What goes up must come down is a musty old adage that is still true today. The roofing contracting market is hot. High volume can create sloppy practices that haunt you particularly when the market slows. Here at ©PROOF Management we are big believers of growing your gross profit as a number one priority rather than sales growth without margin. That’s why many of our customer average 20 percent owner’s salary and profit. Job overload creates a run-run environment rather than a profit so here’s some examples of sloppy business practices to watch out for.
1. Poor Material-Handling Practices
When busy, it’s easy to get away from preplanning and ordering material deliveries. Letting field employees pick up material is an expensive practice. It probably costs $100 every time an employee goes to pick up material. If you’re already behind in the field it doesn’t make sense to take a productive employee out of the field. Using Uber or a taxi would be much cheaper. Not only that, competitors who need employees can recruit your folks. Keep them working.
2. Sloppy Invoicing
The market demand is high and material prices are rising. With that in mind it’s important to keep your suppliers’ pencils sharp. Failure to audit supplier invoices can lead to overpayment.
3. Crisis Scheduling
Being busy and having trouble meeting demands can create a firehouse scheduling mentality. Salesman and estimators over promising and fighting for crews is not uncommon. Schedule when it makes sense, not for the people who scream the loudest. Schedules must always adapt due to weather, other trades and customer readiness. Develop a realistic strategy for dealing with it. Over promising and under delivering is a great way to kill your name brand. Be creative and realistic. First come, first serve probably isn’t the best strategy. If you’re running behind and your backlog is high, make sure you let customers know you haven’t forgotten them.
You may also need to manage your job mix. New construction schedules are hard to manage and when they want you, they need you. You may have to cut back on that part of your business.
4. Infrequent Visits
If field people do not see management, they assume everything is going fine. At times, employees are a little like kids — ignore them and things go sideways. Busy and productive are two different things. Field workers equate a lot of business to the boss is getting rich. Lack of skilled field people has also put a heavy stress burden on your good workers. They want to see the boss and not feel neglected. Overtime can also create a less productive work environment. Inspect what you expect. Leadership is about influencing those around you and it’s hard to influence people you never see.
5. Tolerating Underachievers
The labor market is critically short. If you fire someone, everyone knows it can be difficult to find someone else. However, bad apples reach a certain point where they begin to spoil the whole barrel. Don’t let the extremely bad employees pull down the producers. When a really bad employee is terminated, you almost always find out that it was long overdue and other employees are grateful. Good employees and achievers don’t like to work with people who aren’t carrying their share of the workload. Don’t run the good people off by catering to the underperforming bad apples.
6. Desperate Hires
The labor market is tough and trying to hire people can seem like an impossible task. If the interviewee seems too good to be true, it probably is not true. Sometimes it’s better to do less volume than to throw warm bodies at the problem. Remember, sales capacity is limited by your foreman or job supervision abilities. Also, some foreman are better trainers than others. You may find it a better strategy to recruit unskilled but stable workers from other industries and then train them. You can teach a good worker a skill but you can’t teach a poor worker how to work.
7. Not on top of Hiring
Employees can find other jobs and turnover quickly. If you don’t have an ongoing hiring process, you may find yourself without enough production to break even. Few companies look for employees as aggressively as they seek work. Don’t get caught in this trap. Set up a system to constantly hire and recruit. To make matters worse, failure to respond within 24-hours with a new recruit means that someone else will probably snatch them up.
8. Failing Finances
When you’re busy, things can change quickly. Failure to run monthly financial meetings with accurate information can lead to disaster. High sales volume doesn’t solve all problems. In fact, most contractors go broke when they’re busy. A big job going south can hurt you no matter how busy your business is. Business can be unforgiving.
In summary, we’re delighted you have lots of work but don’t assume that lots of work automatically leads to lots of profits.