In last month's column, we introduced the seven core elements of value and the importance of measuring performance in each area. Tracking performance in each of the core elements allows management to determine where value is created and where it is destroyed. For instance, if your sales force is out chasing contractors for parking-lot work when your specialty is tilt-up construction, it is wasting company resources.

Contractors looking to improve performance should first look at their marketing functions, and specifically their marketing strategy. Nothing is constructed until a sale is made, but no sales should be made until you have determined that they fit your marketing strategy for profitable growth. Profitable growth, increased customer loyalty, and maximizing return on investment are all just abstract terms until you have done the research and worked up the details to determine how your resources should be deployed to get the right work. A focused strategy is the first step in value creation, and it will put you several steps ahead of most of the competition. A recent survey conducted by FMI revealed that only 55% of all contractors have a formal marketing strategy or business development plan.

To ensure that your marketing efforts are creating value, you should gauge your company's performance relative to best-in-class performers. Best-in-class marketers do not chase every project that comes along, nor do they rely solely on advertising their competitive advantages. Doesn't everyone do on-time, on-budget, high quality work? The best companies proactively pursue customers and projects based on a formal business development plan that drives the company's sales efforts. They train their sales people to call on the right customers for the right projects.

The business development plan drives the “get work” priorities of the organization by focusing on building profitable backlog. Publishing key aspects of the plan company-wide ensures that everyone is working toward the same strategic vision. The plan includes specific performance targets, such as the number of new clients, or backlog in each target market and allows for adjustments depending on the market or the consideration of new opportunities. Target marketing works like a map to guide marketing efforts, and some contractors have found it useful to make an actual map to indicate opportunities and competition.

The best companies differentiate themselves from their competitors in ways their customers care about.

They constantly work to understand their customers' needs by surveying the market', perception of their performance compared with the competition. They focus on providing high-value services for the best (most profitable) customers. They use their knowledge of the competitive environment and customer needs to create a consistent marketing message in all marketing collateral, proposals, presentations, and Web sites to reinforce the features, benefits, and advantages of choosing the company over its competitors.

Every business development plan should focus on customers, but the best companies create an internal organization to effectively implement the plan. For instance, what are your pricing strategies, and who has the authority to final price a job? Who makes profit level recommendations? How is overhead being applied? Does the final price take into account project risk? You may want to offer preferential pricing to key customers, but you have to assure that estimating, sales force, and project management are all on the same page. If you are not aware of your performance in each of these areas, you risk losing the battle to a competitor that is better at something that you did not even know you weren't good at. Best-in-class contractors are seldom blind-sided by the competition. They do the research, create a plan, implement, measure progress, and adjust where needed.

Next month, we will describe some specific ways to create value through operational best practices.

— Brian Moore is a consultant with FMI, Management Consultants to the Construction Industry. Brian works with contractors on various strategic, financial, and operational issues. Specifically, his work at FMI involves in-depth market analysis, strategic and business planning, and market planning for clients throughout the nation. He can be reached at 919-785-9269, or by e-mail at