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6 Most Costly Mistakes Made In Business

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With founding a business many subjects come along. Money is one of them - but be careful. Here are 6 costly mistakes to avoid.

We all make mistakes. Each of us looks back over the years and we see personal and business failures that have cost us a lot. Sometimes we didn’t know better or we didn’t have all the information we needed, and at other times it was just sheer neglect or poor performance on our part. I was a restoration business owner for nearly a decade. We began as a new franchise startup and sold nearly a decade later as an award-winning, hyper-growth, full-service restoration company.

Now that I am out, I can pause and look back. I can reflect and observe my own behavior and I see the mistakes I made as clearly as day. I wish I had clearer vision when I first started out and I wish I hadn’t made the mistakes that I did. Each one was costly to me, to others, to my business, and I regret each one!

1. Without a doubt my biggest mistake was that I failed to fire people when I should have.

Owners tend to keep the devil they know than replace them with someone they don’t know. I can promise you that the cost involved in replacing an under performer is nowhere near what you will pay by allowing them to stay and negatively impact people and profits. If you believe they need to go begin the hiring process today. You don’t need to terminate them today but you do need to begin interviewing and recruiting their replacement. Once you have the replacement in hand execute the termination when you are ready. But don’t wait, be strong, act now, or you’ll be sorry! I was!!

2. Failing to properly supervise cost me money and reputation.

In the early years in particular my failure to closely monitor estimating practices left a ton of money on the table. Not providing sufficient site supervision caused me a lot of stress and problems through dissatisfied customers and disappointed insurance carriers. When we would call asking for final payment our collections person oftentimes was read the riot act for calling asking for money before the job was even done. Oops, I was told the job was done. Supervise everything. Confirm what you are told. Be certain “done,” really is done.

3. Hiring a construction manager without experience in the damage repair industry was a daily disaster.

I was always happy for some other company to train my new hires having given them 101 introductory lessons to our industry. My company was always on such a high growth trajectory we were not a good training ground for a newbie. Our damage repair industry is unique from any other type of construction. Being good in new build or even remodeling doesn’t mean you will be a good fit for insurance work.

One manager with wonderful experience in remodeling was absolutely overwhelmed managing 30+ jobs at once when he was used to completing far fewer than that many in an entire year. His skills and experience were canceled out to a net zero because he was overwhelmed by volume. If given the choice of hiring someone with experience in our niche industry or a skilled person from outside of it, I will go with the industry experience every single time, and so should you!

4. Taking bids from subcontractors led to their abuse of my goodwill.

In the very beginning of my construction years I accepted bids from subcontractors. I didn’t know how else to get a number for a job than to ask someone else to give it to me. I learned the only reason you would accept bids from subcontractors is because you don’t know any better. I find contractors giving away construction jobs for a 5% referral fee while others are satisfied with O&P and earn a mere 20% per job. You will never build your business big and strong doing that.

You should expect a 50% profit margin on every damage repair job and this requires that you take control of your material and labor costs. Xactimate contains several often overlooked features that will easily help you master control of costs and insure your profit margins. I never accepted bids from subs (other than for the specialty trades) and you shouldn’t either. Take control of your profit spoilers by controlling your material and labor costs and don’t ever send your work out to bid

5. Making material purchases without a plan cost me a lot of my profit.

How is your purchaser to know what to buy, how much, and at what price point if you don’t tell them? Xactimate has several internal reports that does all of this for you. We always required that the purchaser have this materials list from Xactimate in hand whether ordering over the phone or buying in the store.

I recall when I first started offering construction services one of my employees bought a $210 sink replacement and Xactimate paid me only $90 for the purchase. When I asked why he did that he said, “No one told me what to buy. I thought I was getting a sink that looked the one I am replacing.” I thought for a moment and then realized he was right! How would he know?

What I asked myself next changed everything, “Where do I find out before we buy what Xactimate pricing allows for this purchase?” Finding the answer has saved me more money than any other step I took in business. Do you know where to find this information? I didn’t for the longest time, and that cost me money every single day!

6. Believing my estimator knew more about estimating than I did cost me on nearly every job we did.

Nearly every contractor I speak with is certain their estimator is leaving money on the table. And why not? Most are self-trained in Xactimate and we hire them because of their construction background. Xactimate is how they turn their construction experience into valued help for our company services. So while they may not be lacking in skills and knowledge in construction services there is no reason to think they are equally equipped in estimating or in the use of Xactimate.

When I finally put 2 + 2 together I got deeply involved in our estimating practices and in our estimating platform. What did I find? I found that my regular review of estimates was saving me well over $150,000 annually. That was a huge amount of money that went directly into my company profit that would have been lost forever otherwise.

Owners, you don’t have to be an estimator which requires vast knowledge and experience in construction services but you do need to be the best estimate reviewer in your company. It is a matter of protecting your investment, and improving your profit.

There are just a couple of internal features that go unnoticed by most estimators that when properly utilized will transform your per job profit margins. Those features will give you the most important tool you can imagine to help you take control of your construction services.

Yes, I made each of these mistakes early on in my business. I learned from those mistakes and I made the necessary corrections. I implemented change for each one and gained greater control of my company and improved my operation, my cash flow, and my profit.

So what’s the big idea here?

Every owner wants to grow their business but for many owners the place to start is not with generating more revenue, but with achieving higher profits. What needs to change is not on the outside of your business, but on the inside! It’s not about getting more work but doing a better job with what you have.

If you want to grow your business perhaps the best place to start is with the mistakes being made right now inside the four walls of your operation. Improving the inside will lead to more opportunity and work from the outside.

 

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