Don’t Let the Easy Route Hold You Captive
Thinking small and putting all your eggs into one basket in business is shortsighted.
Being a business owner is a challenge. If it wasn’t, everyone would do it. Stress and time constraints can often lead us to take the easy way out and down the road, that quick fix leaves us at the mercy of others. Here are some of the more common quick fixes that come back to haunt contractors.
1. Hiring multiple family members and buddies.
It’s very difficult to find good employees so it can be tempting to hire employee family members. This can be a particular problem with today’s ethnic population, as many know each other and come from the same communities. Some problems are obvious such as when one person quits, the whole family leaves. But other issues are not as obvious. All family members aren’t created equal and there’s a tendency for families to protect one another. They also may ride together to work and firing the driver can leave you shorthanded. They also probably talk to one another and share pay information. Too many family members makes it very difficult to have a professional HR approach to employment.
Some things you can do to help control the problem is to make sure family members go through the same hiring and review process just like everyone else. When possible, try not to have family members work together. Working together can be a particular problem with brothers and fathers/children. In these situations, a long existing relationship precedes work relationships. In many of these relationships, the dominant family member tends to control things. Pairing father/children can be particularly unfair. When the father retires or dies, it can leave the son or daughter lost and not as skilled as you might think. If one family member does all the thinking, the other is a helper.
2. Too dependent on the magic foreman or crew.
Companies can grow addicted to a super foreman or subcontractor. This can be a particular problem in a smaller company. Strong foreman and subs can be prima donnas and if they leave, you can find yourself in a bind. They can also grow old or simply get hurt. These foreman tend to have strong personalities and many of them aren’t particularly good at training people. Thinking small and putting all your eggs into one basket is shortsighted. Even the best of teams has a backup quarterback.
3. Having too much volume with one customer.
Whether it be new construction and working for a certain construction manager or a private customer like a property manager, year after year having over 20 percent of your volume with more than one customer can be dangerous. If you’re doing 50 percent or more with one company, you have a job not a business. Even if that customer pays a premium, one day it will all end. They’ll hire new personnel who wants to make changes or sell the company, and suddenly you have no work. This can be a hard problem to solve because the customer is great, there’s little marketing expense and it’s easy. Denial that the problem exists can be very strong. I actually know of roadbuilding-related businesses that expanded when the new interstate highway passed through and wondered why they had too much overhead when the road constructed moved down the road. This one customer problem can be hard to fix, but if you’re making big bucks from one customer, make sure you sock some of that money away. Be financially prepared when it ends. Next, keep up your marketing and sales effort with other customers. Do your best to not make other work a non-priority.
4. Allowing aging office personnel to let you fall behind from a technology perspective.
Many contractors have hard-working, valuable office personnel who were vital to their success. Unfortunately, technology skills tend to be generational. I had to laugh when one of our customers shared his lack of success in getting his family member 60-year-old bookkeeper to embrace high-tech solutions to their ever-growing business. Mature office personnel and bookkeepers are hired to manage details and keep things in order. Some of these folks don’t like to change and your business can fall behind technology wise. Forcing the issue is unpleasant and it’s easy to just let it all slide. How do you fix it? Hire a consultant or someone tech savvy to help with the project. You would be amazed what a third year accounting college student can do. Technology can be easy to use but a pain to set up.
5. Failure to put non-competes in place with key managers and salespeople.
Non-compete agreements can be hard to enforce and executives don’t like to sign them. The best time to put them in place is when hiring, as people are looking for and need a job. You must always have a local labor attorney advise you in this regard as state laws vary. My perception (and I am not a lawyer, so that’s why you need to call one) is that it’s easier to enforce people using your customer list and contacts than keeping someone from getting another job. Remember the real deterrent is the cost of the employee defending themselves from your ligation. Again, seek local legal advice.
In closing, sometimes the easy way out can create problems down the road. In our PROSULT™ Networking groups, peers tend to help other peers from making these types of mistakes. A good offense can beat a bad defense.