The Contractor’s Six-Pack to Success

May 18, 2001
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Are you completely satisfied with the performance of your business lately?


Then you must be one of the nine out of 10 contractors scrambling just to survive this crazy economy. If so, these six tips on fine-tuning a business and turbocharging its performance are for you.

Business-building tip No. 1: Manage your cash flow.

Your business survives on cash; learn to manage it properly. Commit to implementing a system that plans your cash inflows and outflows, and force yourself to stop all silly and unnecessary spending.

Learn to treat each job like the mini profit center it is. Perform cash flow statements not only for the company, but also for every job that you’re doing.

Business-building tip No. 2: Increase your markup.

Want to increase your bottom line? Start here. Increase your markup 2%. If that sells, try another 2%.

That measly 2% will improve your bottom line more than you think, especially when you incorporate it with tip No. 3.

Business-building tip No. 3: Cut your overhead.

Take a hard look at your overhead. I can almost guarantee that it has gotten fat and ugly. Try cutting 2% today. Then commit to sitting down and unearthing ways to cut it more.

The compound effect of increasing your markup and decreasing your overhead will dramatically increase your bottom line.

Business-building tip No. 4: Increase your capital reserve.

You need money to make money. If you’re living draw to draw, you don’t have enough money behind you to survive. One little downtrend in your economy and you will find yourself bankrupt.

First, calculate how much money you should have in your capital reserve.

Next, check on the aging of your accounts receivable and calculate the average collection cycle (ACC). Interpolate this into months (not days) and multiply your capital requirements by your ACC factor. This is the minimum you should have access to in cash, line of credit, or a combination of the two.

Review these numbers on a monthly basis; as your ACC increases, you will need to adjust your capital reserve amount accordingly.

Business-building tip No. 5: Develop your uniqueness.

Separate yourself from your competitors. Imitation may be the sincerest form of flattery, but it doesn’t make your business stand out from the crowd.

Your uniqueness is that one “thing” that you bring to your clients that your competitors can’t or won’t. It could be your service, your product line, your ability to complete the work on time — whatever it is that makes you different. Capture your uniqueness and you capture the market.

Business-building tip No. 6: Learn to market like magic.

Marketing your business never ends. If you’ve ever sailed you know that any sailor worth their salt doesn’t stop sailing just because the wind has died down. Instead, s/he puts up more sail. Commit to a strategic marketing plan that will keep your name “sailing” in front of your current and potential customers.


Remember, most contractors don’t fail because of poor construction skills; they fail because of poor business skills. This six-pack of success tips can be a new beginning for you.

Start using these tips today and you will become the one contractor out of 10 who is truly enjoying the fruits of his or her efforts.

Sarasota, FL-based Goudreau speaks at conventions, conferences, and for corporate clients on business development. He can be reached at 941-377-1254; (website).

Publication date: 05/21/2001

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