Mistakes to Avoid in 2012

Recent economic forecasts offer some hope for electrical contractors in 2012. As market conditions improve, it is more important than ever to avoid common contractor mistakes. Ensure you are alert to these business killers, and you will focus on ways to guarantee your success in the coming year.

Failing to plan
Managers often resist planning because it takes time and involves guessing, which is an uncomfortable process. You know circumstances will change and plans will be adjusted over time, but the planning process forces you to focus attention on the primary drivers of your business. Planning is just another form of decision-making, and you will improve with practice. A strategic plan will guide your overall scheme, a budget provides a basis for evaluating financial results, and a cash flow projection improves solvency and purchasing efficiency. A safety plan will reduce injuries and claims, a training plan will guide investments in employee development, and a capital investment plan will predict large future expenditures. More than ever before, failing to plan is planning to fail.

Accountability and responsibility
Everyone in your company must be accountable for his or her results. Too often, employees are not required to establish goals, not allowed to participate in strategic planning, or not provided with resources or information they need to improve their performance. When projects get off track, field employees blame the office staff and vice versa. If you define expectations and provide tools—such as cost information, technology and equipment—you are entitled to expect field and office staff to achieve their established goals. Ensure you delegate responsibility for decisions to those who will be held accountable for the results, and everyone will have some ownership of the system.

Too much stuff
Be careful about what you buy. Everyone from your certified public accountant to your bank will offer you reasons to purchase new assets. Weigh tax advantages of favorable loan terms against the utility of the purchase. Will you gain efficiency, reduce injuries and lower maintenance costs, or are you tempted by a bright, shiny new toy? Assets that are not making you money are costly, even if they are paid off. At a minimum, you still are paying for storage, maintenance and insurance. Evaluating options, such as leasing or renting versus buying, will keep your balance sheet more balanced.

Ineffective pricing
Never forget your profit targets. Pricing to compete with the lowest priced electrical contractor is never a good strategy if you are cultivating long-term customer relationships. You will always sacrifice something—profits, service, quality and ultimately reputation—if you scramble for growth at the expense of profitability. Stay focused on your costs and areas of expertise, and growth will be the natural result of doing excellent work at prices that are fair to both you and your customers.

Resting on your laurels
Marketing budgets are often the first to be cut during hard times. With so many inexpensive options for staying in touch with current and prospective customers, there is no excuse for resting on past successes and expecting customers to seek you out. Use social media, solicit feedback, express thanks and offer educational information to stay on the radar of past and future customers. With so many messages competing for their attention, yours must be concise and useful, not overly frequent, superfluous or annoying.

Egregious contracts
Know your rights, and enforce them before you sign contracts. Examine the scope of work carefully, as most disputes arise from inaccurate or insufficient scope language. Offer alternative language, without apology, for clauses that are unacceptable and often unenforceable. Request supporting documents, such as financial statements and copies of bonds. The customer who resists negotiating or providing information should raise your antennae. At best, you will obtain the balanced agreement you deserve and earn respect for your professionalism and confidence. At worst, you will avoid a project agreement that can kill your business.

Bad clients
Doing business with owners or general contractors who are difficult, pay slowly or not at all, mismanage schedules, or demand unreasonable contract terms is worse than losing their business. As tempting as it is to grasp at any new project to improve cash flow, be disciplined enough to evaluate new customers carefully. And get rid of those who are destroying your financial strength and driving your employees crazy with unreasonable demands. Toxic relationships produce chronic illness, so be gracious about letting your competitors steal these clients. They won’t know the difference until they feel the pain.

Being perfect
Most important, learn from your mistakes. They are your best learning tool, and continuous improvement does not demand perfection. You will never avoid all mistakes, but you can make it your goal not to repeat them in the new year.

NORBERG-JOHNSON is a former subcontractor and past president of two national construction associations. She may be reached at ddjohnson0336@sbcglobal.net.

About the Author

Denise Norberg-Johnson

Financial Columnist
Denise Norberg-Johnson is a former subcontractor and past president of two national construction associations. She may be reached at ddjohnson0336@sbcglobal.net .

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