Defining Your Market, Choosing Your Customers
Let’s keep our options open! Just say yes to every opportunity! Eenie meanie? It’s certainly true that flexibility and possibility thinking are important qualities in life–and business ownership. But, constant dabbling and the inability to define market and customer segments are typically not terrific for long term success. When you own a construction business, leading forward with a strategic focus on where and how you’re competing is essential. Follow these pointers as you assess and tighten your strategic path to growth.
Focus Creates More Opportunity
At Construction Business Owner Lori J. Sullivan, president of BluePrint Growth Consulting, acknowledges that because markets (and the world) are always changing, there will always be reasons to pursue opportunities that fall outside the plan, but cautions that “those exceptions should be deliberate not reactive”:
- Many leaders view market and customer selection as limiting. They prefer to keep every option open and pursue opportunities as they arise. In reality, focus creates more opportunity, not less.
- A clear strategy gives leadership a basis for deciding when to stay focused and when changing conditions justify a shift. It shows business development where to invest time, helps marketing build a stronger message and allows operations to prepare the people and capabilities needed to deliver.
- The right market provides opportunity. The right customer allows the company to turn that opportunity into a profitable project, a strong relationship and repeatable growth.
- In construction, knowing how to build is essential. Knowing where to compete — and whom you want to build for — is what creates a strategy.
As you assess your strategy, be sure that it provides a unifying focus for every aspect of the business. If you find that you’ve got a separate “strategy” for various business functions (tech, safety, admin, marketing, field…), then you and your lead people are quite likely rowing in many different directions. Eric Zichterman, founder of Freedom Forge Coaching, points out: “A true business strategy…shapes how a company leads its people, manages projects and plans for sustainable growth. It’s the blueprint that guides decisions, leadership practices and safety standards, turning individual actions into a unified culture….A strong strategy, reinforced by effective leadership, committed ownership, disciplined management and a deep commitment to safety, ensures your business leaves a lasting, positive mark.”
Evaluating and Choosing Your Markets
Cautioning against using anecdotes or casual information to make hasty decisions about the markets in which your business will compete, Sullivan encourages a rigorous coming together of business development, operations and finance to evaluate market sectors, considering:
- Growth trends — Is the sector expanding, stable or contracting? What regional tailwinds or headwinds could affect future construction spending?
- Procurement approach — Does the market value qualifications and early contractor involvement, or is work primarily awarded through low-bid procurement?
- Barriers to entry — What project experience, bonding, certifications, safety records, technical capabilities or specialized personnel are required to be taken seriously?
- Typical projects — What types of buildings does the sector build or renovate, such as laboratories, residences, tenant improvements or multisite programs that require expertise?
Once you identify the market sector that your business will focus on, it’s also essential to dig deeper into the customers within that market that you can serve most successfully. As Sullivan wisely observes, “Not every customer in an attractive sector will be a good customer for your organization….A good customer is defined by both economic value and organizational alignment….a customer that values transparency, collaboration and long-term relationships may become highly profitable over time, even if the first project is relatively small.”
Specifically, as you explore where your company can create unique value while earning a fair profit, Sullivan suggests assessing:
- the potential for repeat work
- project size
- procurement practices
- payment history
- geographic fit
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