When our soldiers are fighting an enemy at very close quarters the term “Danger Close” is communicated to all the friendly forces coming to help. The idea of broadcasting “Danger Close” is to ensure that responding forces know there is little room for error; and to be careful not to target your own guys in the heat of battle. So called Blue on Blue fratricide. After almost 40 years of working with residential and commercial contractors and subs I’m ready to stop blaming the vagaries of the market and instead identify the number one killer of profits and long-term viability is companies’ inability to recognize their own mistakes and dangerous trends.
A week or two ago our Permit Department entered approximately 1,400 permits for that week. A number we have not seen in about seven or eight years. Whether those numbers hold up on an ongoing basis or not, I can’t tell you for sure, but what it does do is to remind me that when we are most busy, we tend to also have the most blind spots. You see it in the frantic pace many of our members keep up and the issues we see in marketing. Not enough of our members are broadening their base at the moment as they seek to collect the low hanging fruit first with the resources they have on hand. I hear over and over again, how difficult it is to get someone on the phone or in person. You have got to ask the question; is the right information getting to the top and then acted on?
Hands down, the issue I hear about the most is the lack of qualified subs and sometimes even reliable suppliers. This last downturn effectively burned our seed corn and there is not enough good people left in the business or thinking about getting back into the business. This is going to come back to haunt our industry, make no mistake about it. But, what can you do? First, like anyone who has had problems with sobriety…recognize the problem. Next, get involved with your industry leaders and associations and formulate solutions jointly. Individually, realize that a portion of your company’s time needs to be devoted to outreach to technical schools and encouraging startups with offers of work. Create financial incentives reserved for actions and activities you want to encourage. Take some risks and put your company out there as encouraging growth in all the support industries. Mentor young subs and even suppliers; yes, all this is possible and necessary! Most importantly, we must paint the picture that the construction industry is a viable career opportunity. Keep in mind that we are always competing for talent; our industry has not done a good enough job of recognizing that we are in competition with many other industries; often times, less cyclical and reliable than our own.
I do a lot of volunteer work where I live. I say this only to make a point. Frequently, I’ll be at this or that group, meet where there is a call for help and I frequently see mostly the same people. It’s a big well, but too few meet the challenge to show the flag and promote our cause. Someone said to me the other day words to the affect that there was not enough giveback to the industry and community we live in. Not everyone has the time to meet every need, every call for help. However, in the case of your own industry, the rewards of participating are more than just emotional. If we don’t encourage and help create the necessary infrastructure four things are likely to happen:
- The prices we pay for services will rise faster than the market’s ability to absorb that increase
- Our schedules will slip
- Our profits will be less
- The control of our future will be more tenuous
None of these four predictions are good for your business. I hope you agree that the rewards from encouraging new subs and suppliers are manifest. And, for entrenched subs and suppliers, this is also a good thing as a healthy market is more likely to be prolonged and the pool of qualified individuals for you to hire will be enlarged. Ultimately, the best market is one where there are a balanced number of buyers and sellers. Always remember that the ability of our customers to pay for our services is mostly inelastic. We must strive to deliver high quality product at the lowest prices that service our required profit margins.
So, keep in mind that when danger is close, shoot the enemy, not yourself!
I wanted to throw out this late breaking information:
Industrial First Quarter Highlights…Leasing activity for 1Q 2015 totaled 3.6 million SFT, a 55% decrease from the same period in 2014. While…industrial inventory under construction totaled 16.9 million SFT, marking a new record for the Atlanta market. Numbers courtesy of Cushman and Wakefield.
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