Tag: George Hedley

Construction Business Owner, August 2008

Q:

We have been in business eleven years now. We manufacture all types of custom metal products. We are making a profit every year but always find we are on the high end of bids.

Overheads costs, shop hourly rates, etc., seem to keep me confused. To calculate my shop billing rate, I take all overhead costs including salaries, hourly wages for the men on the floor times 2,080 hours a year (normal forty hours weeks), fuel, vehicle payments, electricity, administration, CPA costs, building repairs and all other costs. Then, I take this total cost and divide it by the total hours that my men produce in a year.

For example, All costs = $897,779.00 divided by 10,400 production hours per year = $86 an hour. Then I multiply $86 x .25 percent markup and come up with about $107 per hour to charge for shop rates. But these are out of the ballpark here in our state. So I only charge what I can get at $75 an hour, and we still have a hard time getting work. But at year-end, we still seem to have some profit left over.

My main question: Is there a better way to figure our shop rates, overhead and markup? There has to be a set formula for figuring all this! Your quick response would greatly be appreciated, as I have a chance to land a big yearly account but at a lower overall price. Please help---I'm confused in my business....

Walt Rivers, President

MetalCon Inc.

Construction Business Owner, July 2008

Q:

I have been working on my numbers based on your formulas and I have a quick question: I'm making a profit after materials and overhead. But when I take out wages on many jobs I'm left with a negative profit number (I am a sole proprietor who does concrete staining and resurfacing, so overhead is just me and my bills). This is partly due to jobs that go on too long because of customer demands or unexpected problems. How can I improve? I believe I need to charge more and spend less time. I don't know if the market will bear a higher price and I don't know how to go any faster. Any suggestions are gladly appreciated.
 
James Sadler

Concrete Staining Co.

Construction Business Owner, July 2008

There are lots of ways to make a profit in the construction business. They include cutting costs, reducing overhead, improving field productivity, accurate estimating, reducing field mistakes and having an excellent training program. All of these will give you a small improvement in your bottom-line, but not enough to make a significant difference.

Construction Business Owner, June 2008

Q:

I attended one of your two-day boot camps last year, and was working on setting up our new overhead and profit mark-up schedule using the variable system you presented for labor, material, subcontract and equipment. I need some help figuring out how I should mark the different work classifications.  As a general contractor since we subcontract all of our work and don't really have labor crews, just project managers and superintendents. Here's how our typical job costs break down: 10 percent labor, 15 percent material, 70 percent subcontractors and 5 percent equipment. I know that labor is the most risky and should be marked up more than the other items. But is that more true if you have field crews rather than just supervisors? I'm also concerned that subcontractors may be my most risky category as they tend to raise their prices during the job. Any advice would be helpful.

Mac McHenry, President

MAC Construction

Construction Business Owner, April 2008

Straight Answers to Tough Questions

Q:

We are a design/construction company based in the Cayman Islands.  We own several of your books and have attended one of your seminars.  We listen to all your advice.  We would just like to get your opinion and hope you will be able to assist us with this.  What do you think is the proper percentage commission to give to an estimator/sales person?  Also, if he has already received a maximum commission, should he still receive his wage?  We provide vehicles to the employees. We pay for the registration, insurance and fuel for each vehicle, but is it right to deduct some part of that cost from the employees' wages as they use the vehicles for their personal use, too?  We really appreciate it if you could answer these questions.  Thank you very much.

Hanna Bonzio

Plam Builders

Construction Business Owner, April 2008

Q:

What else can I do to get my cash flow back?  My husband and I have a small welding business with five employees. We offer to take credit cards, and we have a credit line to help. I don't pay bills until they are due, but I am struggling every month.

I have to be very diligent about my collections. I have some general contractors (we are the sub) who will pay, but I have to call first. What do I tell my vendors?  I have told them that I will send a payment as soon as I get mine, but that just isn't acceptable. So, I borrow and borrow and borrow to keep everyone happy. When I do get money in, it is so late, that I usually need it to pay something else. And I can't get anything paid back on my credit line. I haven't used my credit line for the past three months. I have held people off until the last minute and have threatened collections to get contractors to pay.

Construction Business Owner, March 2008

Q:

I recently graduated from college with a bachelor’s degree in civil engineering and went to work for my dad in the construction business.  I have grown up around the business and have a pretty good grasp of the industry.  My dad gets me involved in every aspect including: estimating, project management, meeting clients, year-end financials, etc. 

Construction Business Owner, February 2008

Q:

I've been looking for someone to fill an equipment operator position for two years and haven't been able to find the right person. I hire someone to fill the position and end up firing them in a couple months. There just seems to be a shortage of qualified candidates. Any suggestions?

Matt Desper  

Desper Paving

Construction Business Owner, January 2008

Q: 

Do you know of a "qualification/knowledge" test to use when evaluating a candidate applying for a project superintendent position?

Susan Willard 

ABC Construction Management, Inc.

Construction Business Owner, December 2007

Q:

I have read your articles in CBO and attended your Profit-Builders boot camp last year. Have you ever hit a point where your volume took a huge downturn? Our volume has significantly dropped in the past six months, while our gross profit percentages are still good. We have already trimmed our overhead and eliminated our least profitable employees. Now what? What are some good ways to turn our sales around? What marketing really worked for you? Should we attend trade shows, join business associations or go to meetings like the Chamber of Commerce to meet new customers? What about networking groups? What is the best way to market to architects for work? It's funny, I am an architect by profession, but I still don't know how to approach them without looking needy or greedy. Help!

Jimmy Rustin

R & B Builders Inc.