use the numbers to make financial decisions. From failing to receive an operating loan when needed because the books are a mess; to not realizing the effects of a change in the profitability of the company's prime market segment; to paying too much in taxes --

not understanding company finances can easily cost the company $100,000.

If you want to know how to better handle your business in any of these scenarios, you want to be a part of the Business Risk Management program being offered by Builder Resources and Builder Academy this year.  You can access the available courses by clicking here or >>>

Preparing you to handle the risks of running a construction business:

That’s what Builder Resources focuses on.

You Build. We Biz.

...expresses our commitment to partner with you to protect your construction business.

Builder Resources can help set up those policies, processes and procedures you need to handle the risks of being a ProBuilder.

See other articles in this series...