Your Construction Business Has a Dog

Money is the name of your construction company's dog

You own a dog whether or not you know it

If you own a construction contracting business, you own a dog. And we’ll get to that part later. But for right now, I’ll take you on a little journey down Working Dog Lane.

Ranch dogs must be working dogs

For example, Tonya’s first paying job beyond babysitting was on a ranch in northern Arizona. Her boss was a no-nonsense type who expected each of her ranch hands (including the animals) to put in a day’s work to receive a day’s pay. It makes sense. Therefore, when every dollar must be accounted for, every worker must make an account. The fact is, there isn’t a column for “is great at cuddling.”

Further, Tonya learned that if an animal was on the ranch, it had to pull its weight. Herd the cattle; get your supper. Catch the rats; your bowls remain filled. It’s a matter of simple economics.

Construction Business dogs

There are dogs; then, there are dogs in the construction business. There are great dogs that have the task of charming the folks who work in and visit the office. And, there are wonderful dogs that guard the shop, the yard, or the construction site.

You know they must be trained to perform well. When dogs are well-trained, they are a fantastic part of your business. If you have either of these types of dogs, you know what an asset they are.

But there is another dog that will be able to make or break your construction business. It’s a dog named Money. Yeah, Money is the dog we mentioned up there at the top of this article. The dog every construction business owns.

A dog named Money

Money is a dog that will serve you well, or Money is a dog that will never behave and constantly cause you grief.

The well-trained dog

Do you know someone who can make dogs behave, do tricks, pull their weight? Are you one of those people? Or, are you (like me) one of the folks who only wish they had a well-trained dog?

Above all, dogs aren’t born knowing all the things they need to do to serve well. They must be taught and trained.

Therefore, it makes sense that you do not leave the dog named Money to chance. Train Money well and:

  • Your peers will seek you out for advice.
  • The competition will wonder why you “get all the breaks.”
  • Your business reputation will precede you when you seek new jobs.

Yep, the dog named Money has those darling eyes, that ever-wagging tail, and (by golly) those fierce teeth. Beware!

Working with a dog trainer

A great trainer for the dog named Money (your construction accounting specialist) has much in common with the trainers who work with Fido, Spot, and Daisy. As a matter of fact, this article from Fun Paw Care is a good reference point.

Here are some highlights from the article:

  • Dog training and behavior modification take time!
  • Parents [Construction Business Owners] need to participate in the dog training process.
  • Don’t allow a dog to self-reward with inappropriate behaviors.
  • Dogs must be taught good habits and behaviors.
  • Your trainer is there to help you and your dog.

Some signs you need a dog trainer

Your leashed dog has repeatedly charged ahead of you and dragged you along, causing cuts, scrapes, and abrasions.

The rascal dog won’t quit barking – at passers-by, at other animals, at wind-blown bushes, at rocks.

The dog peeing on indoor objects is rampant and seemingly defiant.

Some signs you need a construction accounting specialist

You’re still cleaning the cuts and abrasions from the last time you took a good dragging.

You’re worried the noise won’t quit – can we meet payroll? Who owes us money? Have we paid the bills?

Something stinks! We need to get a handle on past poor decisions and make better ones in the future.

Who you gonna call?

Let me put it this way:

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

 

It Costs to Live with the Lost Cost Fallacy

Lost Cost Fallacy can slow down the growth of your business

Cost is something we can all understand – or not

There is this interesting mindset we humans get caught up in known as the Lost Cost Fallacy, otherwise known as Honoring a Sunk Cost. David McRaney at You Are Not So Smart goes into detail concerning what is entailed in Lost Cost Fallacy.

What it boils down to is, it’s hard to abandon a person, a product, or a process once you’ve invested time or money into any of them. It is hard to give-up when you’ve spent so much. You don’t want to think that you wasted all that time or effort. Weird thing is, it’s hard to abandon some things even when the investment is minor.

Cost is cost, yet it can be funny

Here’s an example. A while back I went to breakfast with some family members. After eating most of my food, I decided it was time to call it quits. There were mostly just bits and pieces scattered on my almost empty plate. Yet, one of the breakfast party was horrified that I was leaving two intact pieces of bacon. She explained that the meat was the most expensive part of the meal and I was therefore under obligation to eat it.

Even when I explained to her that the cost of my meal didn’t vary depending on what or how much of it I ate (or didn’t eat,) she was insistent that I was making a huge mistake. No thanks, she didn’t want my bacon, she had eaten her fill from her own plate on which she “wisely” left only the toast. 😵

Lost cost fallacy in the construction industry

There are three major categories in construction which present temptation for holding tight to the Lost Cost. They are people, products, and processes.

People

Let’s say you have an out of town division led by a hand you’ve had around for quite a while. Suppose you think there is a possibility he isn’t pulling his rightful share of work. There even seem to be things happening which are not a part of the company culture you’ve worked hard to build and reinforce. Perhaps he tells you there are clients onboard because he brought them on. It could be you let yourself worry over the loss of clients as well as workers if you terminate this fellow.

Besides all that, you’ve spent a great deal of time and money getting this guy into the position he presently holds. Could you be honoring a sunk cost?

Overcome this lost cost fallacy. Think, “Am I sacrificing the opportunity to hire someone better because I am stuck with the sunk cost?”  Are you giving up the possibility of better relationships by sticking with something that is leading nowhere? What is the actual cost of your commitment to a past decision?

Product

You had a great project in the pipeline and at the last minute it fell through. In the meantime, you had ordered product for that “great project” and it doesn’t work on any of your real projects. Or, some excellent salesman convinced you to order a stockpile of the latest and greatest fixtures (or what-have-you) to have on hand for your service clients. And, a year later you still have most of that stock taking up room in your warehouse or yard. You can’t find the things you really want and need because that “stuff” is always in the way.

Time to liquidate the unused product. The cost of keeping it is too great. Think, “If I had the same opportunity to buy this product again (knowing what I know now) would I do it?” If something catastrophic happened and you lost that product would you go out and buy it again? Could it be that the benefits of your choice (it was on sale) decreased over time while the costs (storing it and searching past it) increased? Could it be that you didn’t have all the information when you made the initial decision, but now (with new information) it is clear this product is not serving you in any way? You aren’t saving money, you’re losing money in storage and wasted time searching for what you actually need.

Process

You know and understand that when you put together a process or a system it takes time, money, and effort. Perhaps someone talked you into purchasing and using their system for maintaining the tools and supplies on your service vehicles.

And. It. Doesn’t. Work. It just sort of limps along. No matter how hard you try.

You bought the software, you spent countless hours training your technicians, you spent even more hours on the phone trying to figure out why it wasn’t working.

Does the word, “groan” come to mind? Think, “My goal is to have a great process, not to own a dysfunctional piece of software.” Is it possible abandoning a sunk cost is a sign of good decision making? Are you over-estimating the importance of the sunk cost? Is it possible the lessons you learned while using the dysfunctional process will come into play as you move in a new direction?

Overcome Lost Cost Fallacy

Here are some ideas concerning how you can deal with the Lost Cost Fallacy which crops up in your life and business.

  • Are you trying to prove you made the right decision in the first place? Is being “right” more important than your business and your bottom line?

 

  • Realize that dumping a Lost Cost is in reality a sign of good decision making. It shows you’re good at knowing when to say no and when to move on.

 

  • Reflect on things from your past. Did you give up an item of Lost Cost? Aren’t you glad you got out while you could? What good things eventually came from dumping the Lost Cost item?

 

  • Ask others. Seek help from your mentors, colleagues, friends, and trusted advisors. People are usually much better at seeing the Lost Cost items owned by others. And some, like your lawyer, insurance agent, and accounting advisor (that’s us) are trained to see items you’re missing when it comes to lost costs and lost causes.

Here at Schulte and Schulte we specialize in accounting for construction subcontractors. We’ve seen a few people limping in with the Lost Cost Fallacy hanging on to them like a child wrapped around and clutching onto his daddy’s leg. When we show our clients that’s not their kid, but rather a naughty dog they learn how to “shake it off.”

5 Strategies to Retain Your Best Employees – Part 5

Pay your employees well in order to retain them.

Pay your employees well in order to retain them.

This is the final installment of a 5-part series about specific strategies you can use in order to retain your best construction employees. You can find the first installment here, the second here, the third here, and the fourth here.

Pay them well

Dad explained to me, when I was quite young, that the wise person “knows which side his bread is buttered on.”  Dad was referring to his relationship with his employer. He knew, that in order to keep his job he had to perform up to a certain standard or he would be on the job hunt. Now-a-days, the roles have shifted somewhat, and it is the construction business owner who must look at his employees when it comes to determining the matter of buttered bread.

At the very least, keep your pay scale in the ballpark of what your market is paying. And, don’t wait until someone leaves to learn what others in your industry are paying. One simple way to check, is to use the information you can find on the website of the recruitment business known as indeed. Go here, enter the job title in the open section of the first block, hit search, and receive a plethora of information. You can refine the search as you progress in order to gain more and more specific information.

Consider the whole cost

If you can’t afford to pay them well, how are you ever going to afford to replace them? When it comes to the cost of employee turnover, you’ll do well to consider the whole picture. This article from Jobsite takes a look at some tangible as well as intangible costs connected with employees walking off your jobsites.

Retain them – parts 1 through 5

Coming full circle, it is time to admit that pay for your employees matters. Yet, if the only thing you offer is a bigger pay package you’re not likely to retain your best employees long-term. In a Harvard Business Review article, titled What Matters More to Your Workforce than Money  the author states, “One of the most striking results we’ve found is that, across all income levels, the top predictor of workplace satisfaction is not pay: It is the culture and values of the organization, followed closely by the quality of senior leadership and the career opportunities at the company.”

This same author goes on to state, “While pay can help get new talent in the door, our research shows it’s not likely to keep them there without real investments in workplace culture: making a commitment to positive culture and values, improving the quality of senior management, and creating career pathways that elevate workers through a career arc in the organization.”

Your turn

Be always on the lookout for ways you can improve the experience for your best employees. Make it a priority. Make it happen.

Developing Accounting Systems That Work

Through the gate to running a profitable construction company

Through the gate to running a profitable construction company

You need an accounting system for your construction contracting or service business because you need data. There are three basic reasons you need data.

  • Because the federal as well as state and local governmental entities require it. And, let’s face it, running your construction contracting business from a prison cell would be much harder than any issues you’re currently facing.

 

  • Because banks or lending institutions, as well as bonding businesses require it. Loan officers have a certain protocol for approving a loan and without accurate, current records getting a loan could be like trying to find a warm, sunny beach at the north pole.

 

  • Because growing or scaling your business depends on how accurate your financial information is. Knowing the financial position of your construction business, what some call understanding “the language of business,” sets you apart from the large number of construction business owners who fail.

 

Having accurate information, things like cost and earnings, liabilities and assets, profit and loss gives you the business guidance you need to either stay the course or take corrective measures. Well, sort of.

When records and reports aren’t enough

We’ve found that many construction contractors know well the systems required in their select industry, yet when they begin dealing with the systems necessary to manage their financial data, they feel as if they’ve run into a brick wall.

Even those who’ve managed to chip away at the brick wall creating windows of financial understanding have usually only gotten to “records” and occasionally “reports,” thus they’re lacking the “analysis” portion of the financially healthy equation.

Crunching the numbers

That’s when including a professional from the accounting world becomes necessary for the welfare of your business.

These pros make sure you understand the meaning of the financial information. They’re interpreters of a sort. They help you learn “the language of business.” They’re great at helping you develop the systems which are necessary to put you in the driver’s seat.

Putting a gate in the wall

Guiding you to create a system for measuring and summarizing business activities, interpreting financial information, and communicating the results is how your professional accounting team puts a gate in that brick wall. A few of the things you can expect to gain from a capable accounting pro are:

  • Guiding you through the SaaS options
  • Developing a tech stack best suited to your needs
  • Determining where you may be losing money
  • Showing you which types of clients are offering the biggest returns on your efforts
  • Enhancing your decision-making capabilities through better understanding of the numbers

Going beyond the brick wall

Because Schulte and Schulte, LLC is a professional accounting service specializing in working with construction contractors, we help our clients develop and use accounting systems which serve both their legal and their managerial needs in the wild and wooly world of construction contracting. And, because we’re a Profit First certified firm we take them beyond having a nice set of records and put them on the path to having a vibrant and profitable business.

You can reach us Toll Free: 866-629-7735 or get in touch the easy way right here.

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.