I started my career in construction as a carpenter apprentice decades ago. My brother and I eventually formed our own general contracting business that operated continuously until last year when my brother retired. Years ago, while running our start-up contracting business, I realized that I was learning how to build, but I knew nothing about the “science” of construction, so I signed up for night school to study engineering.
Pretty soon I began to think that I knew it all until our company grew more complex, and I began to realize that I knew very little about the “science” of running a business. Just because I was now an experienced contractor didn’t mean I knew how to run a business. It became clear to me that Building and Business are two entirely different sciences, and to remain successful and grow we needed to learn the “science” of business, so I began my second career as a night student to learn accounting, economics, finance, marketing, and organizational behavior.
At a Certain Size Every Business Becomes a Science
I always thought that running a business required only a dose of common sense. After all, America was founded by immigrant families that had little education. Dry cleaners, shoemakers, dress shops, druggists, hardware stores, and barbers were all in business for themselves. Some began by first learning English. They all seemed to make money. How hard could it be?
As Schleifer Brothers Construction began to grow beyond drawing our business plans on the back of a napkin and borrowing money on our homes to finance the next project, I began to realize that I needed to learn the science behind business. I needed to understand debits and credits, balance sheets, budgets, legal contracts, tax strategy, capital allocation, recruiting and training, delegating authority, time management, motivation, cost control, the role of a board, and how to make a profit. I was so intrigued by the interplay between the two sciences of building and business that, later in life I went on to earn my Masters and Doctorate in construction management and eventually became an educator and construction business consultant. I have relished the role for forty-five years because I still identify with the contractor’s mindset.
The Contractor’s Mindset
Contractors are hands on doers and risk takers. Some of us came up the hard way through the ranks of the trades and were not satisfied letting someone else tell them what to do and letting the “boss” make all the money. Contractors are restless natural leaders who possess the energy and intelligence to multi-task, motivate, lead, and push their way to success. They relish risk taking and sense that it sets them apart from the timid. Success goes to the bold is a contractor’s mindset.
Learning The Complexity of Contracting
When my brother and I started in business we not only went out and got the work, but we built the projects ourselves with the help of our labor force. We kept the books in a three-ring binder stored in a kitchen cabinet. There was no science. However, as time went on, we signed bigger more complex contracts, hired subs, borrowed money, bought equipment, opened an office, and drove company pickups. We hired an independent accountant, legal advice as needed, and young people to answer the phones. We began to add multiple projects and had to learn to be in two places at the same time. Things were getting more complex, and details began to “fall through the cracks”.
The Long View of Construction
Forty years of study and research have broadened my beliefs about success in this highly complex and competitive industry. Respecting both the science of building and the science of business has altered my perspective on contracting to what I call the “long view” (stepping back from the day-to-day details of construction to see the business as distinct from the field work and recognizing how important the “science of business” is to our success). I am trying to communicate this “long view” to current construction professionals who are in the “thick of things”.
As a starting point, mark the following beliefs about the construction business as either “true” or “false” in your view, and we’ll compare your view to the “long view” in next week’s blog.
- The risk of failure in the contracting business is always tapping at the front door.
- Some construction projects are not profitable.
- A failure to make a reasonable profit on most projects erodes a contractor’s ability to do business regardless of the size or longevity of the firm.
- Most contractors do not utilize financial statements effectively to run their business.
- Contractors rarely employ a professional CFO and almost never admit the position into top management decision making.
- The construction industry has a dangerously limited access to working and growth capital.
- The typical construction “contract” places an unfair burden of risk on the contractor’s shoulders.
- Most closely held or family-owned construction companies have no long-term, professionally developed succession plan in place.
- Most construction companies do not utilize the wisdom and experience of a truly outside board of directors.
- Growth is not always good.
Hold on to your results and next week we’ll discuss your “long view” score.
For a deeper look into science of construction, read more here: SCIENCE
For a broader view into growth, read more here: GROWTH
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