Construction and Contracting Business. Entrepreneur magazine
While not inclusive or unique, the PANIC list gives the important factors required to become a thriving and happy contractor.
Astute readers will notice that we do not mention high intelligence or IQ, nor do we include advanced degrees. Intelligence and education are important, but they are not the most important aspect of becoming a successful contractor. Contractors are practical folks with unique talents that cannot be measured by university degrees and advanced-placement testing. Sure, they might have to pass competency tests in their home state, but these are usually practical exercises devised by politicians attempting to protect the public.
Of course, entrepreneurs should not actually panic when events take a wrong turn; just remember that failure is not an option. However, after reading the remainder of the chapter you’ll understand that the definition of PANIC cannot be found in any dictionary.
Successful contractors exhibit steady persistence in spite of the many obstacles that they meet each day. Running a business is a difficult, sometimes discouraging, undertaking. Entrepreneurs are able to look to the distant future, stick with their long-range plan, and not get sidetracked by temporary difficulties. Perseverance implies a great deal of optimism about the future and a strong passion for your work. If you really believe in the future and believe that your work is important to your community, you’ll be able to overcome adversity, win clients, and own a respected, profitable, and successful business. And having faith in yourself allows you to go further than others and rise to the top of your profession.
tip
Typically, a landscape contractor who works in the northern part of the country may have to lay off the majority of his employees for three months during the winter. Income drops to a trickle, but fixed costs need to be paid. Before any bonuses are paid to key executives, he ensures that enough cash is on hand to tide the company through the lean months. As one of the owners told us, “In the winter it often seems like we dig a big hole in the ground and throw money into it.” He also has a mathematical formula for distributing bonuses that ensures there are funds available to reinvest in the company as it grows. Not only is the company able to purchase new equipment, it keeps its interest expenses at a manageable level.
A good sense of financial management is critical to succeeding as an entrepreneur. Because cash flow is the lifeblood of most businesses, including those in the contracting industry, timely management of income and expenses often makes the difference between a successful business and one that ultimately fails.
In many parts of the country, contractors have to contend with seasonal fluctuations of income and expenses, which makes long-range financial planning essential for success. Successful contractors establish a reasonable budget, use it to implement a competitive system for establishing prices, and regularly monitor both income and expenses to ensure that their financial management plan is on track.
Starting your own contracting business involves a certain amount of risk because of the degree of competition in the industry and because many specialty contractors require a substantial financial investment just to get started. However, the risks can be greatly reduced by employing a sound and consistent financial plan.
In general, contractors are creative craftspeople who use their innate skills to develop their business. Creativity comes in many forms: Some have the power of visualization and can “see” how the many elements of a project fit together. Others are masters of scale and proportion who can place individual elements together. Yet others are true artists who can make perfect individual elements that fit into the whole. Many have an excellent aesthetic sense and make creations that have good taste and a sense of beauty. Finally, successful contractors understand that many times “form follows function,” and they use their skills to ensure that their creations not only look appropriate for their task but also “work.” Whatever form or forms of creativity these entrepreneurs display, they all have full confidence in their own natural abilities. This self-confidence allows them to forge ahead and take on the risks that are inherent in starting a new business.
Natural ability and creativity are not limited to merely the physical aspect of a contractor’s work. Creative accounting can save a contracting company thousands of dollars each year. Creative use of employee incentives can raise the level and quality of the work produced by the company. Every aspect of managing a contracting business can benefit from creative thought, and the most successful entrepreneurs tap into their own natural abilities. In addition, contractor-owners must be able to multitask, that is, understand, recognize, and react to all that is happening around them—not only the day-to-day events of running the business but also the consequences of many conflicting personalities working together for a common goal. On the other hand, owners must be able to focus on the immediate task at hand and avoid getting sidetracked on unimportant issues.
While we applaud those who aspire to higher education and do not recommend dropping out of college, several famous entrepreneurs actually did drop out of college (or took a leave of absence) to pursue their dreams. Their natural abilities and creativity allowed them to succeed without completing their formal education. Here’s a short list of well-known names with the company they founded and the college they attended: Bill Gates, Microsoft, Harvard; Michael Dell, Dell Computer, University of Texas; Steve Jobs, Apple, Inc., Reed College; Paul Allen, Microsoft, Washington State University; and Mark Zuckerberg, Facebook, Harvard.
At the other end of the spectrum, Google, Inc.’s founders Larry Page and Sergey Bin both received master’s degrees from Stanford; in fact, seven of the top-ten CEOs of U.S. companies, including Warren Buffet, have college degrees. Several have master’s degrees, and one has a Ph.D.
Most of the skills required to operate a successful contracting business can be learned, either through formal training or from experience. However, instinct, which really means having a good feel for business, is something that cannot be taught. It is the intangible something that separates the most successful entrepreneurs from the average business owner. Those with good instincts really know themselves and, most importantly, understand their own strengths and weaknesses, turning this knowledge into an asset, and creating an efficient and profitable entity. These folks not only have the ability to talk a good game, they can also execute their plans to the benefit of the company.
Business owners who really understand themselves also understand their own shortcomings and take steps to balance their weaknesses by surrounding themselves with people who compensate for them. The best and most successful realize that their success is often a result of the people around them rather than themselves alone. Instinct, or good business sense, allows these entrepreneurs to get the most out of the people around them and build a true team with a common goal.
Confidence is an asset, arrogance a liability.
Excellent communication skills make up the final section of my definition of the word PANIC.