Ted Garrison's August 2013 Report

Ted Garrison's August 2013 Report

Strategies to Increase Profitability

Traveling around the country a common complaint I hear from contractors is how crazy the competitive bid market is today. Contractors can’t control the marketplace; however, they can control their response to it. Regardless of the market conditions, contractors must focus on delivering high value. To do this they must be proactive, but unfortunately responding to the design-bid-build process is reactive.

One road builder client, despite having to bid most of his work, makes more than average profit margins, because he bids work that his competitors don’t know how to do. The high value he brings is his superior knowledge and skill. Another contractor was frustrated with conditions so he took the initiative to meet with his clients and ask how he could provide better value? He asked his clients what he could do for them that he wasn’t doing. With this information he adapted his services and in the process was able to increase his profit margin by four percent.

While every client is different and there is no silver bullet, what follows are eight strategies that you can use to take control of your marketplace, or at least improve it. The first three are simply common sense, but unfortunately too many contractors don’t take advantage of them.

Trust. While it seems at times that the only thing clients are concerned about is how low a price they can get, they are also frustrated with poor performance by contractors. Of course, a lot of that has to do with them taking ridiculously low prices. However, contractors that establish a reputation for trust; namely, doing what they say they will do and who also help the client make the right decisions; have an opportunity to breakthrough.

Fairness. Fairness is related to trust. Clients hate the games contractors play by bidding low then attempting to recover their costs with excessive change orders. Contractors that provide good value for their services can distinguish themselves.

Easy to deal with. Problems will occur. The question is how you deal with them when they occur. Do you provide leadership to solve the problems when they occur? Do you do what’s right and not what is expedient for you? An interesting statistic is that if you make a mistake and handle it to the client’s satisfaction, the client will be more loyal then if you never made a mistake.

The next five strategies offer contractors ways to differentiate their services from their competitors.

Expertise. Of course there are consumers that are always looking for a deal, but that’s not a prospective client for a high performing contractor. In contrast, intelligent consumers understand the value of working with high performing contractors that provide superior solutions for their problems and issues. However, it’s not enough to have experience, you need to prove to the client you possess the necessary expertise. This proof is referred to by Professor Dean Kashiwagi of Arizona State University as “dominant proof.” Dominant proof is evidence that when reviewed almost everyone will have the same conclusion. In the contractor’s situation he must have evidence that supports the soundness of his advice and the quality of his performance from previous projects.

Options. Contractors need to understand that they need to be able to provide options for clients. The one size fits all approach doesn’t work. Clients have different budgets and priorities. The value based contractor listens to the client’s requirements then uses his expertise to create an option that fits the client’s specific needs.

Flexibility. Options are related to flexibility. Options refer to the technical aspects of the solution, in other words it describes what you are providing. Flexibility refers to how it is delivered or the procedures. An example might be how you adapt your efforts to meet a client’s schedule and operational needs in an existing facility.

Peter Drucker wrote that every business needs two skills: marketing and innovation. When he referred to marketing he wasn’t talking about the contractor’s brochure or PowerPoint presentation. He was referring to market research.

Engagement. To truly understand the client’s needs the contractor must engage the client in a dialogue. Often client’s think they know what they want, but unfortunately what they think they need will not produce the desired results. Therefore, the value based contractor insures there is sufficient dialogue to uncover the results the client desires. The contractor can then use its expertise to provide the best solution.

Innovation or Creativity. Once a contractor understands a client’s true problem and the desired results the client wants, the contractor can use its creativity to develop an innovative solution based on its expertise and understanding of the situation.

The value based contractor understands the process is not about them, but it’s about delivering the best possible value to the client. This can only consistently occur when the contractor truly understands the client’s needs and delivers on those needs. Contractors that use these strategies on a consistent basis experience increased profitability.

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Ted Garrison, president of Garrison Associates, is a catalyst for change. As a consultant, author and speaker he provides breakthrough strategies for the construction industry by focusing on critical issues in leadership, project management, strategic thinking, strategic alliances and marketing. Contact Ted at 800-861-0874 or Growing@TedGarrison.com. Further information can be found at www.TedGarrison.com."