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By Erica Konieczny
March 29, 2016
Small construction companies have unique challenges when it comes to marketing and sales. Unlike companies selling everyday consumer products, construction companies are usually selling an expensive service. Small construction companies also work within limited geographies, meaning their market is more limited and they are at the mercy of cyclical expansion and contraction. Here are a few ways your small construction business can succeed in such an unstable environment:
The term “sales funnel,” is used to describe the entire sales process–from initial contact to purchase. With such a high cost, construction sales tends to be a much longer process than most. Purchasing a house, remodeling a home, or expanding or building a shopping center, are all major investments, so people tend to spend more time and effort in the research and planning stages before they are ready to buy.
It also means that many prospects are not really prospects at all. Once they find out the real cost of their dreams, they can be quick to change their minds. That makes it very important to have some type of lead-qualifying process. You need to know if the prospect is willing and able to fund the project. Then, you need to ensure you stay top-of-mind–providing all the resources to assist your prospect in making the best decision (which is you!).
If you sell to homeowners and the single-family residential market, your potential customers will be making personal investments rather than a business investment, creating a lot of personal risk. Your system needs to have highly accurate estimating so that potential customers feel safe about the cost and timeline of the project. You should be responsive to questions or concerns about contingencies, and offer ample evidence of your expertise. It’s important to stay in touch until a contract is signed and to ensure all parties are satisfied with the agreement.
Selling to developers or businesses is often a more cut-and-dry process of submitting bids. However, these potential customers are still concerned about risk and they will want to be assured that you have accurate estimating, excellent planning, and the expertise to complete the project. Make sure you are staying in touch with your prospects–as in any other business to business relationship, a personal touch carries weight. Whether it’s an appropriate, heartfelt gift, or a note of congratulations on an achievement, personable is memorable.
Construction’s business cycles are closely tied to financial markets, government spending, and demographics. With so many factors, the cycle becomes a series of rising and falling curves denoting periods of expansion and contraction. The construction business that doesn’t take this into consideration is going to end up rising and falling with the market, often in extremes.
To manage these cycles and ensure they are not disruptive to your business, you have to know your market. If you build homes, demand for your product is going to go down as interest rates go up or as the economy declines. If you provide services for non-residential, you will know that a rising economy does not mean that every part of the sector will expand proportionately. These cyclical trends make it more important than ever to stay up to date on how the construction economy is performing–whether that’s labor, commodities, or investment. The sooner you can detect changes in the business cycle, the more you can plan ahead.
Before you begin to plan specific actions, it’s important to start with the big picture.When the economy is expanding (like today), your plan may include improving your business assets and resources. If the economy is beginning to decline, consider your overhead and look for ways to boost cash reserves. As you begin to drill down, you can begin to factor in projects in the pipeline, the state of your business, and any changes in the economy.
In order to have an effective marketing and sales program for a small construction business, you’ll need to pay attention to the details of your market. Once you understand the cycles, you’ll be able to plan further ahead and avoid any potentially damaging effects.
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