Strategies to Grow

Slowly, the construction industry is emerging from this stagnant economy. According to a recent Commerce Department report, home construction rose 15 percent in September 2012. Additionally, apartment buildings increased 25.1 percent and applications for building permits rose almost 12 percent. While this is encouraging news, it is too early to determine if the economy is in a true recovery or experiencing a short-term peak headed for a double-dip recession.

To ensure successful revenue growth through either scenario, it is essential for business owners to stay focused on diversifying their customer base and revenue streams. Successful implementation of a diversification strategy minimizes the company’s revenue fluctuation and stabilizes cash flow. The key component of a successful implementation is the ability of the business owner to work “on” the business, not “in” the business.

The distinction between the two is very clear: owners working “in” the business are consumed by handling the day-to-day activities of sales, operations and finance. There is little time left in the day to proactively focus on directing and managing the company. Owners working “on” the business, spend approximately 80 to 90 percent of their day planning, organizing and leading their employees for peak performance. As an end result, the company is always positioned to quickly respond to both micro and macro economic conditions.

Innovative Diversification

Owners working “in” the business typically wait for the demand to come to them. In other words, they wait for the phone to ring to obtain additional work or they rely on their old contacts to bring them business, thus positioning themselves at the complete mercy of the economy. Working “in” the business forces the company into a position of market follower, which means fierce competition and lower margins. In the end, these owners miss out on the potential new markets, sales channels and product innovations.

On the other hand, those owners working “on” the business understand that their job is to focus on and understand market conditions, trends and product/service innovations. They use basic management practices such as delegation and management by objectives to stay in touch with employees and day-to-day activities. This provides them with the necessary time to work “on” the business. This group actively seeks out, researches and develops new sales and marketing channels for their companies.

The ability to understand and project where new market, product or service demands will occur over the short- and long-term horizons is vital to ensuring the survival of the company and the security of the employees. Business owners who have the ability to develop and deliver market-based solutions are the ones who will realize strong growth – if the economy is actually recovering – or survive a double-dip recession.

One of the key attributes of working “on” the business is having the time to examine and understand industry trends. There is enough information on the Internet, TV and in newspapers to provide business owners with industry and market information. Based upon recent trends, the following markets represent growth opportunities for small business owners:

  • Fortune 1,000 companies
  • Green industry
  • Government sponsored construction grants

Each of these areas represents an opportunity due to their current and/or future access to working capital and government funding. This is where the money is and will continue to be throughout the next several years. Small business owners are at the crossroads of a crucial decision. They need to determine whether they are going to follow the markets with the money or stay in their niche market and try to compete for less business.

Additionally, it’s important to not ignore the residential home building market. Industry statistics indicate it is starting to make a slight comeback. This market is important for a construction company’s growth plans due to the fact that many of the previously well-known and positioned homebuilders placed a moratorium on advertising and promotions. In other words, they lost their name recognition. This presents a great opportunity for a new player with a strong marketing plan to enter the market and become a major competitor.

Becoming an Industry Leader

The key to becoming a leader within the construction industry is the owner’s ability to establish a wide network of contacts within and outside the construction industry at places like city, county and corporate offices. Working these contacts and developing a trust based relationship will serve companies well and position them as reliable solution providers. Here are some networking tips to assist owners in increasing their presence and name recognition:

  • Participate in industry-related association and/or chamber of commerce activities.
  • Join groups or associations comprised of potential clients. For example, if an owner wants to work with commercial banks, they need to determine which groups or associations the decision-makers from this industry are involved with.
  • Develop the skills to engage in small talk effectively. Ask open-ended questions about the other person’s business, success and struggles.
  • Hold volunteer positions in related organizations.
  • Follow up with every contact.
  • Learn the difference between cultivating a relationship versus only looking for a sale.

Another viable channel is the use of social media outlets, such as Twitter and LinkedIn, for networking. While it is a smart business practice to be involved in all forms of media, it’s also important to recognize the value of social media and understand its intended purposes. Social media should be used as a lead generator, image builder and a way to advertise and promote a company’s plans, markets and products/services. However, it is not a replacement for “person to person” networking, as we still live in a society where people continue to do business face-to-face.

Positioning Companies for Growth

A major impact of the sluggish economy is the psychological effect it has on business owners. It negatively impacts their entrepreneurial spirit and leads them to question whether or not they want to remain in business. Owners can avoid this demoralizing and harmful attitude by changing their overall approach to running their company. Working “on” the business and diversifying the company’s product or service offering is the first step. Mastering this method of running a business ensures the company is always positioned for the next economic trend.

Daniel Schneider is a consulting services director with Corporate Business Solutions. Located in Schaumburg, Ill., Corporate Business Solutions provides comprehensive business analytical and consulting services to companies in the United States and Canada. For more information, call 224-676-7190, email [email protected], or visit www.cbs-cbs.com.

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