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The Importance of Good Management

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Many builders go out of business after only a few years. They are overcome by the competition or their own weaknesses. The problem is that, while they may be excellent builders, they lack good business skills. They are very capable at installing materials, but they are not as good at establishing profitable contracts, and managing and performing the work required to fulfill those agreements. For long-term success, you must have expertise in carpentry and the types of construction your business offers.

Many builders go out of business after only a few years. They are overcome by the competition or their own weaknesses. The problem is that, while they may be excellent builders, they lack good business skills. They are very capable at installing materials, but they are not as good at establishing profitable contracts, and managing and performing the work required to fulfill those agreements. For long-term success, you must have expertise in carpentry and the types of construction your business offers. But you must also be a good project manager, contract manager, entrepreneur, marketer, logistics manager, decision-maker, information manager, financial manager, legal manager, and personnel manager. A construction contractor must have more diverse skills than those required by almost any other industry.

Since building construction is a high-risk industry, successful contractors must also be good risk managers. Some of these risks can and should be prevented. Others can be controlled. All must be recognized and managed. These same risks apply to large and small building and remodeling companies.

Managing means making a plan and creating a process for getting things done, gathering the needed resources, and then making sure it all happens as planned. Every contractor must be a manager. You have to know the plan and execute it efficiently. You must identify the potential problems and figure out a way to deal with them while still making a profit. You have to continually figure out ways to make jobs more profitable while satisfying each customer.

Just because a person is the head of a construction company does not always mean that he is completely qualified for that role. Often someone who was a competent tradesperson or estimator starts his own business or climbs to the top of a company and takes on a leadership position. In many cases this person has no business or financial training.

A construction company, large or small, requires business management capability. It is rare in this day and age for a company to succeed without sound business and financial management practices. So, the checklist for the head of the company is a simple one-liner: “Am I the man for this job?” If the answer is “no” or “maybe,” it is not too late to gather the basic knowledge that is required.

Along with management is the need for leadership. Effective leaders have vision. They are continually looking ahead. They ask, where are we going, and how are we going to get there? How can we get better? What markets should we pursue? Leaders don’t just pull together labor when they’re ready to start a job, but think ahead to upcoming labor shortages and ways to avoid the problem. Leadership involves making decisions like investing some of your profit in company growth, instead of buying a new boat or bigger house. Leadership involves staying informed about developments in the industry. Leadership is what separates continually successful companies from those that don’t reach their potential.

This article was adapted from Best Business Practices for Builders & Remodelers by Thomas Frisby. Click here to read an expanded excerpt.

by Thomas Frisby last update:Dec 21, 2009

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