Determining Your Sales Pipeline in Construction

Bursting Sales

A few years ago, the owner of a construction company was working long hours and feeling completely stressed out all day every day. His company was growing rapidly and the phone was always ringing. His construction company had started small, but now it had grown into a $100 million-dollar business. All of the staff was working at full capacity and the owner found himself constantly hiring new employees just to fill the holes in the strained organization. There was no need to make sales calls. 

The market was overflowing with construction projects and there were more bids than the owner could possibly consider, along with a constant stream of referrals from satisfied customers. At times, the owner felt the company was going to burst from the pressure of the large number of projects in the pipeline. He often longed for the good old days when the company was simple and he could maintain control over a small, more manageable number of projects.

Drought in Sales

Then, the world turned upside down and the owner’s sales pipeline suddenly lost pressure. The market was weakening and the number of new projects to bid began to drop significantly. To make things worse, the owner started noticing leaks in his sales pipeline, and he was no longer able to secure customers simply based on his company’s strong name and reputation. Projects with signed contracts began to get cancelled or postponed. To win bids on new projects, the company had to cut profits significantly, but there were still very few new sales flowing into the pipeline to support the company’s large overhead costs. The company was slowing down, and the owner was completely stressed out again, but for a different reason. He needed to get more sales into his pipeline to keep his company from running out of work and failing.

Generating Sales

Now, the construction industry is highly competitive, and the old way of getting contracts by reputation alone is not an option – business owners can no longer wait for the phone to ring. An actual sales process has become a necessity, but in the construction industry, the sales process can take months, and many owners do not even know how to begin. Construction company owners must learn and understand how the entire sales pipeline works from making an initial contact with an Opportunity, measuring the lead’s progress through the pipeline, to finally delivering a product to a satisfied customer. Construction companies also need to understand how sales pipelines leak. If a contact is not properly handled or does not perceive that the company will offer value, then it will fall out of the pipeline during the sales process and fail to become a customer.

A sales pipeline consists of the following stages: 

1. Target Contacts 

2. Interested Contacts 

3. Active Contacts 

4. Prospective Buyers 

5. Closed Customers 

Target Contacts

Construction companies must determine the optimal method to locate and communicate with contacts, potential projects, and other leads who will be interested in the company’s services. Leads are often generated by advertising, participating in trade shows, networking, and making sales calls. Establishing strong leads requires listening for opportunities and networking everywhere, all the time. Effective lead generation methods for construction companies include networking at association meetings, conferences, charitable events, alumni meetings, and having conversations with current clients, accountants, lawyers, banks and insurance agents who are involved with other local projects. Many construction owners, however, do not want to spend the large amount of time networking that is necessary to locate good contacts – but contacts lead to increased sales productivity and sales productivity leads to profits.

Interested Contacts

Construction companies need a relevant message to communicate in order to gain the attention of their contacts and to stand out from the competition in some way. You must create awareness of your company in the market so that buyers will recognize your company name and become interested in your services. Market recognition often requires professional advertising that utilizes the company logo to create brand awareness and to build confidence in the market. Construction companies who send out periodic mailings that are bold, unique, and eye-catching are often rewarded with a higher volume of contacts and leads. Creative marketing programs that are clever and fun can generate interest in the market and can educate the buyer about the products and services of the company.

Active Contacts

Construction companies must establish a systematic approach to communicating effectively with contacts that are interested in their products or services. Companies need to exhibit a passion for providing products and services that are of value to customers. This often requires a series of meetings with key individuals to build relationships so that buyers feel comfortable discussing their project needs. The goal is to engage in an ongoing conversation with a potential buyer to maintain their interest and to educate the customer about the value of your services compared to the competition. 

Prospective Buyers

Construction companies must work diligently to gain the commitment of potential buyers. Companies often need to negotiate with the customer in order to execute the final contract. It is also important for companies to follow up with customers after the project is finished to maintain satisfaction and to make the customer a repeat customer. It is much more profitable to keep your existing customers than to chase new contacts. Customers who are happy will also make referrals that will lead to new projects. 

Closed Customers

Construction companies must work diligently to gain the commitment of potential buyers. Companies often need to negotiate with the customer in order to execute the final contract. It is also important for companies to follow up with customers after the project is finished to maintain satisfaction and to make the customer a repeat customer. It is much more profitable to keep your existing customers than to chase new contacts. Customers who are happy will also make referrals that will lead to new projects. 

Maintaining Sales in the Pipeline

“Construction company owners need to continuously maintain the flow of new and repeat customers in their sales pipeline by utilizing a systematic and well-defined sales process. The owner should be actively involved in the process to convey that they are sincerely committed to gaining and maintaining the customer’s business. Customers are often delighted when the owner shows them attention as well as dedication to meeting their needs and solving their challenges.

Sales leads are the fuel of construction companies. Construction companies need to follow up relentlessly with their existing leads in order to generate sales opportunities. If an Opportunity does not accept a proposal the first time around, companies should wait a few months and contact the lead again. Situations change and the same lead that did not accept a proposal four months ago may have a new construction project in the planning stages.”

Measuring Sales in the Pipeline

Construction companies need to measure how leads are generated in order to properly target potential customers. Owners must also determine the maximum number of projects that can be handled by their field and administrative employees, and then measure the current backlog of contracts plus project bids that are anticipated in the future. Measurement of the sales pipeline in construction is a continuous function due to the long life-cycle of a project. Owners must forecast sales in the pipeline by predicting future events and conditions, and they must also prepare for uncontrollable external events that can impact the future sales in the pipeline (e.g., interest rates and the global economy). 

Owners need to understand the external market conditions and future market trends in order to develop a realistic forecast and create appropriate strategies to generate sales when external events have an impact. They also need to implement internal, controllable strategies that can affect the sales pipeline, such as launching new products and services that can increase sales volume. Finally, owners then need to compare their sales forecast with actual results in order to determine how effective their sales process has been at producing satisfied customers. 

Everyone is a Salesperson

Every person, from the receptionist to all of the field employees, has a part in the sales process. Every employee ultimately represents the company, and the actions of any employee can win or lose a potential customer. Construction company owners who actively lead the sales process and involve all of their team members will maintain a healthy sales pipeline and continue to be successful in the industry. 

Founded in 2001, FocusCFO is the leading onsite fractional CFO services provider in the Midwest and Southeast, with more than 100 CFOs and Area Presidents throughout Ohio, Michigan, Kentucky, Indiana, Pennsylvania, Tennessee, and North Carolina. FocusCFO works closely with small to medium sized businesses helping business owners gain control over three key financial and operational areas: increasing cash flow, reducing business risk, and creating a platform for scalable growth. This allows business owners to then realize full financial control and increased value in their businesses. 

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