John Kenney, CPRC, CEO, Cotney Consulting Group
Last month, we discussed the items a roofing company might experience in a growth or decline volume stage and the general and administrative stair steps taken to address those changes. In this month’s article, we will focus on using cycles positively, fighting the tendencies in consecutive cycles and the steps to take to be successful in your roofing business.
It is possible to make positive use of a market or business cycle using the stair step concept. If the volume declines, it is an excellent time to focus on the best customers, work by type and people. A decline phase is often a relief to a company because it allows them to cut out the customers they don’t want to work for, the work that doesn’t make money and the people they can do without. Volume declines can also heal the balance sheet and cash position if the decline phase doesn’t last too long.
Growth is the stage to stretch out the overhead and tests the limits of the effectiveness of systems and people. The early growth phases are usually the most profitable of all conditions if the company can manage the cash demands well.
Stagnation is the time to sharpen the ax by improving systems and people. It’s the best time to train, fix equipment, change techniques and address other project management needs. In a growth phase, you are too busy to improve, whereas in a declining market, you are afraid to invest money. All three stages offer value and the company can significantly benefit if you use each well.
As mentioned earlier, ownership and senior management often cannot react to current market conditions successfully because the company is usually still responding to the previous market cycle while also looking forward to the next expected cycle. All of these considerations begin to affect the decisions leadership makes.
For example, if a company’s volume has been declining for a while and is still declining and is expected to continue to decline, leadership’s actions would be clear, though challenging. The same clarity would hold true if the company has been growing and expects to continue to grow. Leadership would be primed and know what to do. There are two significant challenges to overcome:
Leadership must stay present and focus on the management techniques they must use to take advantage of the different stages to fight the first tendency. One of the best solutions for dealing with this stuck condition is to have solid outside voices around the
company such as a non-competing industry peer or advisor. These should be someone senior management respects, who will be direct with them and who has enough distance from the company that they can maintain an objective perspective.
Leadership needs to use the scenario planning discussed earlier to recognize conditions quickly and take appropriate actions to counteract the second tendency. No one can predict the future, but leadership can envision different likely futures, so they are prepared to respond when change occurs promptly.
It is difficult enough to get work, perform and manage a roofing company on a level playing field with consistent conditions. So, when market conditions change, owners and senior managers tend to get stuck in the mode of thinking necessary to succeed in
the last cycle. Too often, they complain about the challenges of the current market and lose the opportunity to use the present conditions to improve the company. Some of the keys to success include:
■ The company knows that it can benefit from all phases of market conditions.
■ Since leadership tends to get stuck in the last cycle, which everyone does, they must guard against it and use outside advisors to help them maintain a proper perspective.
■ As conditions change, leadership needs to change perspective and stay on offense and use the cycle to improve the company.
■ Leadership must be prepared for whichever cycle is coming next by having different scenarios ready.
■ The company has to adapt to the new cycle quickly.
Arm yourself with the skills we discussed in this series and you can use market cycles and changes in volume to your roofing company’s advantage.
John Kenney, CPRC has over 45 years of experience in the roofing industry. He started his career by working as a roofing apprentice at a family business in the Northeast and worked his way up to operating multiple Top 100 Roofing Contractors. As CEO, John is intimately familiar with all aspects of roofing production, estimating and operations. During his tenure in the industry, John ran business units associated with delivering excellent workmanship and unparalleled customer service while ensuring his company’s strong net profits before joining Cotney Consulting Group. If you would like any further information on this or another subject, you can contact John at jkenney@cotneyconsulting.com.
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