Profit Strategies for Your Building Trades Business photo

Profit Strategies for Your Building Trades Business

Here are five of the most important profit strategy considerations I’ve encountered in a long career using strategy and advising building and trades companies about it:

Strategy is not about the long-term

Thinking about strategy as some kind of long-term commitment can blind you to the fact that strategy is not about the long term or the short term, but about the fundamentals of how the business works: the sources of value creation, the drivers of the cost to deliver it, and the basis of competition.  To get a grip on strategy, we do not need to lengthen the time horizon of our thinking, but its depth. Far from being about things we are going to do in the future, strategy is about what we are going to do now in order to shape the future to our advantage.

Become an Influencer

Your clients will pay you in direct proportion to the amount of confidence they have in you. How can you give them confidence in you and thereby increase your pay grade? The key is to demonstrate your skills and industry knowledge in every available way at every available time in every available forum. Sound challenging? Your results are a lagging indicator of your habits so if you’re not happy with your results you know what you need to do … become an industry influencer.

Competitive advantage is essential

The truth is that you need to rely on multiple advantages rather than just the one. What do you have that allows you to compete at an unfair advantage? Is it location, is it skills, is it unique processes, is it cost advantages? Find what these things are than focus your business on maximising your unfair competitive advantage in the market.

Being agile won’t compensate for strategy

Agile trade businesses – especially start-ups – are always turning on a dime and they certainly don’t seem to be following any kind of plan.  Easy enough, then, to assume that what you see an agile firm doing – acting at high speed, maintaining a high tempo, being highly responsive – is all there is.

Agility is not a strategy.  It is a capability, a very valuable one which has immediate operational benefits, but that cannot permanently affect a firm’s competitive position unless there is a strategist taking the right decisions about where to direct that capability.  And the seeming absence of a plan doesn’t mean that successful start-ups don’t have strategies.  A strategy is not a plan, it is a framework for decision-making, a set of guiding principles which can be applied as the situation evolves.  And most start-ups fail because being able to turn on a dime doesn’t mean that you’ll turn in the right direction.  Successful start-ups actually do a lot of hard thinking about fundamentals, questioning and testing basic assumptions with a rigour that older businesses would do well to emulate.   Start-ups have to, because their resources are extremely scarce.  If they don’t have a coherent strategy, they will make poor resource allocation decisions, and for them that will not mean a fall in earnings, but death.

You need a digital strategy

Digital technology is a way of collecting, storing and using information, and information is everywhere. In its early stages, it enabled us to do what we did already but better.  Then it enabled us to do it a lot better.  Then it enabled us to do things we had never done before.  Building trade businesses without a digital strategy will never maximise their profit potential.

In our uncertain world, fundamentals are changing so we need to think about them, whether they are valid in the short- or long-term.  Think how you can deploy the capabilities you have and build new ones you need to defend your competitive position. Add them in layers to create barriers. Be clear about what will make a difference so that you can make rapid resource allocation decisions. Think deep to act fast. Strategy is still what it has always been: the art of taking action under the pressure of the most difficult conditions.

Adapted HBR April 2019 Bungay