Cost-Benefit Analysis

Cost-Benefit Analysis for commercial construction contractors

Cost-Benefit Analysis and numbers

The cost-benefit analysis allows commercial construction subcontractors to compare expected potential revenues to likely potential costs.

In effect, a cost-benefit analysis allows you to minimize risk and proceed only when there is more certainty than uncertainty.

While the essence of decision making in the construction industry often calls for quick reasoning and decisive action, an adept cost-benefit analysis takes time to gather information from trusted sources before a decision is made. Simply put, it is a technique used to bring greater objectivity into the decision-making process.

Keep in mind; this method works best when you consider the possibility of unforeseen events or circumstances.

Prioritizing through analysis

Whether the question concerns projects, new hires, or acquisitions, using the principals involved in the cost-benefit analysis also allows you to prioritize through added clarity.

Using a cost-benefit analysis helps make the implications and impact of potential decisions, something that can be visualized.

For example, you determine you need a new piece of construction equipment. Your choices are:

  • Purchase the big, shiny, new one
  • Buy the used, well maintained one
  • Lease or rent one

The purchase or rental price of the equipment is not the only cost to consider. For example, expected maintenance and upkeep costs, downtime, as well as potential resale value, need to be examined in the process.

Then throw this bit of difficult information into the mix – would your long-term equipment operator prefer something with all the new bells and whistles, or would he prefer equipment more in line with what he is used to using?

Or, if you don’t already have someone in your employ who operates equipment, will finding that new employee be easier because of the equipment offered?

Cost-Benefit Analysis and people

It is important to note that cost-benefit analysis may include intangible benefits and costs or effects. For instance, many decisions have the potential of affecting employee morale or customer satisfaction.

Is it worth it?

The principles concerning this process have been true since humans began making choices. In its purest form, the question being asked is, “Is it worth it?”

Using the data at your disposal and common sense concerning those parts which are more difficult to quantify (for instance, customer satisfaction) allows you to get to the bottom line and determine the values involved.

 

We desire to familiarize you with business concepts, which will make it easier for you to be a better commercial construction subcontractor through our blog posts. Some are new ways of looking at things, and others are refreshers. 

The Profit Constructors Provide Contract Document Management and Advisory Board Level counsel for small to medium commercial construction subcontractors.

So you can Run With the Big Dogs! Call us 866-629-7735

The Whole Team

The whole team includes professional advisors and experts.

The whole team

When you run a commercial construction subcontracting business, it is vital to have people who know what you don’t know on your team.

It goes beyond the people on your payroll, to include your consultants, advisors, and other experts. These professionals step in to allow you to create a Whole Team. Some examples may include:

  • Accounting
  • Estimating and Takeoff
  • Compliance and Legal
  • Business Coach
  • Human Resources (HR)
  • Information Technology (IT)
  • Virtual Assistant (VA)
  • Tax Preparation
  • Systems Development
  • Marketing and Social Media

The bottom line is a reliable and candid advisor who understands construction is a valuable business asset.

There is no reason to know the answer to everything. What you need to know is where to get the correct answers.

“Now, will you kindly tell me, WHY I should clutter up my mind with general knowledge, for the purpose of being able to answer questions, when I have men around me who can supply any knowledge I require?” – Henry Ford

The team isn’t whole

Sometimes you have a lack of knowledge, and other times you have a lack of hours. Finding folks who can fill the gaps gives you peace of mind as well as a piece of time.

Frequently, the way you know you need help beyond those you have in your employ is when you run into a knowledge wall, a skills wall, or a time wall.

It isn’t a matter of not being smart enough. You’re plenty smart!

You’re intelligent, or you wouldn’t be in the position of owning a construction business that has grown large enough to necessitate additional professionals. For example, you know how to put geometry and calculus to work in the field, but you may be uncertain of how correctly interpreting financial reports makes sense in the back-office matters of sustainability and profitability.

Finding team members

But, where do you go to find the people who offer the whole team services and advice you need?

Joining and being active in your industry association gives you ample opportunity to mingle with people who can lead you to the specialized professionals you need.

Look through the ads in The Blue Book or other comparable services.

Peruse industry-specific magazines and websites for articles as well as advertisements concerning your needs.

Perhaps most importantly, seek recommendations from others. They may include:

  • Your other advisors and their networks
  • Fellow subcontractors
  • General contractors

Developing the whole team

Jumping into the area of whole team building takes time and isn’t always pretty. Finding just the right people with just the right expertise for your construction business doesn’t happen overnight. Yet, when done correctly, it is worth the time and effort.

Three important factors:

  • Find people who know what you don’t know.
  • Look for folks who stay abreast of their industry expertise.
  • Seek specialists who want you as a person and as a business owner to succeed.

 

We desire to familiarize you with business concepts, which will make it easier for you to be a better commercial construction subcontractor through our blog posts. Some are new ways of looking at things, and others are refreshers. 

The Profit Constructors Provide Contract Document Management and Advisory Board Level counsel for small to medium commercial construction subcontractors.

So you can Run With the Big Dogs! Call us 866-629-7735

Crossing the Waters

The story of a water crossing and rising above

The tale of a water crossing

About thirty years ago, I drove an 18-wheeled truck from Farmington, New Mexico, to Page, Arizona. It was my job to deliver a load of gasoline to one of the convenience stores owned by the company I worked for. After I made the delivery and was headed back to home base, a rainstorm marched heavily across the high desert.

And, as is often the case during Arizona’s desert rainstorms, the arroyos crossing the road I was traveling began trickling with water. Some of the arroyos began to resemble small creeks. All we drivers went through them. We slowed and were cautious, yet we drove through.

The surging waters

Then, I arrived at one arroyo, which didn’t resemble a creek at all. Instead, it looked more like a raging river.

There were five vehicles ahead of mine, a police car straddling the two-lane road, and barricades set up. Two police officers serving the Navajo Nation were standing by their car waiting and watching.

Even though the rain had been reduced to a mist or at best a few sprinkles here and there, the arroyo river raged on. Many of the drivers gathered in small groups talking about – what else? – the chances we would be across that piece of the road any time soon.

Examining the water

Several of us strolled up to the police officers and visited with them for a while. Of course, we wanted to know what their police radios had told them concerning when we might be able to cross safely. They didn’t have any answers.

More vehicles piled up behind our little parade of stranded drivers. Lots of pickups, some cars, a van or two, and many 18-wheelers formed an orderly line awaiting the surrender of the hurling water.

Not yet

In less than an hour, the waters did begin to subside. Through my youthful bravado and my yeah-I’m-a-girl-driving-a-truck bluster, I suggested to the cops that my vehicle was larger than the others close to the front of the line. I felt I could drive across. They said, “No!”

After another ten minutes or so and after the waters calmed down even more, I once again told the nice policemen I thought I could cross the arroyo. Their second answer resembled the first. I think the only thing they left off was the exclamation mark. They said, “No.”

Do you want to cross the water?

Not much later, perhaps another five minutes, one of the officers came to me and said, “Do you want to try to drive across?”

You bet! I want to go home. My hubby will be worried about me. Let’s get this show on the road.

Let’s cross the water

After the policemen had the drivers ahead of me maneuver their vehicles to the other lane of the road, I climbed up into my truck with gusto. I pushed down the clutch, turned the key, pulled the stick into gear, let up on the clutch, pressed the accelerator, and began driving toward the arroyo – with my heart beating ninety miles a minute.

After all, I had spent many of my growing up years in the deserts of Arizona. I knew how many crazy drivers had faced disaster after driving into flooded city underpasses and flooded desert arroyos. Why hadn’t those silly cops done the sensible thing and waited until we could see the road before allowing anyone (much less me) to try that crazy passage? What were they thinking?

Had I mentioned to them that my truck was empty of its cargo now? Did they know that the tanks I was dragging behind were filled with only gas fumes? Had they considered how easy it would be for those waters to push my vehicle aside?

Pushing through the water

Because I’m here to tell this tale, you have to know that one way or another, I survived the crossing.

As it was, my trusty 10-speed big truck rolled through the undulating water without a pause. (Good thing too, perhaps a pause would have been my undoing.)

A look in my rearview mirror revealed that truck after truck was pulling from the stranded lane to work their way to the front of the line. They were coming through. I was ecstatic!

The moral of the story

If you’ve gotten this far, you may be wondering what the moral of this story is. Why is this blog post (written for commercial construction subcontractors) filled with a story about a lady truck driver crossing a water-filled arroyo?

Because, dear reader, I liken those creek-like crossings to the crossing of the COVID – 19 streams that we’re all taking slowed down and with caution.

That raging river-like crossing is the one we will face after the reaction to the pandemic comes to hit us full-face. That is the one which will stop us in our tracks. It is the one that will have us gathering and discussing the what’s next questions, and the is it safe questions.

That raging water-filled arroyo is the one that will have our hearts pounding and our thoughts racing. Some will be able to drive through. Others will wait. Those construction company owners who have the equipment, the skill, and the know-how will cross that arroyo and get back to the astounding task of building America one project at a time.

Are you ready?

 

We desire to familiarize you with business concepts, which will make it easier for you to be a better commercial construction subcontractor through our blog posts. Some are new ways of looking at things, and others are refreshers. http://www.schulteandschulte.com/blog/

The Profit Constructors Provide Contract Document Management and Advisory Board Level counsel for small to medium commercial construction subcontractors.

So you can Run With the Big Dogs! Call us 866-629-7735

Did You Hear the One About

Coronavirus things to laugh about.

There I was, scrolling through a personal social media account when I saw what I was certain was just one more post telling me how to live my life during the Coronavirus pandemic.

Who needs another set of Coronavirus guidelines? Not me! And, probably not you.

But that word, “maybe” and that question mark in that first line made me pause.

I read.

So should you. It is time for a bit of mirth.

FOLLOW ALL OF THESE, maybe?

Here are the official Coronavirus guidelines:

  1. Basically, you can’t leave the house for any reason, but if you have to, then you can.

 

  1. Masks are useless, but maybe you have to wear one, it can save you, it is useless, but maybe it is mandatory as well.

 

 

  1. Stores are closed, except those that are open.

 

  1. You should not go to hospitals unless you have to go there. Same applies to doctors, you should only go there in case of emergency, provided you are not too sick.

 

 

  1. This virus is deadly but still not too scary, except that sometimes it actually leads to a global disaster.

 

  1. Gloves won’t help, but they can still help.

 

 

  1. Everyone needs to stay HOME, but it’s important to GO OUT.

 

  1. There is no shortage of groceries in the supermarket, but there are many things missing when you go there in the evening, but not in the morning. Sometimes.

 

 

  1. The virus has no effect on children except those it affects.

 

  1. Animals are not affected, but there is still a cat that tested positive in Belgium in February when no one had been tested, plus a few tigers here and there…

 

 

  1. You will have many symptoms when you are sick, but you can also get sick without symptoms, have symptoms without being sick, or be contagious without having symptoms. Oh, my..

 

  1. In order not to get sick, you have to eat well and exercise, but eat whatever you have on hand and it’s better not to go out, well, but no…

 

 

  1. It’s better to get some fresh air, but you get looked at very wrong when you get some fresh air, and most importantly, you don’t go to parks or walk. But don’t sit down, except that you can do that now if you are old, but not for too long or if you are pregnant (but not too old).

 

  1. You can’t go to retirement homes, but you have to take care of the elderly and bring food and medication.

 

 

  1. If you are sick, you can’t go out, but you can go to the pharmacy.

 

  1. You can get restaurant food delivered to the house, which may have been prepared by people who didn’t wear masks or gloves. But you have to have your groceries decontaminated outside for 3 hours. Pizza too?

 

 

  1. Every disturbing article or disturbing interview starts with “I don’t want to trigger panic, but…”

 

  1. You can’t see your older mother or grandmother, but you can take a taxi and meet an older taxi driver.

 

 

  1. You can walk around with a friend but not with your family if they don’t live under the same roof.

 

  1. You are safe if you maintain the appropriate social distance, but you can’t go out with friends or strangers at the safe social distance.

 

 

  1. The virus remains active on different surfaces for two hours, no, four, no, six, no, we didn’t say hours, maybe days? But it takes a damp environment. Oh no, not necessarily.

 

  1. The virus stays in the air – well no, or yes, maybe, especially in a closed room, in one hour a sick person can infect ten, so if it falls, all our children were already infected at school before it was closed. But remember, if you stay at the recommended social distance, however in certain circumstances you should maintain a greater distance, which, studies show, the virus can travel further, maybe.

 

 

  1. We count the number of deaths but we don’t know how many people are infected as we have only tested so far those who were “almost dead” to find out if that’s what they will die of…

 

  1. We have no treatment, except that there may be one that apparently is not dangerous unless you take too much (which is the case with all medications).

 

 

  1. We should stay locked up until the virus disappears, but it will only disappear if we achieve collective immunity, so when it circulates… but we must no longer be locked up for that?

 

I do not know the original author. But thank you!

How to take this

My wish for you, dear reader, is that you have enjoyed this jaunt into the comedic side of the unrelenting onslaught of information as well as misinformation concerning COVID – 19.

Now, wash your hands (the proper way) and get back to work. 😉

 

We desire to familiarize you with business concepts, which will make it easier for you to be a better commercial construction subcontractor through our blog posts. Some are new ways of looking at things, and others are refreshers. 

The Profit Constructors Provide Accounting Guidance, Contract Document Management, and Advisory Board Level counsel for small to medium commercial construction subcontractors.

So you can Run With the Big Dogs! Call us 866-629-7735

Being Profitable

Being profitable even during COVID - 19

Every Monday morning, The Profit Constructors’ social media posts are routinely filled with something akin to an Irish blessing. They vary slightly week to week, but typically they look like this, “May your coffee be strong, your influence be ever-growing, and your week be profitable.”

It is that last portion of the “blessing” we’re discussing today. That part about being profitable – because it never varies. Those are the same words week after week.

Even during the Coronavirus pandemic, we wish profitability on our clients and social media followers. And we mean it! We’re not just sticking with the old words. We haven’t lost our minds.

Profitability wears many hats

One way most look at profitability can be measured in dollars and cents. You know that making more than you spend is how profits come into existence. But there are other ways to measure profitability.

For example, a genuinely profitable week would include personal growth. A week spent in strategic planning could prove to be very beneficial. Adapting to changing conditions while maintaining core values gives you the opportunity to show your customers, your employees, and the community at large your grit – and that is very profitable.

And of course, helping others without thought of gain gives an immeasurable profit.

Following is a six-point list of ways you can work toward profitable endeavors during and after the mayhem surrounding COVID – 19.

Remove “woe is me” thinking

Look around – see the big picture. Yours is not the only construction contracting company affected by the circumstances in which you now find yourself. It isn’t as if you’ve been singled out.

Plus, you may find it useful to look at history. Here is a list of some well-known construction companies that are in existence today that made it through the ten years known as the Great Depression (1929 – 1939) as well as other ups and downs in the economy.

  • Sundt Construction, Inc. founded in 1890
  • Bechtel founded in 1898
  • Fluor Corporation founded in 1912
  • The Turner Corporation founded in 1902
  • Peter Kiewit Sons, Inc. founded in 1884

And, check out this list from Mental Floss about other Great Depression success stories.  

Use time wisely

Whether your pace has increased or slowed, maximizing the use of your time to accomplish much is imperative. (We know different states have taken different stands on whether or not construction workers are essential.) That means, for some, it may be making sure the crews have the correct PPE and are practicing proper safety measures. For others, it may be taking advantage of your time to create better-documented systems. For still others, it may be time to take an online class or to teach one.

You get the picture. Take the time to determine the best use of your time. Now do it!

Forget about safety – be daring!

Wait! Don’t think for a minute I’m talking about on-site safety. Keeping those guys and gals safe has never been more critical.

I’m talking about stepping out of the norm, being daring in ways you may not have thought of in the past. Things like:

  • Set up an appointment with a general contractor you may have formerly thought was out of your league.
  • Pivot – do something differently.
  • Create a new division that will take on the new opportunities afforded when the crisis is over.
  • Buy that piece of equipment you know will be necessary for your construction company’s growth in the future – especially when you find a good deal.

Note: I’m not saying that doing any of the daring things in the above list will make you more profitable. I am saying these are the types of things you should consider.

Write a book

Yes really. Do it. Hire a ghostwriter if you need to but write a book about how you not only survived COVID – 19 but how you flourished during and after the crisis. There is nothing wrong with a secondary income stream. And, even if you never see it in print, at least you will have thought of ways to accomplish it.

Advertise

Get serious about your mailing list. Call your past and present customers. Let them know what you’re doing and how you can help them. Use your social channels to help others. Let everyone (including the general public) know you’re here now and will be in the future.

Work together and help others

There is possibly no better way to create channels of profitability than to help others. Sharing the load, working through a dilemma, and resurging afterward are hallmarks of great business leaders who survive the test of time.

One last thing

May your week be profitable!

 

We desire to familiarize you with business concepts, which will make it easier for you to be a better commercial construction subcontractor through our blog posts. Some are new ways of looking at things, and others are refreshers. http://www.schulteandschulte.com/blog/

The Profit Constructors Provide Advisory Board Level counsel for small to medium commercial construction subcontractors.

So you can Run With the Big Dogs! Call us 866-629-7735

Budgeting and Estimating

Estimates and Budgets for construction contractors simplified through software

Proper budgets and estimates

If your commercial construction contracting business is to survive, then you must be equipped to provide proper budgets and estimates. More importantly, if your construction business is to be profitable, then having budgeting and estimating skills in place is essential.

Develop a total project budget

Developing a project budget includes:

  • Analyzing requirements and drawings to verify the scope
  • Determining cost and time parameters
  • Allocating enough for contingencies and cost escalation

Moreover, once the project is underway, the budget allows you to:

  • Remain vigilant concerning variances
  • Make decisions based on actual costs

Therefore, using a project budget establishes useful guidelines for completing profitable jobs.

Benefits of proper budgets and estimates

While there are some easily spotted benefits to using proper budgets and estimates such as:

  • Avoiding inaccurate bids
  • Curtailing the constant use of change orders
  • Collecting sound financial information on which to base decisions

There are other benefits which are less easy to measure, for example:

  • Realizing a greater ability to make continuous improvements and anticipate problems
  • Growing an improved sense of clarity and focus
  • Achieving more confidence in your decision-making

Estimating – the cornerstone of construction projects

Accurate cost estimation is critical for creating and maintaining a feasible budget for construction project costs.

Estimating is the process of evaluating or calculating the amounts of material, labor, and equipment necessary to complete a project. Therefore, it becomes the cornerstone upon which all else rests. Above all, getting project budgets right and controlling costs is essential to project success.

And, like any other phase of construction contracting, having the right tool for the job makes the difference. Thanks to technology, estimating has been dramatically simplified and streamlined.

Knowify makes it easy

The team here at Schulte and Schulte knows, uses, and recommends the use of the software developed by Knowify. They provide a step-by-step process which moves from bidding, to the proposal, to billing.

In no order, I’ve listed a few of the features or functions construction contractors note they can apply when using the system developed by Knowify.

  • Labor costs tracked precisely
  • Avoid missing items when invoicing
  • Change orders sent and approved quickly
  • Monitor the profitability of each current job
  • Better track materials
  • Better organization of invoice tracking and employee productivity
  • 2-way sync with QuickBooks
  • Ability to create AIA style billings

Moreover, one contractor said Knowify is a “one-stop-shop for estimating, time-tracking, invoicing, and scheduling.”

To sum it up, Knowify helps build a budgeting plan, measures results, and improves overall operations.

 

We desire to familiarize you with business concepts, which will make it easier for you to be a better commercial construction subcontractor through our blog posts. Some are new ways of looking at things, and others are refreshers. 

Schulte and Schulte Provides Accounting, Contract Document Management, and Advisory Board Level counsel for small to medium commercial construction subcontractors.

So you can Run With the Big Dogs! Call us 866-629-7735

Ask the Right Questions

Ask questions to grow your team, your leadership skills, and your construction business.

Want to know what your employees want, so they feel satisfied with their job? Ask them! It isn’t as daunting as you may think.

There are reasons you should be asking the right questions of your team members, both your employees and subs.

  1. It makes them know you care.
  2. You’re better able to lead.
  3. It improves your construction business.

It makes them know your care

The questions you ask go beyond “How’s it going?” to showing you do have an interest in their well-being.

The following list can give you ideas about what types of questions you should be asking.

  • What do you like most about your job?
  • Which task do you find most difficult, tedious, bothersome?
  • Where do you want to be in one year, five years?
  • Are you stuck somewhere? What challenges are you facing?
  • What is [your construction company name] doing, or could be doing, to make you more successful?
  • On a scale of 1 to 10 how happy are you working here?
  • Either at work or outside work, what’s the best thing that happened to you this week?
  • If you owned [your company name,] what’s one thing you would do differently?
  • Who else on the team made a great contribution to the efforts this week? Did he or she overcome an obstacle? Fix a bad situation? Solve a lingering problem?
  • Are you clear about your role? Do you know what you should be doing?
  • Do you feel connected to the rest of the team?
  • What kind of training would you like to receive to help you accomplish your career goals?
  • What’s your most recent accomplishment at work?
  • Do you feel respected by your direct supervisor?
  • Is it fun working here?

You’re better able to lead

Assuming you know what is going on in the lives of your team is a dangerous path to take. Asking the right questions gives you the insight you need to step up your own game.

  • Who can give the older hands help with digital devices?
  • Who’s best at helping new team members learn the ropes?
  • Which process can be fixed or improved?
  • What do you like most about working here?
  • Tell me the number one reason you took a job here?
  • What did you like best about your previous employer?
  • How effective are our team-building activities?
  • Do you feel like coworkers respect each other here?
  • What would make me a better leader?
  • What motivates you to go above and beyond at work?
  • Do you believe [your company name] gives authentic recognition to the people here?
  • What drives you crazy here?

Many of these questions can be off-the-cuff as you talk with your crew and staff throughout the day. Others, you might reserve for one on one meetings.

This blog post about leadership, found on the website of Lighthouse gives a great deal of information concerning having one on one meetings with your staff.

Perhaps the most valuable piece of advice from the post is this:

“Action is what leads to change and improvement. It’s what starts the flywheel going to make these the mega-valuable meeting they are.

This is why the 2 questions to ask in every one on one meeting are:

1) What can you do to take action or make progress on what we talked about today?

2) What can I do to take action or make progress on what we talked about today?

By asking these questions, you’re working *together* to make things better. It creates a psychological contract between the two of you to both keep your promises.”

It improves your construction business

Eleanor Estes, CEO of TPI, Inc., one of the top IT and engineering recruiting firms in the country says, “As a leader in your organization, you set the culture – you establish the norms, and your example should trickle down throughout the company. Your company is a place that is made up of many different people. And if you are doing it right, the people you hire will enhance your company so that the whole will be greater than the sum of its parts.”

That leads to asking further questions which can help you find ways to build your team as well as improve your commercial construction business.

  • Do you think [your company name] supports you in your professional development?
  • Can you use one word to describe our company culture?
  • What are some ways that we can improve communication at [your company name]?
  • What’s one thing you’d like to see us continue doing here?
  • How well does your supervisor support your developmental goals?
  • Do you feel comfortable providing feedback to your supervisor?
  • Would you refer someone to work here?
  • Do you believe the management team is all on the same page?
  • What do you think is our company’s biggest strength that we should be focusing on?

Ask the right questions. And, listen to the answers. Use the information to help your team members grow, improve your leadership ability, and enhance your commercial construction business.

 

We desire to familiarize you with business concepts which will make it easier for you to be a better commercial construction business owner through our blog posts. Some will be new ways of looking at things, and others will be refreshers.

Schulte and Schulte Provides Accounting, Contract Document Management, and Advisory Board Level counsel for small to medium commercial construction subcontractors.

So you can Run With the Big Dogs! Call us 866-629-7735

 

Safety and Your Construction Crew

Help your construction crew understand safety is for them

Safety counts

The most important tool in your “safety toolbox” is found in the minds of your workforce. Therefore, the first hurdle to overcome is the mindset which incorrectly identifies safety and productivity as enemies of one another.

Consequently, it is your job to make certain your subs and employees understand that safety and productivity walk hand in hand.

From the human point of view, no one wants to see someone be injured or killed. That simple.

In addition, from the stats point of view, when safety measures go unheeded (and someone is injured or killed) productivity takes a hike. Also, that simple.

Safety now

Let’s take it down a level. Remember having this conversation with your children? “Stop that! Someone is going to get hurt!” Then, you hear back, “Nobody has gotten hurt so far.”

Similarly, there are times even adults tend to play the nothing-bad-has-happened-so-far card. You know what I mean, you’ve seen it:

  • Not using PPE
  • Disregarding proper procedure when using or repairing tools and equipment
  • Improperly placing ladders or temporary access apparatus
  • Neglecting to disconnect electrical power
  • Entering unprotected trenches or other spaces

Mark Twain, in Innocents Abroad said, “He cuts a corner so closely now and then . . . that I feel myself ‘scooching.’”

For instance, it’s likely you’ve been on a job site where you felt the need to “scooch.” Removing the scooch isn’t easy, yet it is worth it.

The bravado factor

 

A LiveScience article titled, Why Do People Take Risks, mentions that some “. . . desire to venture past the limits of safety in pursuit of a rewarding experience.” Likewise, in the construction industry, the rewarding experience may be as basic as a paycheck. Or, it could be a misguided attempt to fit in with the crowd or please the boss.

The second hurdle of the safety quandary is the bravado factor inherent in many of the people drawn to the construction industry. Certainly, it isn’t that they have a death wish or a desire to be injured. They often see the risk as less than others might perceive.

Safety is No Accident

Instilling a safety-first mentality in your subs and crews is imperative.

Make certain they understand you want them to stick with safety procedures. Help them see it will help keep everyone (including their fellow workers) safe.

Yeah, I know, safety training can be expensive and time-consuming. That’s because safety is so blasted valuable, in every respect.

Safety story

A rich man needed to hire a chauffeur to transport his dear wife to their beautiful new home. A mountain top home. Therefore, the driving job required great skill as the road to the home clung to the side of the mountain. This single-lane road had an edge with a deep drop to the driver’s left.

The rich man took all three candidates to the site and gave this instruction, “Show me your skill for driving on this treacherous road.”

The first candidate drove slowly, slowly up the hill with his tires only inches from the precipitous edge, in an attempt to prove his skill. He was told he would not be needed.

Subsequently, the second driver took the same route with his tires only inches from the drop. And, eager to prove his skill, drove at a higher rate of speed. He too was dismissed as a candidate.

However, it was the third driver who got the job. He was the only one who drove as far away from the edge as the car would allow.

You get it. Most importantly, be sure your employees get it too.

It is our desire this article (among our growing library of construction-centric informational articles) helps commercial construction contractors build better building businesses. http://www.schulteandschulte.com/blog/

Providing Accounting, Contract Document Management, and Advisory Board Level counsel for small to medium commercial construction subcontractors.

So you can Run With the Big Dogs. Call us! 866-629-7735

 

Weathering Financial Storms in Your Construction Business

Preparing for financial storms in your construction business

Financial storms in varying sizes

Financial storms can be minor or they can be devastating. Think of  the way dust devils and tornados create different levels of damage. However, even a dust devil can grab and keep your attention when you’re in the heart of it.

Financial storms are real

Joe, Tonya, and I were having a chat. Consequently, this post was born. I mentioned  I had come across another wayward piece of information. In short, the owner of an accounting service declared he could make his clients audit proof. 

It would have been laughable, except . . .we weren’t laughing. We wondered how many people might think becoming audit proof is a possibility. To clarify, it is not.

In other words, it ain’t gonna happen, Baby.

When a tornado hits your town or business, there is likely to be damage.  That is why the wise folks who live in Tornado Alley have built storm shelters.

Consequently, they are tornado prepared.

Likewise, when the IRS comes your way, the best safeguard is to be audit prepared.

Financial storms to prepare for

However, the IRS isn’t the only possible storm on the horizon. Commercial construction subcontractors need to be prepared for other inevitable financial storms. Because, there is every likelihood one or more storms are just around the corner from your construction business it is wise to be prepared. Be on the lookout for these possible financial storms.

  • A downturn in the economy
  • Job shutdown due to weather (yeah, the real weather)
  • Natural disasters
  • Owner or general contractor bankruptcy
  • Pre-bid reviews by general contractors
  • Loaning institution reviews
  • Bonding and insurance requirements
  • Equipment failure

Some of the above items are more akin to dust devils which cause you to duck and protect your eyes.  However, others are more like tornados, and being in a safe place is called for.

3 financial storm preparedness measures

Controlled operational systems

You can set yourself apart as a savvy contractor by getting all your operational systems documented and in place.  You become a savvy contractor ready to make the best of the good times. Furthermore, you’re known as the wise contractor ready to hunker down in the stormy times.

Remember all those little signs posted on the wall which direct you to the nearest exit or safe place where you can take shelter? That is to say, documented systems tell you which path to take.

Construction contractors with a well-designed organizational structure are better prepared and more likely to complete work on schedule. Don’t think the GCs in your area won’t notice.

Financial documentation

My cliché bell is ringing. Yet, having “all your ducks in a row” concerning financial documents is imperative in both good weather and bad. They’re in place to serve you. Having your financial reports and documents ready and up to date means you can be better prepared for the future.

For instance, it is likely the general contractor considering your bid will want to assess:

  • income statement
  • balance sheet
  • statement of cash flow
  • backlog levels in relation to working capital
  • available bank funds or financing options
  • lien history
  • past credit problems

Having all your financial documentation ready and accessible gives you peace of mind for day to day operations. More importantly, those documents act as a buffer when a financial storm hits.

Dedicated save/spend accounts

A good start is to have a savings account for your commercial construction contracting business. However, there is more to it than having a savings slush fund.

Dedicated save/spend accounts put you ahead of the game. This method is similar to Dave Ramsey’s personal financial recommendations concerning envelopes. Using this system helps keep you from making spending mistakes. You know how much is available in each account.

More importantly, you know what it is for. As a result, you don’t buy equipment or perform tenant improvements with your personal tax liability funds.

Some categories which you should consider are:

  • Profit*
  • Owner’s Personal Tax Liability
  • Equipment (and/or Vehicle) Repair, Maintenance, Replacement
  • Customer Satisfaction Program
  • Real Estate or Tenant Improvements

For example, take a look at the equipment account.  You know that big shiny piece of equipment will need to be repaired, replaced, or removed at some point in the future. Setting aside a percentage of real income (real income = revenue – cost of doing business) puts the equipment-storm at bay.

* Your Profit account should be built up and not touched until it contains at least 6 months of operating expenses just in case. A fund of 12 months of those expenses is even better.

Closing thoughts

In conclusion, being audit prepared makes sense. What makes no sense at all is thinking you’re audit proof.

Being prepared to weather financial storms allows you to walk in confidence as well as gain peace of mind.

 

It is our desire this article (among our growing library of construction-centric informational articles) is helpful in assisting commercial construction contractors build better building businesses. 

Providing Accounting, Contract Document Management, and Advisory Board Level counsel for small to medium commercial construction subcontractors.

We are dedicated to serving you rather than merely performing obligatory functions.

So you can Run With the Big Dogs. Call us! 866-629-7735

Indirect Costs in Construction Contracting

Indirect Costs are important to the health of your construction company

Indirect Costs can cause hair loss

You know what I mean; trying to figure out what amount goes into which column can be a hair pulling adventure. And, making matters worse, indirect costs can mount in a hurry.

At first glance, it would seem differentiating a direct cost from an indirect cost would be somewhat intuitive. And, in one respect it is. Because, you can name the labor cost and the materials cost per job and you’ve got the foundation for your direct cost column.

Therefore, the rest should be easy, right? Anything on which money is spent and which isn’t a direct cost is quite obviously an indirect cost. Well . . . not so fast.

Indirect Costs accounting methods

There is more than one school of thought concerning how to handle job costing for indirect costs. They vary from “don’t do it” to “create several accounts depending on X factor,” and a few between. Of course, if you’re a commercial subcontractor and your bonding agent wants to see indirect costs on your job reports, and you say, “Oh we don’t mess with indirect costs,” you’re in for a rude awakening.

[In case you’re wondering which method we at Schulte and Schulte use, the answer is, “Which ever is the most appropriate for each individual client.” Yeah, we don’t believe in the one-size-fits-all method of dealing with our clients’ accounting needs.]

How it comes together

Dealing with indirect costs means determining things like fringe, general and administrative, and overhead then putting the numbers to use. It means you use appropriate tools strategically. And, it frequently means making your best estimate.

Indirect Costs can be a guessing game

So, if it is a guessing game – why bother? Right?

It is tempting to think the two words “accurate and estimates” could be counted as an oxymoron. Yet this article, Why Guessing Is Undervalued, suggests guessing is a huge part of our daily lives. And thoughtful guessing (estimating) is a skill worth developing.

Plus, think about this; guesstimates are the golden thread running through much of the construction contracting tapestry. From the beginning of the process, construction contractors take a unique set of variables, consider scope and feasibility, develop an “accurate estimate,” and call it a bid.

Taking into account we understand that close, just about, a little more (or less) than, and between are important and valuable words, it is also important to be able to determine a number which will satisfy several entities with whom you interact.

I’ve already mentioned that bonding agents want to see the numbers. So does your income tax preparer, the lending agency, the insurance provider, and the general contractors in your sphere.

Even more importantly, proper accounting for indirect costs allows you to receive appropriate tax deductions as well as make better business decisions.

How we can help

I’m just going to have to say it – the Schulte and Schulte team goal of helping our clients Run With the Big Dogs has a subheading titled “help them have peace of mind.”

Are you a construction contractor who needs help getting your indirect costs dilemma straightened out? Give us a call!

 

It is our desire this article (among our growing library of construction-centric informational articles) is helpful in assisting commercial construction contractors build better building businesses. 

Providing Accounting, Contract Document Management, and Advisory Board Level counsel for small to medium commercial construction subcontractors.

So you can Run With the Big Dogs. Call us! 866-629-7735