Diversification will stabilize your business during, and after, difficult economic times.

Today’s economy and work shortage have most business owners very concerned with what will happen and what they should do. The first half of 2011 is over and it doesn’t look as if the second half will be much better.

How many feasible options have you already considered to bring in more work? Or do you really believe 2012 will be better? You cannot afford to procrastinate. There are definitely some good options available to you; weigh the pros and cons and then give it your best shot. The very worst situation I can imagine is for you to do nothing and then watch one of your former employees enjoy the success. It happens every day.

The majority of contractors who started their own companies were proudly pursuing the Great American Dream:

  • I will be the boss. No one can tell me what to do.
  • I can work when I want to and simply pay others to do whatever needs to be done.
  • All the profits will be mine.

    Unfortunately, many of those who chase that dream encounter a workingman’s greatest nightmare - there was an open septic tank at the end of their rainbow!

    In addition to finding enough work, collecting your money, paying your bills, fulfilling required insurance/licensing/bonding obligations, you must recruit, train, motivate and maintain a quality, productive workforce.

    Webster’s dictionary defines entrepreneur as “one who organizes, manages and assumes the risks of a business or enterprise.” You know of contractors whose dreams came true, as well as those who decided to quit or just didn’t make it. We also have those real winners who have successfully maintained a reputable and profitable third- or fourth-generation family-owned company.

    I have visited hundreds of these entrepreneurs to help turn their dream into a reality. I can provide a multitude of feasible options for them to consider, but I will not tell them what business would be right for them. I’ve always answered that question with, “What would you like to do?” It is hard to succeed at something you don’t really want to do. And even if you could, how long would you be happy doing it?

    Possibly the biggest eye opener for unhappy contractors is that contracting is not the only available option. One may wish to own a restaurant or retail store business. Another could pursue a favorite hobby or become a professional guide for hunting or fishing. Opening a sports bar or nightclub, possibly with live entertainment, is another possibility.

  • Expand into other construction areas

    As you might expect, most construction tradesmen think their best option is becoming a contractor, doing their present trade. I’ve always encouraged them to closely observe the other trades and compare how well and how fast they could perform that type of work. It is quite easy to find out pricing to see if it is worthwhile.

    Possibly the most feasible options for successful contractors involve expanding into other construction segments:

    1. Start a repair service company in your local area or another area convenient to one or more of your service employees.

    2. Perform all mechanical, plumbing, air conditioning, fire sprinkler, control work, electricity and site work on a job, which provides a very attractive bid package as well as a coordinated project.

    3. Maintain a remodeling division to change partitions, install wallboard and tile, and do painting and touch-up work.

    4. Open a new company in a prospering, remote area. This is especially effective in an area where one of your employees lives or has relatives in the area.

    In addition to successfully expanding into a larger company, you will maintain more stability when onlyoneof your companies is struggling rather than youronlycompany. Survey the struggling companies you are familiar with, then consider what is needed to salvage that business and give you ownership or controlling interest.

    Add a partner

    Although a lack of financial strength appears to be the cause of failure, it usually is the result of a lack of Business Management 101. Sadly, the lack of funds has been a comfortable excuse for these lack-of-management business failures:

  • No chain of command, job titles, job descriptions, performance files, and/or wage and salary administration. All are crucial to maintain a proud and productive workforce.
  • The second most-costly management void is the lack of on-time documentation, such as; issue RFIs to clarify any questions before bidding a project; inspect and negotiate contract language; maintain an accurate daily log on every project; and get signed work orders for any changes and send out bills for them during the month they occur.

    We have millions of capable employees who share that Great American Dream but may never have their own company. Some have tried and failed; most are afraid to risk what they already have accomplished. You have unlimited opportunities to help them and strengthen your own company.

    The majority of these dreamers would be satisfied and very proud to say, “I own part of this company.” To do this, set up an Employee Stock Ownership Plan, which gives employers the opportunity to sell stock and retain their productive employees.

    You can form a joint venture for one project or a limited period of time, enhancing your bid prospects. Or become a partner and try to retain more than 50 percent of the stock to assure controlling interest.

    Obtain a partner to furnish a vital business link for your new venture or to reinforce one that is struggling. This may be finances, bonding, insurance, licensing, expertise in your trade or a well-trained workforce. Make sure to negotiate a favorable deal that will last. These negotiated partnerships are especially effective with your immediate family (including wives and daughters), close friends and/or valued long-time employees.

    Our younger generation definitely has more experience and expertise with today’s computers, electronics and the Internet. For many business ventures, their involvement can transform company failure into financial stability.

    As you weigh the possibilities of starting a new business, you can understand why I cannot tell you what would be right for you.

    An amusing response I often hear when talking about starting another business is, “With so many of the competitors going broke, what chance would I have to succeed?”

    What chance would you have if they didn’t go broke? It opens up your area.

    Consider the newly available skilled workforce an insolvent company leaves behind. Those employees will be extra productive to protect their newfound security.

    And some of those contractors would welcome the opportunity to join forces with you to establish a profitable and competitive company. An ideal, realistic American dream would be to negotiate a survival deal with a contractor who is failing. Your local supply houses would join your efforts and everybody wins!

    Along with my recommendations, you need input from family, friends and business acquaintances to give you realistic ideas for opportunities, available skills and capacities. You will be pleasantly surprised at the number of people who would like to have their own business, but never thought it could happen.

    It doesn’t have to be a trying time for you to keep on trying.

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