The average building company lasts just 3.6 years.
Some of the builders that make it past the five-year mark go on to become multi-millionaires. Others continue on the hamster wheel constantly chasing cashflow.
As it turns out, there are quite a few traits that the successful builders share, and it isn't just the amount of money they’ve made.
In this article, we’ll reveal why some builders become multi-millionaires while others are left trying to figure out what they are doing wrong, as well as giving you the sales process they are using to dominate their market.
If you are serious about succeeding in business, then passing the million dollar mark is a pretty good benchmark.
What follows are seven of the most common traits we’ve found in successful building companies. So if it works for them, it may work for you too.
1. They Dream Big and Have a Strong Work Ethic
Firstly, successful builders see the possibilities beyond the immediate future. They look to scale their building company. Nothing holds them back. Obstacles and setbacks are just potential learning experiences.
They have big goals, and truly believe that they will turn their vision into a reality, even if it means stepping out of their comfort zone.
Turning a vision into reality not only takes hard work, it takes drive, ambition and total belief.
But there’s something else you don’t always hear about...and that’s the ability to step out of your comfort zone.
The ability and confidence to sail forward into unchartered waters after experiencing success is a very rare quality but one that is essential for a builder to move forward at speed, towards a goal.
2. They Choose Their Niche Strategically
Secondly, successful builders don’t take on any job they can, they work strategically within a niche.
Usually, they’ll start by looking at the work they have been doing over the past 24 months and analyse the net margins. That’s really important, it’s not the gross margin that’s crucial, but the net margin, after fixed costs have been applied to the job.
Once they know which jobs are the most profitable, they target that niche and become the authority in that area.
When researching this subject we came across some interesting stats:
- 63% of builders admit their company does not have a competitive advantage
- 59% of builders have no idea who their ideal client is
- Only 11% of builders have looked at their previous jobs to discover a good niche.
Seems pretty surprising, right? You'd think that the owner of a building company would be interested in doing more of the work that makes the most money rather than taking on just anything.
That, however, is why some builders make it big. They think differently. They see opportunities and jump right into them. That might mean, however, that the market they're going into isn't the one they are passionate about, such as ‘architectural homes’. But they do end up living in a luxury home rather than just building them for other people.
3. Successful Builders Have A High Tolerance Of Risk And Failure
Successful builders also have a high tolerance of risk and failure. Failure is a constant feedback loop. Every time you fail, you'll learn something.
To be a market leader in any business, you have to be willing to take big risks that might fail. You have to be able to get back up after getting knocked down, and use what you've learned to grow and keep moving forward.
One of the biggest risks any business takes is investing in marketing. Every new advertising campaign is a bet. Most bets result in losses, but when an advertising bet pays off, it can then be scaled up... and that means big returns.
When you advertise your building company, test your campaigns with small bets. Measure the success by keeping a close eye on your lead acquisition costs. When your cost per acquisition dips below your earning per lead, then you are in a great position to scale up a building company.
Have you tried a different advertising strategy lately? Maybe now is the right time to set up a Facebook campaign or run an advert on Google Adwords.
4. They Are Self-Disciplined And Delay Gratification
Self-discipline is another extremely important and common trait among successful builders.
A disciplined business owner sets their sights on a big goal, then figures out how to reach that goal. Disciplined people are not easily sidetracked. They could be shown a hundred different ways to grow their business and only select one or two that are best suited to their strengths and the market they operate in.
The opportunities a builder says no to can be even more important than the ones they pursue.
5. They Develop Their Sales And Marketing Skills
Although they might not be the person implementing the marketing strategies or making the sales in their building company, all successful builders have developed their sales and marketing skills over time. Without a high-level understanding of how sales and marketing works, it’s almost impossible to successfully manage a team and hold them to account on their performance.
Most builders are not natural sales people. In fact, most builders would rather spend the weekend painting a house with a toothbrush as opposed to sitting in a display home.
But with a process in place, signing a building contract becomes a natural part of the whole experience. It also allows successful builders to scale up their building company quickly while keeping their finger firmly on the pulse of the business.
So let the market tell you what it wants. A lot of builders just want to build. They think, "I can build anything," but they end up with very little work. Success is the complete opposite, identify the need and create a marketing strategy to fill that gap.
Once you’ve done that, learn from the marketplace. The more time you spend speaking to clients in a particular niche, the more you’ll understand their fears, concerns and pain points. Once you understand your ideal client, the easier it becomes to speak to them directly in your advertising.
And when you know who your ideal client is, targeting them becomes so much easier. It also allows you to repel the leads you are not interested in speaking to, the time-wasters and price-checkers.
6. They Don’t Waste Cash
The majority of successful builders aren’t taking every dollar they earn out of the business to fund their lifestyle.
The successful ones are acutely aware of the volatility of the residential market and are always focused on building the company reserves before drawing dividends.
The main reason for the average building company only lasting 3.6 years is because they run out of cash during an economic downturn. While a typical business will aim for three to six months cash reserves to cover outgoings, a building company requires enough cash to cover twelve months of expenses PLUS all current creditors and the WIPAA liability.
Reaching that figure takes self-discipline and determination, but once achieved you will never chase cashflow again. Instead, you will see opportunity in both boom times and recessions.
7. They Understand Their Financial Reports
And finally, every successful builder, and by that I mean a multi-millionaire builder, understands their financials.
Not only that, they read their financial reports every month. For a building company that means the work in progress calculation must be calculated on the last day of each month and entered into the accounts. Without it, the Profit & Loss is a mess.
So successful builders understand their work in progress, workflow, current liquidity, net margins, gross margins and expenses every single month of the year.
Better information leads to better decisions.
[Bonus] 8. They Use A Proven Sales Process
A sales process lays out a clear path for taking a new enquiry through to contract. It eliminates the time-wasters early on and allows you to save time by only working with serious clients who are ready to build.
By following a process, you can tailor your proposal to a client's specific pain points, effectively positioning your company as the only viable option for the client, eliminating your competitors and ensuring your margin is protected.
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