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It’s a new year, and not much has changed here in the United States. The country has re-elected President Obama, Congress is locked in quagmire and America’s infrastructure continues to age and fail. With each new natural disaster that strikes, another aspect of our deteriorating infrastructure is revealed.
The reports of how our weather patterns have recently affected our infrastructure make a strong case for a complete rethinking of our civil engineering backbone. A standard joke now is that we get hit with a 100-year storm almost every year. The heat in Dallas last year, where they had more than a month of consecutive 100-degree temperatures, put stresses on pavement that have never been seen before. Hurricane Sandy hit the Northeast and was the worst ecological disaster to ever hit the New York subways. The “worst-case scenario” was far worse than engineers envisioned. Perhaps the good news in America’s future is that we, regardless of party affiliation, are at least beginning to acknowledge our tragic failings as a country when it comes to improving and maintaining our infrastructure.
Of course, the result of improving our infrastructure will be opportunity for contractors. We must rebuild. So how do we capitalize on this forthcoming construction economy? Bottom line: Don’t wait for things to change, use the beginning of this new year to take care of yourself and take the steps you need to strengthen your company for the coming work. So what should you be focusing on?
Here are some ideas to consider:
- Evaluate, expand and redevelop your business model
- Put your initial budget together (don’t worry-you can adjust it as you go)
- Reinvigorate your marketing strategies
- Take advantage of new hardware, software and upgrade your employees skills
Review Your Business Model
Will you just keep pushing your strategies from 2010-2012 into this new year or would now be a great time to re-evaluate? One way to improve your contracting business is to work to become part of a Public/Private Partnership (PPP or P3) that may offer opportunity in your area. We discussed this in my May 2012 column; our industry is going the way of P3s. Our entire system of performing construction in the U.S. is changing, and the contractors must adapt. Corporations now own and will continue to expand ownership of many parts of our infrastructure. A current example of this might be the four new high-occupancy toll (HOT) lanes project that was built to relieve traffic congestion around Washington, D.C. It was financed through an innovative public-private partnership between Fluor, Transurban and the Virginia Department of Transportation (VDOT). This is not just a trend; it is a trend that might place you on very large and high profile projects. The pie is usually big, and contractors should look into how they might penetrate and join these teams.
Another aspect of your business model to review is whether to add a new expertise to your toolkit. Many companies went out of business during the recession, and the marketplace lost skillsets. Use the beginning of 2013 as a catalyst to make adjustments in your company to fill some of these voids. Maybe adding a new service would strengthen your firm. Add value to what you offer your clients and market these services. This is an opportunity to strategically fill voids that have been left by those who closed shop.
One area of growth that should be considered is natural gas and all of the related services involved with it. The pursuit of work on natural gas sites and the construction of drillpads, ponds and access roads, and building regeneration facilities are all still good business investments and are heavily government-subsidized. That government intervention helps make natural gas a good option for investment. People within the gas industry have piles of proposed drill sites on their desks, and they can’t get to them quickly enough. Some industry resources for natural gas work include www.aga.org, www.ngsa.org, www.naturalgas.org and www.texasgas.com.
As energy independence continues to be a key issue in this country, this could create many jobs and opportunities for those in construction both now and in the future. The coal industry is already beginning to resurge as energy companies invest in clean coal processes. The mining industry offers many types of engineering and construction services on site, whether removing overburden, constructing mine facilities, hauling, and performing rehabilitation and land reformation projects during closures. Much of these services are site preparation work. Check out the Mine Safety and Health Administration (MSHA) for any rules that may apply to your company while on-site. Begin to subscribe to industry resources such as the Mine Development Digest to get a pulse on what is happening.
This is also a good time to examine your relationships. Meet with your clients to catch up or inform them of your new capabilities and services that could benefit them. It is easy to get so busy that we don’t have time to check in regularly with clients, and before you know it, the client finds someone to underbid your services. You need to remind your clients how your services provide more value than a low bidder, whether with priority treatment, better response times or your commitment to stand behind your work.
Look into developing or joining consortiums where you can pair your expertise with others that are crucial to a project’s development and success. Explore how adding a partner that can finance projects with a licensed engineer who can design and get them approved will allow you to be the builder of the project.
For example, in one case where we worked with a consortium to put together a speculation narrative for a landowner to develop a property used for trailer home rentals, the group consisted of a banker, an engineer and a contractor. We assisted them on a study that identified a two-phase project, which held high potential for a profitable development. The current rentals in Phase 1 would be relocated to the Phase 2 area. Phase 1 construction would include high-density townhomes, an assisted living facility and single family homes. As Phase 1 was concluding, the contracts for the rental trailers would be terminated making way for Phase 2 construction. This group had all of the expertise to propose this plan, back it with financing, design it, get it approved and build it.
Put Your Budget Together
Many companies move their accounting and bookkeeping along from year-to-year, essentially paying bills and salaries with their receivables. If you operate this way, consider a different approach in 2013. Develop plans for your company’s operations that consider your desires and your downside expectations. Attach a percentage of expectation that the task will occur. Review these estimates monthly and adjust your expectations as new information arises.
For example, if you are projecting a new purchase of a dozer in August, you may start 2013 with a 100-percent expectation that you are on target to make the acquisition. In March, you may learn of an unexpected tax bill from two years ago that makes the dozer purchase less likely. You knock down your expectations to say 50 percent, depending on landing the next big project and using some of the profit for the purchase. Add in your expectations for actually winning that project, and project it at, say, 50 percent. This simple calculation may show that you actually have a 25-percent chance of obtaining the dozer. As your percentages rise or decline, you may begin to see trends that cause you to begin pursuing a plan B. In this case, maybe plan B is to acquire a used dozer at a cut rate. For those who don’t have accounting departments, this may be a simple tool that offers a common sense approach to projecting ahead.
Reinvigorate Your Marketing Strategies
A good way to begin the year is to have management and key staff attend local contractor meetings where you can meet and greet colleagues in the business, find out what projects are upcoming and build relationships that will help in joining teams to go after these projects. There are many organizations and groups you can join to increase your presence in the industry, including state-based contractor associations.
An often-overlooked approach is to look back at projects you lost over the past year or two. Review why you lost and what you would do if you could do it over. Maybe you didn’t have all of the expertise required, maybe you overbid, maybe you didn’t have the equipment available, etc. What adjustments do you need to make to improve your bid for next time?
You can also take a look at how you get your message out to clients. Some things are very simple, such as including your company brochure in every invoice. Place your company logo on your heavy equipment and trucks. When I drive past construction sites, I like to see who is working on them and one of the few ways to tell is via their company logo on the equipment. Many companies don’t do this and lose out on that marketing potential.
You should also review your website: its content, formatting and delivery. Is your contact info easily found? Are your new investments in equipment mentioned? Have you achieved any new certifications your potential clients should know about? The website is your company brochure now; treat it as a major component of your marketing strategy.
Link to your social networking pages on your website and include the information on invoices, flyers and all other communications from your company. Take a look at the header for siteprepmag.com, for instance, and how it includes links for social media. Social networking needs to be part of your company’s marketing strategy.
New Tools and Skills
Take a look at some of the new technologies that have emerged recently and see how they can be incorporated into strengthening your business. One newer technology is BIM, and some large jobs now require a BIM component as discussed in my December 2012 column. Begin building your expertise in this area during 2013; it may help you win contracts.
Visit industry shows to see the latest products and technologies available. Use the winter months-especially for companies in the northern part of the United States-to train your staff on these new technologies. Now is the time to invest in your employees.
The beginning of this new year should serve as a catalyst to explore new offerings that have been introduced to the market but haven’t made it into your company yet. Take this time now to review your current marketing and sales approaches and consider expanding into new business ventures with a P3, consortium or new sector. Network and attend events to see what is going on, build relationships and market your firm. Use the New Year as a fresh chance to improve your company’s abilities-and stability.