Penny Pinching is Good for Your Construction Business

Becoming profitable through saving money

Becoming profitable through saving money

You’ve moved up from “Have hammer, or wrench, or paintbrush – will travel,” to running a construction contracting business. Now, you have much more to be concerned with than simply finding a project, doing it, and getting paid for your effort. You have a business to run, one which should be profitable.

And in the construction business, just as in other businesses, cash in king. That is simply how it is. To run a profitable construction contracting business you must learn how to master the cash, how to make decisions concerning the cash, and how to prudently use the cash.

Are you making a profit?

While there are a number of things which you can change concerning how your numbers are adding up (or not adding up,) in this article the subject will center on ways you, a construction contractor can tighten the belt, can be more frugal, can pinch a few more pennies on your way to making a profit.

And while we’re on the subject of decisions, let’s back up a minute and understand that those expenses in your accounting records represents a decision you’ve already made. It takes fortitude to look at a particular expense, challenge yourself, and think about the decision you made, then perhaps taking steps to change or improve it.

First things first

When you first started out you had ways to “get by,” to make ends meet, to keep going while you looked for that next job. Now, you have people working for you, running crews, driving your vehicles, using your tools, performing the back-office duties. You have jobs back to back or over-lapping and you have lots of expenses.

It is time to revisit your ability to “get by.” It is time to be innovative and to grow your ability to solve problems rather than throwing money at them.

Get out of the rut!

In some ways, this is a call to reduce inefficiencies in your own as well as your employee’s work habits. In other ways it’s a challenge to see if there are better, less expensive ways to get things done. It’s easy to get stuck in a rut. Yet, once you know you’re in a rut, you can take specific measures to get out of it.

Top 5 ruts to jump  

Vehicle or fleet

Whether you have only one business truck or an entire fleet of vehicles there are likely ways to reduce your expenses. One major way to save money here is to be cautious and certain before signing on the dotted line for that beautiful new pickup you’ve had your eye on for a few weeks. Do you really need it right now? We can help you determine whether or not your business can really afford that shiny new toy. Also, when it comes to vehicles, there are other ways to save, for example, in this article from Construction Executive, there is a list of 5 simple changes you can make to help control fuel costs.

Office tools and supplies

Whether you need to complete an RFP (Request for Proposal) with a few of the top suppliers, or you simply need to keep an eye on the cost comparisons of a few local office supply stores along with membership stores, get out of the rut of always buying supplies from the same place. One simple method you may choose is to maintain relationships with two providers that are competitive on price. And, because the ordering process is easy online you can switch providers quickly and easily. Check out these tips and tricks from Grainger concerning managing your office supply inventory.

Construction supplies and materials

Your particular trade will often dictate your choice of suppliers. Yet, just as in the office supply providers in the above section, you will do well to maintain relationships with more than one supplier. And, you already know who the heavy hitters are in the overall construction supply industry. Are you taking advantage of all they have to offer? While it may take some of your upfront time delving into all the benefits they offer to the pros, it will pay off in both time and finances to become familiar with and take advantage of their programs. You can start by getting to know your Pro Account Representative at Home Depot and checking out Lowe’s ProServices.

Tools and equipment

Determining whether you need to purchase or lease particular tools and equipment and the cost saving factors of either choice will have an impact on your ability to save pennies now and dollars down the road. This article from Construction Marketing Association will give you information you can use in the decision-making process.

Also, when you make the determination that you will purchase tools, be cautious about quality. Invest in the best quality tools you need and can afford rather than trying to get by with cheap substitutes. Just be sure you remember the need factor.

Credit card processing fees

Shop around. One of the first places you may want to check is with your trade organization many of which have an agreement with credit card processors to provide lower rates. Be cautious, some companies will try to lock you in for a long period of time in order to receive a better rate. Also, look for rates concerning leasing the equipment. When you use QuickBooks Online you are able to take advantage of their bank transfer processing through ACH (Automated Clearing House) payments. You may choose to accept only ACH payments at no charge, or to also accept Credit Card payments (with percentage fees) based on your needs.

More ruts to consider

Insurance

Be sure you’re getting the best rates for each of your insurance needs. Check around, look for providers that know and understand the construction industry. For example take the time to shop around for the best workers’ compensation prices you can find, especially if your company has a low accident rate that you can use to negotiate with carriers and agencies.

Marketing

When you’re low on money, marketing is one of the last things you should cut totally out of your thoughts or your budget. Yet, by being creative and using many of the options for marketing which are no or low cost you can remain in the game getting the word out. This article from Forbes gives you four creative and useful ways to save money on marketing.

Rent or mortgage on office and shop locations

Again, creativity is your best friend. Would you benefit by moving your operation to a different (less expensive) location? If your construction business doesn’t depend on walk-in-traffic why pay more for a location which touts traffic as a rental perk?

Temporary office structures and/or sanitary utilities

Should you own or rent your on-location structures? Is there a better rate for the portable toilet from a different vendor than you normally choose?

More money saving tactics to scrutinize

  • Determine if selling or leasing underutilized equipment will be of benefit.
  • Reexam your need for company owned vehicles.
  • Review your entertainment costs. (This is no longer an expense which can be deducted on your tax reports.)
  • Look for free or low-cost training for yourself and your employees. If you belong to a trade association take advantage of what they offer.
  • Adopt a just-in-time philosophy of material staging in order to deter waste as well as keep the money flow in check.
  • Save money by outsourcing your accounting and some other office tasks.

 Get in touch here, or give us a call 866-629-7735.

The Top 5 Critical Problems Schulte and Schulte Solves for Owners of Construction Contracting Companies

 

When you first became a construction contractor or construction service business owner it was pretty simple – get a job, do the job, get paid, see how much money you made. Now, things are different. You have people working for you, people who rely on you in order to make a living.

Knowing the whats, hows, and whys of construction accounting has become much more difficult.

Following are 5 critical problems Schulte and Schulte solves for clients on a regular basis.

Not knowing how to maintain cash flow

“Projecting future cash flow is something I’ve never understood how to do.”

Solution: Once the system is implemented you’re “in the know” daily concerning all the angles of cash flow.

Not having proper records for the IRS and for other potential needs – like proving credit worthiness

“I’m not even sure what I should keep, much less how to keep it.”

Solution: Your records are brought up-to-date and kept current so you’re always ready for both the IRS as well as for investors or loaning institutions.

Constantly having to chase work to build revenue

“It seems if I’m going to make money I always have to find new work (some I don’t even want to do) and it drains my time, energy, and capital. There’s got to be a better way.”

Solution: You’re taught smarter ways of maximizing revenue rather than the eternal work chase.

Not understanding their job costs

“I know it is more than just what I pay my people and how much I paid for supplies, but I’m not sure what all goes into job costing.”

Solution: You know what the job costs are for each job and for each type of job, giving you valuable insight concerning future jobs.

Not having enough time in the day to do it all as a small business owner

“I don’t hardly have time to breathe, much less time for figuring out all the ins and outs of construction business accounting.”

Solution: You’re relieved of trying to “figure it out.” The Schulte and Schulte pros take away much of the “drudge” of bookkeeping while informing you regularly about the financial health of your construction contracting or service business.

Solution: Maximizing Your Profits.

Now that you know we offer solutions for your critical problems, it is time to stop messing around and trying to figure it out yourself. Reach us through this number 480-442-4032 or get in touch here.

Part 2 – 10 Qualities Needed for Scaling Your Construction Contracting or Service Business

If you missed part 1 with the first 5 qualities needed for scaling your construction contracting or service business you can find it here.

6. You will need to focus on helping others – on every side of the coin

Customers and potential customers

Think: What do they need? Perhaps information concerning what to expect when they hire you to perform a service for them.

How can you give it to them? Flyers, brochures, website, social networking sites.

Yet, always be on the lookout for ways to help your customers on a personal level. It may be as simple as bringing their newspaper to the door, giving a handwritten Thank You note, or defaulting to “yes” when presented with small, reasonable requests that customers make.

Employees and subcontractors

Think: What do they need? Maybe just some recognition.

How can you give it to them? Perhaps employee of the month incentives, maybe small rewards like gift cards, or something as simple as lunches or dinners to celebrate milestones or job completion.

If you need someone to help you learn what your employees need, then enlist the help of a person you know is good at noticing.

Colleagues and associates

Think: What do they need? It could be they need your help on a service project.

How can you give it to them? Answer “yes” and follow through.

“Sit downs” with your colleagues and associates are bound to aid you in determining what they need. Be sure to schedule these sit downs on a regular basis.

7. You must be obsessed with cash flow – because cash is king

We at Schulte and Schulte are excited to work with our clients to put an excellent system in place giving them the advantage of getting a clear view of their actual cash flow when taking a daily peek at their checking account balance, (we know you do it) and then gives them useful information.

8. You have to charge what you’re worth – without flinching

Charging what you’re worth is not only beneficial for you, but for others in your realm. Your family benefits. Your employees and subcontractors benefit. Your customers benefit.

Yep, your customers benefit.

  • They get excellent service
  • They get peace of mind concerning their decision to hire you
  • They get the wealth of knowledge and skill you’re able to provide them yourself or through your excellent and well trained employees.

You know things others don’t know. Put that knowledge to use and charge what you’re worth.

9. You should turn down jobs – not just because you’re busy

When something about a home owner or business owner makes your spidey senses tingle it is probably time to turn down their job.

When you run into someone who wants the job done cheap and fast and that’s not what you do, (see number 8 above) it is time to politely decline.

Once you know who your ideal client is, this step becomes easier, but it is good to pay attention to the fact that some jobs don’t pay enough in revenue, some jobs don’t pay enough in peace of mind, and some jobs . . . well, they’re just not worth it.

In whatever form it takes, you may wish to give this message to the person you won’t be working with after all.

“Dear Sir/Madam,

Thanks for the recent opportunity to quote your work. We feel that [company name] is not a good match for your project. We wish you well with your project.

Thank you.”

10. You will want to create a lasting legacy – because you want to benefit others

In this instance, I’m using the word “legacy” in its broadest sense. The legacy you leave behind (your construction company) may be managed by your children or by other people not related to you.

The important part is you will have created something meaningful, something that will benefit the lives of others now and in the future. Your family, your friends, your employees, your customers, your colleagues, your community will all be touched by the legacy you create.

If scaling your construction contracting or service business is something you’re serious about, we at Schulte and Schulte are serious about helping you.  Get in touch 480-442-4032 or Toll Free: 866-629-7735