Recession, inflation, shortages of labor and materials and lack of capacity are just a few of what is happening in the modular and offsite industries today. These are the realities we face going forward.
It really doesn’t matter what your factory is building, these factors are always blamed for factories failing and shuttering their doors or going bankrupt.
But would it surprise you to learn that none of these things are why many offsite factories fail?
The list above are outside influences placed on every offsite factory. Focusing on them is important but if you haven’t figured out the reasons you’re failing by now, it just might be time to plan your exit strategy.
Here are NINE early warning signs of impending failure. If you have one or two of these signs, you need to begin spending more time fixing them and you should have a good chance of staying in business. If you see three or more items on this list that apply to your company, you’ll need some real soul-searching and hard changes to survive much longer.
Here are NINE ugly truths many factory owners, especially new ones, must face up to in order to survive.
You don’t have business plans
One of the oldest sayings in business is “if you fail to plan, you are essentially planning to fail.” Having a written financial plan, a marketing plan and a strategic plan are the most important things every factory needs. Without these three basic building blocks for your factory, your company will simply bounce from one bad idea to another.
Fundraising won’t save a floundering business
If you find yourself fundraising to keep staff on payroll, take a minute and ask yourself if that stopgap measure is really going to help save your factory. If you find yourself fundraising to make sales you haven’t figured out how to get yet, getting more money is a rabbit hole, and if you haven’t figured out how you are going to use a windfall investment, this may be the perfect moment to assess your business model and product marketing plan. I’m sorry, I forgot you don’t have either of those.
Forget marketing, people love us!
If there has been little to no ROI on the startup’s marketing campaigns, this is not a good sign. This could be indicative of the fact that even well-thought-out marketing initiatives cannot always help the fact that perhaps a product or service is not engaging or useful enough. The purpose of your business is to make enough profit to survive. No sales equal no profit.
You’re running a three-ring circus
You are the Ringmaster of a factory circus when your sales department, upper management and production don’t effectively work together. If you must personally take charge of every department in order to keep the show on schedule, then it’s time to tear down the tents and clean the cages. You can’t keep it up.
“I’m not a micro-manager!”
Don’t try to run your business by yourself. Hiring people that you feel need your continuous input about every phase of their job, is micro-managing. You may think you are being helpful, but resentment is a time bomb with those you second guess and constantly correct. Employees who are unsatisfied with their roles—due to toxic culture, lack of growth opportunities, inability to make an impact, and poor compensation—are all signs that something is not right. Find and onboard trustworthy seasoned advisors to discuss your business ideas, strategy, challenges, and progress. Wisdom and power exist in the multiplicity of counsel.
Over-promising and Under-delivering
For your factory’s customer, this can be the kiss of death, especially for large developers looking for their product on time and built as promised. Your investors are another story. No matter what they tell you, they want to see a return at some point on their investment dollars. Simply ignoring them won’t make them go away and with the fall of Katerra, look for them to watch and be involved more than ever.
“I will work every day, all day to make (keep) this a success”
The biggest mistake entrepreneurs make is underestimating the demands of their businesses. Stories about startups are making people think optimistically; this is because the information available does not highlight the hardships of starting a business, but it glorifies the end, which is a thriving business. Because of this, people think that a startup is easy and fun, when, it is quite the opposite. Startups take most of your time and money. It can even ruin relationships
Pricing without knowing your costs
One of the questions I’m asked at least a couple of times a month is, “Can you recommend a good costing program?” The answer is I can’t. Finding a way to know the cost of your finished product involves more steps than a single program or a group of people can determine accurately. What happens if the cost of materials suddenly go up 5% just after you’ve signed a contract to build 100 modules or worse yet, you can no longer source it and your contract has a deadline clause? This is one area you need to work on constantly if you are to be successful.
Failure to keep your eye on the ball
Staying focused is very important for both startup and established factories. There will always be opportunities showing up where you think you can morph your business’ products to either expand your product line or introduce new products. However, this expansion can lead to a loss of focus away from the original goal your factory was trying to achieve. When owners or upper management is faced with growing their business, focusing on a small set of problems becomes very important and if they ever find themselves in a spot where they are trying to be all things to all people, it is time to reevaluate.
The Beatles summed up all these problems in their song “Uncle Albert/Admiral Halsey” with these famous lyrics:
… But we haven’t done a bloody thing all day
We’re so sorry, Uncle Albert
But the kettle’s on the boil
And we’re so easily called away…
Gary Fleisher is the Editor in Chief of Modular Home Source and Offsite Builder.
Gary Fleisher, Editor in Chief of Offsite Construction Magazine
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