We recently participated in the ICAN Event Auction. We offered a $10,000 voucher for our business consulting services as a means to raise money for the Island Coast AIDS Network, a charity that raises money and assists those afflicted and affected by AIDS, at its annual charity ball auction in Naples, Florida.

The Philip Douglas Salons (2 For The Road, Inc.) was the big winner and commenced work with us to expand their revenues, increase their profits, and attract and retain the very best hair stylists and color experts in the region.  Philip Lindquist and Paula Warnock, owners of the renowned chain of salons in Naples, Florida, enjoy the reputation of “Salon to the Stars on the Gold Coast of Florida“.  Philip, personally, is noted for the generous philanthropic giving of his services and money to those suffering from cancer.

Ed Sundberg and Tony Burruano, Joint Managing Directors of the Burruano Group, Inc., will be delivering 2 workshops at the Southeast Building Conference (SEBC), in Orlando, Florida tomorrow, July 14 2007. Sundberg will be presenting a workshop from 8am-10am on successful succession planning (Succession Planning: What, When, Why, & How) for privately held and family owned businesses.

Burruano will be presenting a workshop entitled “7 Deadly Mistakes Construction Businesses Make… How to Recognize, Quantify, and Avoid Them” from 10am-12pm also tomorrow, July 14^th.

This is the second straight year Burruano and Sundberg have offered workshops at this Eastern Regional construction business event. Marcia Albert, EVP – Marketing for Burruano Group will be on hand for both presentations to answer questions of the attendees regarding BG or regarding marketing/branding issues of their companies.

www.sebcshow.com

We are proud to announce the Burruano Group has joined NAHB. The NAHB is an association that offers timely information and support to the home building, home remodeling, and commercial construction industry. Burruano Group contributes to the NAHB by volunteering their time to several construction committees of their local chapter, Collier County Builders Association, and by offering their business consulting services to members of the NAHB at a discount. By the active involvement of its executive staff of Ed Sundberg, Marcia Albert, and Tony Burruano in NAHB, Burruano Group intends not only to broaden the firm’s knowledge of construction issues, but hopes to assist the association and its membership with improving their respective companies in terms of increased revenue and profits.

For more information please visit the NAHB’s website: http://www.nahb.org

We cannot be all things to all people! Not only do we need to focus on the applications of our products or services, but as our first step, we must clearly define, exactly, who our top tier customer is, where he is, and how to get there. The top tier customer is that person who is willing to pay for the value added service we provide (i.e. give us the margins we want) and will normally repeat that sale if that is important to us. Once we know who we want, we need to fine tune our message to them in order to set standards for ourselves around how many steps it will take to secure each sale. Our message confirms the “customer promise” (what the customer expects) and defines the value proposition that our business must deliver (we set up centers of excellence behind the value proposition). The standards define the resources we need to get the results we must have.

Hooking a potential customer takes much deliberate work. The first step is to find out where he lives and how to access him. It may often take a third party introduction or finding the proper conduit for reaching the prospect. The second step is to arrange that first meeting. That may sound odd, but the less you come across “selling”, the less the chance you will be lied to in return. Just think about all the times people have tried to sell you things you didn’t want to buy. You would tell them anything to get them out of your way. That applies to even the best sales person when talking to someone who doesn’t know they need your product or service. So the approach here is not to sell, but set up the prospect to buy! This is called “hooking”. If the hook is buried deep, you can close. Premature closing can result in that fish pulling away and the “sale” lost.

So how do you hook? First, you must appreciate the research that says that people “buy” emotionally and not intellectually. Second, you need to get your prospect into your system of selling and get them out of their system of buying. During your discourse with them, qualify their emotions to determine it they fit a “real” customer profile. If you undertake your discourse correctly, you will lead your prospect into a funnel of emotional pain. That emotional pain is not an “OUCH!”, it is an emotional need to change and buy your product or service in order to solve their serious issues or needs that you can address better than your competitors. Once you have captured the emotional issues surrounding your prospect’s ability to do a better job for themselves by using your product or service, you have placed the hook. Setting the hook deeper requires a constant reinforcement in the “selling” process. Their relief from pain comes from working with your company using your solutions that he is very willing to pay for at this point. Now how do we get to “close”?

The next article in this series will describe how to “close” the customer.

Bonuses paid when a job or a year “goes well” or “you make money”, or worse, paid as a Christmas bonus inevitably become ENTITLEMENTS. When the incentive is not paid based on the job and/or the year EXCEEDING your planned profit and performance, when it’s not based on the employee or employee group (as applicable) exceeding their specific standards in their jobs linked to your MINIMUM ACCEPTABLE PROFIT, simply the bonus becomes a gift and eventually becomes an expected entitlement. When it becomes an expected entitlement and it’s not paid on a job or at the end of the fiscal year or in December, the reverse often occurs…productivity declines - another waste of profit and cash flow with a potential decline in business discipline, poor attitudes, and more lost profit and cash flow.

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I’ve heard the term “accountability” probably only second to cash flow/profit over my 30 plus years of working with privately held and publicly traded companies. I’m often told, “I hired them for their experience and expertise, they know their jobs, but I just get what I get…not what I want”.

The fallacy is that when you leave it up to your employees to determine “what good is”, you simply get their “good” (potentially multiple little businesses ongoing with no risk…except to you as the owner), not YOUR GOOD. Assuming that your definition of “good” is valid (keeps you in business) and achievable (not impossible or benchmarked to constant 100% performance), whether in construction, manufacturing, distribution, or services, if you can’t clearly define YOUR GOOD in terms of critical processes to be performed, financial and operational standards linked to HOW YOU MAKE MONEY, have the ability to measure those results by critical process, and link the results to how the employee makes money, you simply can’t create ACCOUNTABILITY. In simpler terms the employee has to know precisely what they are accountable for daily/weekly/by job (standards or benchmarks based on the specific job or process); when they have to look to know if what their doing is working under your definition of “good” (via reports or simple observation); and to whom they have to communicate the results of their observation of good or bad to defined timelines.

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Nearly 10% of all the companies that I have personally worked with over the past 35 years describe themselves as “Christian Based”. The Christian based companies have an exceptional acknowledgment of Jesus in their daily lives, love of the Bible, and they believe in the power of prayer. They read from the Bible either at home or at the office and often with their employees. Many begin each meeting with prayer. Everyone I have met in the Christian based companies are wonderful, consistent people who care deeply about their faith, their customers, their family and their employees.

The nature of my business, the Burruano Group, consists of defining and implementing corrections to problems involving employee accountability, profit, compensation and revenue. During the course of my work, I have discovered that each one of the Christian based companies experiences the same problems common to every other company we have worked with over the years, Christian based or not.

One of the unique challenges I have encountered in working with this group is that when they have an over dependence on prayer and family ties, they become paralyzed. They are unable to take “ACTION”. As I’ve said to each of them, “You were already successful or you wouldn’t be in a position to retain our current firm. You have been given a blessing in the continued existence of your business. Realize that many businesses fail early on, yet you have made it this far!”

What they often forget is the charge in the Bible to “Stewardship”, which is a responsibility to take the gift you have received, use it and act upon it. Neither prayer alone, nor love of family and employees alone, “gets it done” in the business world or in life.

Acting with discipline, accountability and standards, and moving forward to implement your desired and achievable results, coupled with a faith based culture in your organization, “gets it done”. Accept your responsibility as a “Steward” to act and use the gift you’ve been given by God.

Many construction companies utilized their own equipment in the execution of their contracts. They’ve made a determination that there is sufficient potential utilization that ownership is better than renting for a job for various economic and efficiency reasons. They use the market rental rate or an internally determined rental rate within their bids. Once the job commences, many contractors do not account within their job costing for this equipment. The effect is to overstate profit during the ongoing job review or at the end of the job, since costs within the bid are not considered on the job cost. Thus, the contractor can overrun labor hours and cost, overrun materials or subcontracted costs, and this is offset by the zero equipment cost posted.

The same situation occurs when a computed labor rate is used in the bid. More often than not, the labor rate exceeds the actual labor rate, and the effect is the same overstatement of profit. Buy out gain of materials or subcontractors post bid award, again has the same effect.

There should be posted to the job an internal rate of rental by day, week, or month as is applicable. This should be compared routinely to the expenses of repairs, parts, useful life depreciation, interest on the equipment loans, and possibly fuel and any other costs of the operation. This is a profit center, or the contractor would never have purchased the equipment in lieu of renting. It’s simply another means of profit in your business.

Buy out gains on materials, equipment, or subcontractors should be tracked and reviewed for the same reasons and the net buy out should be entered into your job costing system as the “estimate” if your system does accommodate an area for buy out gain.

Labor rate variances of bid rate to actual are often 10% or higher or more. Buy out gains can range from 1% to over 5%. Depending on how much of your own equipment makes of the bid, it can vary the results by 2% to 15% or more. When you add these up, it can create a false ongoing review of the job, then when you review your financial statements, you haven’t earned as much as you thought. Contractors lose confidence in the financials and assume it’s just errors or accountant’s tax moves, and the financial problems on the job are not identified specifically, not addressed, and they simply persist leaving tens of thousands to hundreds of thousands of dollars lost by simply not knowing what is occurring because it’s masked by these other profit centers (equipment, buy out, labor rate).

A simple analysis of your completed jobs compared to estimates, coupled with a financial statement presentation that mirrors the components of your cost of jobs estimated can be accomplished by a knowledgeable construction financial person. If they don’t understand this, change the internal or external accountant.

Over the years of working with companies as a consultant and running companies, it has amazed me as to how many accounting personnel within companies and, even worse, how many outside accounting professionals just don’t understand how that business is organized to “MAKE MONEY”. I’ve heard, “I just can’t get the information that I request”, or “I just look at the bottom line of my financials”. All too often financial personnel and professionals are not trained in the fundamental profit controls of the company for which they work, don’t ask questions to learn, and simply do what they know how to do, not what the business requires.

The purpose of an outside accountant is to not only prepare taxes or provide an acceptably formatted financial statement for your bank or bonding company, but to understand and challenge the financial controls of your business. If they don’t understand the nuances of your bidding process, if they’ve never questioned it and requested information to support what has been explained, it’s likely that your internal personnel are preparing financial statements in a format to support whatever your accountant asks. The accountant will often do what’s been done before, utilize a format that supports them in preparing your tax return, but not supporting management needs and profit control requirements.

A financial statement is simply a control or “sanity check” to determine if what you think has occurred during the last month, quarter, or year is accurate and consistent with the internal information (or gut sense) that you’ve assimilated and with which you’ve managed your company. The purpose of monthly financial statements is to allow more rapid response to issues that arise when the financials don’t match what you think occurred or by effective analysis of key trends and data, focus the company better on means of increasing profit. This can only be effective if the accountant asks questions, verifies responses so he or she truly understands the issues and business.

Question, when was the last time your accountant took the time to conduct an in depth review of your financial processes, procedures, and statement presentation? When was the last time that you had a meeting with your internal or external accountant and learned something new about your business besides tax planning? You are in the business of making money. Profit should be the primary topic of every conversation with your accounting or financial professional. If you don’t take away something that is implementable routinely from these meetings, then you are either perfect (never saw a perfect company) or missing profit and cash flow.

The simple purpose of your outside advisor is to increase profit, increase cash flow, maintain compliance needs, and to MAKE YOUR LIFE EASIER. Ask yourself the question of whether all those primary issues are addressed. If not, you’re missing profit and missing the right professional.