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The Secret to Contractors’ Success
Tax Tips
Uniting the Way
The Dingo on Biodiesel
In The News
The Secret to Contractors’ Success
FMI Investigates How Contractors Define and Achieve Success
By Philip Warner, Arthur Heimbach, Ph. D., and Sabine Hoover
Success is boring. There is no need to run for the exits when someone cries, “Success!” It doesn’t sell newspapers. Then again, who wants to hire a contractor who doesn’t know how to succeed, who rarely gets the
work done on time or who loses money on every job? Success should be celebrated more
— touted as a crowning achievement in one’s career or the life of a company. It shouldn’t
be a secret, and it shouldn’t be boring.
In a study of 356 contractors for its latest study How Contractors Define and Achieve Success,
FMI has discovered there is no single secret for what makes a contractor successful. In fact,
FMI found successful contractors fit into five different Contractor Success Profiles:
- The Humanist builds strong relationships with customers, employees and the
community.
- The Generalist balances all six success factors (improving people and their lives, profit
and wealth, sense of presence and reputation, survival and sustainability, progress on mission and preparation for the future and project execution).
- The Tactician projects and processes success.
- The Bottom-liner is measured by financial results.
- The Freewheeler delivers appropriate responses to changing opportunities, times or market situations.
Contractors that succeed manage to catch problems before the chain reaction that leads to failure can get started. Successful contractors learn from their mistakes, but they learn more from their successes. In short, they create a culture of success that pervades the company and everything they strive to accomplish.
Rating their companies on the idea of being an “overall success,” only about 19 percent of respondents felt they were 100 percent successful. However, in a question offering only a yes/no response, 95 percent rated their companies as an “overall success.” In other words, almost all contractors studied considered their companies successful; yet few said they were 100 percent successful. So why do well-to-do contractors not see themselves as successful?
Contractors are reluctant to declare overall success for their companies
The reluctance to declare success for their companies was detected in interviews, as well as from responses to the online survey. Thinking of success as the pinnacle of a life’s work or the goal of a business implies that there is nowhere to go but down or out of the business once success is achieved. In this context, the achievement of success would be the end of the story or nearly so.
Profitability is not the leading factor in defining success for contractors
Participants told FMI that achieving above-average or higher profitability ranked 10th from a list of 15 attributes of success with only 49 percent of respondents selecting “achieving above-average (or higher) profitability as an ultimate achievement” for defining success. For successful contractors, profitability shows up on the scorecard, but it is not the sole measure of success, nor is it a highly-weighted attribute of success.
Values play an important role in defining and achieving success for contractors
Looking strictly at profitability can be misleading when judging the level of success for a contractor. Values are based on much more than the value of money. Ideals like a “sense of family,” “quality employees” and “integrity” frequently trump profitability. Success defined by values and a values-based culture crosses generations, often stemming from the values of the company’s founder(s). The value-based definition of success embraces many important aspects of community and business.
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| Working overtime? When FMI asked contractors to choose among a list of potential trade-offs they have had to make to become successful, they most often said that they sometimes risk losing money in order to keep the customer happy. |
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The criteria used by contractors to define their success are variable
Success definitions are not always static, even within the same organization. While many of the criteria and definitions of success remain the same over the life of the business, about 55 percent of the contractors responding to our survey said their definition of success changed over the years. This may be due to changes in the business cycle, changes in leadership or changes in market forces and the competitive environment.
Setbacks Are Not a Factor for You
Few, if any, companies achieve success without experiencing some setbacks along the way. For successful contractors, it is usually better to deal with setbacks early in their careers or life of the company. Such setbacks, once overcome, become part of the success story and serve as examples of how the company overcame adversity. Setbacks become learning experiences that are talked about openly and solutions are found to prevent such problems in the future.
Setbacks to success are usually singular events that occur now and then in the life of any company. Trade-offs can be of more nagging concern. When we asked contractors to choose among a list of potential trade-offs they have had to make to become successful, they most often said that they sometimes risk losing money in order to keep the customer happy.
Considering concern for customer satisfaction was second only to having high integrity on our list of criteria for success; this is not surprising. Successful contractors will often go out of their way to please their customers. The key to avoiding trade-offs is to pick good customers whenever possible.
Many of the successful contractors responding to our survey expressed low employee turnover as an important criterion for success. As might be expected, the Humanist Contractor Success Profile exhibited the lowest turnover rates of all Success Profiles for salaried employees and the second lowest for field employees. Turnover for field employees varies greatly depending on the type of contractor and the markets in which they work, but successful contractors strive to keep their best employees employed and improve their skills by providing training opportunities and new challenges.
Upon closer analysis, it isn’t that contractor success is boring, but it is more complex than contractor failure. One reason that stories of contractor success rarely make the headlines is that success isn’t a singular event in time. Rather, overall success is an ongoing, continuous effort. To achieve lasting success, a contractor has to build a culture based on its founding ideals and definition of success and keep on building success, often for many generations. Success isn’t boring — it is interesting, it is challenging and a lot more fun than failure.
For the more information, visit www.fminet.com and for the full report, visit www.fminet.com/assets/SuccessfulContractorReport.pdf |
Tax Tips
Grant Thornton Offers Advice for Contractors
Now more than ever, construction contractors face complex tax issues that can strain resources and drain what may be already-shrinking profits. Especially during a recessionary period, contractors need to do what they can to minimize spending by effectively managing their tax burden and protecting themselves against tax increases and assessments. With 2009 ushering in new tax changes and the economic situation worsening, construction contractors should keep in mind the following tax tips:
1. Nail down “bonus” depreciation deductions. All contractors should be aware by now that bonus depreciation deductions were revived for investments made in calendar year 2008. As an incentive for investment in equipment, taxpayers are allowed to deduct half of the cost of 2008 qualifying property in the first year of use, and then depreciate the remaining half of the asset over its normal useful life. For five-year equipment, this results in a deduction of 60 percent of the asset’s cost. If you invested in this property in 2008, make sure to take this bonus depreciation. And keep your eye on Congress in 2009. Legislators are already talking about extending this provision for calendar year 2009.
2. Maximize capital asset expensing deductions. Rules originally intended for small businesses were significantly expanded in 2008 to allow contractors to expense up to $250,000 of fixed asset cost, provided less than $800,000 of assets are placed in service throughout the year. Unlike bonus depreciation, this applies to new or used assets. Look for this provision again in 2009. Congress is expected to extend it.
3. Consider future capital gains and dividend tax rate increases. Under current law, capital gains and qualified dividends are taxed at a favorable 15 percent federal income tax rate. This preferential treatment is scheduled to expire at the end of 2010, however, the presidential election may significantly change the taxation landscape. Taxpayers with significant capital gains transactions will want to work with tax advisers to determine if the tax positions of the new president and Congress merit acceleration of these items into 2009.
4. Revisit the tax rebate. Most taxpayers who qualified for an Economic Stimulus rebate have already received a check, however there are situations where taxpayers may claim an additional credit, even though they have already received a check. The tax stimulus rebate actually is an advance rebate on 2008 tax liabilities, so if income or dependency changes from 2007 to 2008, taxpayers may be able to claim additional credits when they file their 2008 income tax returns this filing season.
5. Look out for the expanded “Kiddie tax.” Most contractors are family-owned businesses and many have used a variety of tax planning techniques to shift income from one family member to another. The kiddie tax has been expanded to require excess unearned income of full-time students under age 24 to be taxed at their parents’ marginal rate, unless the student’s earned income equals one-half of his or her support. Thoroughly review estate planning and gifting strategies to avoid higher income taxes on dependent children over age 18.
The people in the independent firms of Grant Thornton International Ltd. provide personalized attention and the highest quality service to public and private clients in more than 100 countries. Grant Thornton LLP is the U.S. member firm of Grant Thornton International Ltd. — one of the six global audit, tax and advisory organizations. Grant Thornton International Ltd. and its member firms are not a worldwide partnership, as each member firm is a separate and distinct legal entity.
Uniting the Way
New Holland Construction Contributes to United Way with Sale of 35th Anniversary Skid Steer Loader
Like a wide-eyed child collecting the latest baseball card or Corgi Toy, grownup contractors have a collectable urge for equipment. And when there’s a rare black and silver New Holland L175 35th Anniversary skid steer on the market, a contractor would do almost anything to get his or her hands on the limited loader.
The loader that made rounds at last year’s trade shows and New Holland events was purchased by Nebraska-based New Holland dealer Klein’s Motor Electric Co. in a tight 48-hour dealer bid. New Holland Construction has donated part of the sale’s proceeds to United Way of the Plains, in Wichita, Kan., home of New Holland’s global manufacturing plant for skid steers and compact track loaders.
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| Mike Allen, Construction Sales Manager for Klein’s Motor Electric, was excited to receive the anniversary unit at the official handover in Wichita, Kan. New Holland Construction has donated part of the sale’s proceeds to United Way of the Plains. |
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“Good companies make a quality product to sell. Great companies not only make quality products but recognize that strong communities can positively impact the bottom line. United Way is pleased to continue our wonderful relationship with a great company like New Holland Construction as together we build a better community for all of us,” commented Patrick Hanrahan, President of United Way of the Plains.
New Holland’s donation will benefit local United Way programs that are designed to assist community members to increase their financial stability and maintain their health, as well as to help young people to improve their academic performance.
Mike Allen, Construction Sales Manager for Klein’s Motor Electric, the New Holland dealer that purchased the one-of-a-kind skid steer, was excited to receive the Anniversary unit at the official handover in Wichita. The custom machine features chromed rims, tinted cab windows, New Holland-yellow pilot controls, chromed throttle, New Holland leaf decal on the rear window and, last but not least, customized Built to Work decals.
“We have been a family-owned business since the 1930s and the New Holland skid steer loaders are our main product line,” said Allen. “Tradition and heritage mean a lot to us. The New Holland L175 Anniversary unit will be the proud centerpiece of our exhibits at shows in the area for many years to come.”
The Dingo on Biodiesel
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| Toro flexes the power of biodiesel, as its TX 525 wide track and TX 525 narrow track CUL models are biodiesel compatible in 2009. |
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Continuing the green trend, Toro’s 2009 red Dingo TX 525 wide track and TX 525 narrow track diesel compact utility loaders (CUL) will be biodiesel compatible for blends up to B20 — which represents a mixture of 20 percent biodiesel and 80 percent petroleum diesel fuel.
“Demand for biodiesel-compatible equipment continues to grow,” said Greg Lawrence, Product Manager for the Toro Dingo line. “For the past five years, Toro has conducted extensive equipment testing using pure biodiesel and biodiesel blends. Our biodiesel-readiness initiative represents Toro’s continued commitment to exploring and developing innovative solutions that meet the needs of our customers while protecting the environment.”
Biodiesel is a biodegradable, non-toxic alternative fuel derived from biological sources. Compared to petroleum-based diesel fuels, biodiesel releases less carbon dioxide, unburned hydrocarbons and particulate matter — all major contributors to greenhouse gas emissions.
The Toro Dingo TX 525 narrow track and TX 525 wide track compact utility loaders feature a 25-hp Kubota diesel engine and deliver added torque and hydraulic flow for enhanced performance. Toro compact utility loaders can be outfitted with a multitude of productivity-enhancing attachments.
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A Helping Hand
In today’s tight economy, customers are running their construction equipment longer and harder. To help boost equipment uptime, Case Construction Equipment is expanding its toll-free customer assistance hotline — 1-866-54CASE6.
“Customers’ needs are not restricted to traditional business hours,” said Chris Fabbri, Director of Service Excellence at Case Construction Equipment. “Our mission is to provide parts and technical support when customers need it most.”
As of Feb. 1, the Case customer assistance program will be available for models of Case crawler dozers, large excavators, motor graders, large wheel loaders, articulated trucks, skid steers, compact track loaders and compaction equipment.
For additional information regarding Case products, service, finance offers and product demonstrations, see your local Case dealer, call 1-866-54CASE6 or visit www.casece.com.
Sell! Sell! Sell!
Topcon Positioning Systems has signed an agreement with AeroTech Sales LLC, of Fountain Valley, Calif., to represent the OEM market for TPS’ mobile control products. AeroTech has extensive experience in servicing large defense, transportation, space and related industries throughout Southern California.
James Murphy, Topcon Director of Sales and Marketing, OEM Products, said, “Having Topcon’s OEM GPS and GLONASS products and technology represented by an experienced and well respected firm like AeroTech in these important market segments is quite exciting.
“AeroTech has an extensive network of contacts and strong record of success in the defense, transportation and aerospace industries and in combination with Topcon’s leading edge technology. I foresee a very formidable competitive tandem.”
AeroTech’s strengths include the “more than 80 years of combined experience in representing electronic manufacturers to key industries,” Murphy said. “Their representatives meet with engineers, program managers and procurement specialists of many of the largest systems integrators on a daily basis.”
AeroTech’s Todd Jones, Managing Member of AeroTech Sales, said, “We are privileged to represent Topcon in the Southern California territory. AeroTech Sales specializes in electronic subsystems and systems that are innovative and proven reliable in multiple types of environments.
Who You Gonna Call?
JLG Industries Inc. has a new toll-free phone number to help customers reach JLG Service Centers. JLG customers can dial 1-877-JLG-CENTER and a quick menu will guide them to the JLG Service Center of their choice – Riverside or Houston. Once connected, JLG personnel can help with scheduling a repair, inspection or parts order. They can offer technical expertise and troubleshooting on whatever the inquiry may be.
JLG Service Centers provide both in-shop and mobile repair service, maintenance and inspection services, warranty repairs, reconditioning and same-day parts service for JLG customers’ aerial work platforms, telehandlers and even other types of equipment.
One for the Record Books
Sports fans love to pour endlessly over statistics of their favorite players and teams, and contractors are no different — boasting how far a HDD drive was or how many feet of pipe were installed. A new record has been set by the International Powered Access Federation (IPAF), which has issued a record 81,378 Powered Access Licensed-Registration (PAL) card in 2008. This marks an increase of 89 per cent from the 43,007 PAL cards processed in 2004, which are due for renewal in 2009 as the PAL card is valid for five years.
“Training will grow steadily in 2009, as new markets and industrial sectors embrace the benefits of internationally recognized operator training,” said Tim Whiteman, IPAF Managing Director. “The IPAF training program has won acceptance in many countries and we are seeing a strong push towards a standardized level of platform operator training available globally.”
The IPAF training program for operators of aerial work platforms is certified by TÜV as conforming to ISO 18878. It is a voluntary, industry-led program with the aim of making safe equipment even safer. Powered access offers a safe and efficient way to work at height, but basic training and familiarization are needed before using the equipment. IPAF itself does not provide training. The program is provided through a worldwide network of more than 330 IPAF-approved training centers, mainly member manufacturers and rental companies.
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