The most successful electrical contractors choose to invest in assets that enable them to perform efficiently and recruit employees who have the skills necessary to complete their projects to the satisfaction of their customers. Every time your company interviews a prospective employee, you assess the likelihood of a good fit with colleagues and company culture. Is the same effort made to determine whether customers’ projects and business practices are a good fit?
To build a business, it is tempting to grab every job, and volume can quickly create burdens on profitability. It is easy to believe that winning jobs is always about price, and there is no long-term loyalty in customer relationships. The idea is that every customer is the same, and they must be retained at all costs. You don’t educate your competitors—just beat them on every possible bid, even if you beat yourself up in the process.
If a business operates long enough, 80 percent of its profits probably come from 20 percent of its customers; that growth drains cash and often compromises profit; and that smart customers prefer long-term relationships with competent, reliable ECs instead of low-bid lotto. You may conclude that competing with stupid competitors is, by definition, stupid—time is more important than money to most customers, and they will often pay more for early completion. Customer relationships can resemble dating, and that doesn’t always work out.
E-Harmony for construction?
How compatible is your company with each of your customers? Although there are different interests, you are ultimately working toward a common goal, with an agreed-upon framework for completing the job on time and on budget, and with an exchange of value that both parties deem fair. At various points in the project, conflicts will be resolved, and timing will affect the quality of the relationship. Sometimes, one of the parties wants to quit. What we call “doing business” is always about the relationships between the key people involved in the process of achieving the goal. If the EC and customer are compatible, the relationship works.
Determining the profile of the ideal customer is similar to joining a dating network. You analyze your own needs and wants and offer the most desirable aspects of yourself to the marketplace. ECs can analyze the data from past projects to ascertain their ideal project size, type, location and the specialized skills their employees have developed. When defining the parameters of your most successful (profitable) projects, it is easy to see what the customers have brought to the relationship in each case. Most likely, these were the projects that ran smoothly from the customer side with a reasonably fair contract, and you were paid somewhat promptly.
Risk and reward
Dating is not a random process. Underlying factors always affect the success of a relationship. When the negatives outweigh the positives, one person eventually chooses to end the pain. The same risk and reward process may lead to “breaking up” with customers who are causing the company more pain than profit. Why are contractors so reluctant to break up with customers who are detrimental to their well-being? Sometimes it is loss of revenue, but often it is a victim mentality—the lurking sense that being treated poorly is the accepted role of the subcontractor, and you just cannot do any better. It takes courage to cut these ties, but it is easier than you think.
Breaking up is easy
Leaving an unproductive relationship can be similar to a romantic break up. The customer may ask for a reason (the equivalent of “Why don’t you love me anymore?” or “What is wrong with me?”). Kindness requires that you provide the equivalent of the “It’s not you, it’s me” rationale. When I first tried this, I explained to the customer (who was continually pounding me to meet prices from incompetent competitors) that we were just not a good match. Then, I had some fun. I referred that customer to a competitor who was a better match. This was win-win-win; I cleared some room on our schedule for new customers, my so-called competitor thought he had stolen a customer from me, and the customer got the subcontractor he deserved.
This method worked remarkably well in aligning our company with customers who were a good fit. We were willing to be more selective in pursuing projects, less interested in growing beyond our ideal revenue level, and ultimately we became more profitable. And we never confessed the truth—it wasn’t us, it was them. Breaking up with customers really is that easy.