By TOM WOODCOCK
It’s beginning to happen. The effects of higher interest rates and the dwindling of post-pandemic backlog is creating concern in the construction industry.
You may not be feeling it quite yet, but trust me, it’s occurring. Some markets and trades are affected sooner than later, but the slowdown will become more and more prevalent. As I travel all over the country speaking and training construction professionals, I gain more and more insight into how this eventual slowdown will occur. But no need to fear. I have some ways to avoid the impending dip.
The rise in interest rates is beginning to eliminate the window of cheap money we’ve enjoyed. Because of the affordability of construction lending, both investors and project owners have been very active. It’s a simple equation that when rates increase, capital goes elsewhere as opposed to into construction projects. If your business hangs on a couple key customers that bring you recurring work, you could be in quite a bind soon. Another reason I know this downturn has begun is that I see it via the demand for what I do. My speaking and training slate is filling up faster than ever and our marketing company (Too Creative) is getting calls left and right. This always takes place when contractors fear what’s ahead. So what’s the answer? You guessed it…sales.
First and foremost, you must buy into the fact that sales is the most important aspect of your business. It doesn’t matter how well you build, manage your business or spend resources on marketing if your sales effort is weak or not a priority. Without sales, what do you have? The challenge is that many contractors’ sales personnel are people with multiple responsibilities and not purely sales agents. Therefore, they trend toward the more tangible responsibilities such as project management or estimating. They will look for reasons not to engage in the sales effort as it is generally more uncomfortable than these “practical” aspects of construction. Why does this happen and how do you change it?
The baseline is understanding your market size and your level of penetration in that market. It’s the simple concept of pie. How big is the overall market pie and how big is your piece of it? If you need a bigger piece of a shrinking market to just maintain, you’ll need to sell your way there. This will require a structured sales strategy and approach. It will demand more time and attention to the overall sales effort. Finally, the individuals doing the selling will need to be trained and motivated. Lacking in any of these three areas will drastically limit your success. Not doing the necessary sales work will cause some companies to cease to exist. It happens every time the market shifts downward.
Business owners and managers need to take the steps necessary to make sure their sales effort is the primary focus of their companies, and that they have sales personnel who are as dedicated as possible to simply securing profitable business. Just grabbing work to keep the doors open eventually backfires and the results aren’t pretty. Those who are unsure as to how to do this need to get the necessary help. Flying by the seat of your pants or throwing bodies at your sales effort is a recipe for frustration. Set a strategy, get the right people, train them and stick to it. Grab a bigger piece of the market pie and circle the wagons around your current customer base.
I just had a conversation with a contractor in Texas who said he was seeing more and more Midwestern contractors coming into his territory. He wanted to know how to freeze them out. Packing your bags and heading to a saturated market is not the answer. Invest in your local sales effort and grow your business base. Sell to secure projects at a healthy level of profitability and track your sales process. Refusing to do so in the upcoming construction climate may end up being your Achilles heel. Go get a bigger piece of the pie.
Tom Woodcock, president of seal the deal, is a speaker and trainer for the construction industry nationwide. He can be reached via www.tomwoodcocksealthedeal.com or (314) 775-9217.