The average building company lasts just 3.6 years. Some of the builders that make it past the five-year mark go on to become quite successful. Others continue on the hamster wheel constantly chasing cash flow.
As it turns out, there are quite a few traits that successful builders share and it isn’t just the amount of money they’ve made.
Learn seven common traits of successful builders and identify the sales process that successful builders use to dominate their markets.
1. Dream Big and Have a Strong Work Ethic
Successful builders see the possibilities beyond the immediate future. They look to scale their building company. Obstacles and setbacks are just potential learning experiences. These builders have big goals, and truly believe that they will turn their vision into a reality, even if it means stepping out of their comfort zone. Turning a vision into reality not only takes hard work, it takes drive, ambition and total belief.
The ability and confidence to sail forward into uncharted waters after experiencing success is a very rare quality but one that is essential for a builder to move forward at speed, towards a goal.
2. Choose Your Niche Strategically
Successful builders don’t take on any job they can, they work strategically within a niche. Usually, they’ll start by looking at the work they have been doing over the past 24 months and analyze the net margins. That’s important because it’s not the gross margin that’s crucial, but the net margin, after fixed costs have been applied to the job.
Once successful builders know which jobs are the most profitable, they target that niche and become the authority in that area. But consider the following:
- 63% of builders admit their company does not have a competitive advantage.
- 59% of builders have no idea who their ideal client is.
- Only 11% of builders have looked at their previous jobs to discover a good niche.
Successful builders think differently. They see opportunities and jump right into them.
3. Maintain a High Tolerance of Risk and Failure
Successful builders also have a high tolerance of risk and failure. Failure is a constant feedback loop. Every time builders fail, they learn something.
To be a market leader in any business, builders have to be willing to take big risks that might fail. Builders have to be able to get back up after getting knocked down, and use what they’ve learned to grow and keep moving forward.
One of the biggest risks any business takes is investing in marketing. Every new advertising campaign is a bet. Many bets result in losses, but when an advertising bet pays off, it can then be scaled up — and that means big returns.
When builders advertise their company, they test their campaigns with small bets. They measure success by keeping a close eye on their lead acquisition costs. When the cost per acquisition dips below the earning per lead, then they are in a great position to scale up their building company.
4. Be Self-Disciplined and Delay Gratification
Self-discipline is another extremely important and common trait among successful builders. A disciplined business owner sets their sights on a big goal, then figures out how to reach that goal. Disciplined people are not easily sidetracked. They could be shown a hundred different ways to grow their business and only select one or two that are best suited to their strengths and the market in which they operate.
5. Develop Sales and Marketing Skills
Although they might not be the person implementing the marketing strategies or making the sales in their building company, all successful builders have developed their sales and marketing skills over time. Without a high-level understanding of how sales and marketing works, it’s almost impossible to successfully manage a team and hold them to account on their performance.
Most builders are not natural sales people, but with a process in place, signing a building contract becomes a natural part of the entire experience. It also allows successful builders to scale up their building company quickly while keeping their finger firmly on the pulse of the business.
6. Don’t Waste Cash
Successful builders are acutely aware of the volatility of the residential market and are always focused on building the company reserves before drawing dividends. The main reason for the average building company only lasting 3.6 years is because they run out of cash during an economic downturn. While a typical business will aim for three to six months cash reserves to cover outgoings, a building company requires enough cash to cover twelve months of expenses plus all current creditors and the work in progress accounting adjustment (WIPAA) liability.
Reaching that figure takes self-discipline and determination, but once achieved, those builders will see opportunity in both boom times and recessions.
7. Understand Financial Reports
And finally, every successful builder understands their financials. Not only that, they read their financial reports every month. For a building company, that means understanding work in progress, workflow, current liquidity, net margins, gross margins and expenses every single month of the year.
[Bonus] 8. Use a Proven Sales Process
A sales process lays out a clear path for taking a new inquiry through to contract. It allows builders to save time by only working with serious clients who are ready to build. By following a process, builders can tailor their proposal to a client’s specific pain points, effectively positioning their company as the only viable option for the client, eliminating their competitors and ensuring their margin is protected.
Watch a free demonstration inside The Association of Professional Builders membership portal to see how they can help you get started with growing your building company.