Almost every contractor’s goal is to win more work than he or she currently has scheduled. When the economy was slow, contractors worked hard to keep crews busy and break even. And as the economy heated up, contractors began to take on more work than they could handle with their current staff. On paper, they figured they would make more money, as their overhead remained constant while their revenues grew. For many, with increased workloads and higher levels of retention money outstanding; available cash became scarce, cash flow tightened and their ability to pay bills and payroll became more difficult.
More Work, More Profits
Having a busier construction company is like running faster and faster on an uphill treadmill going nowhere. Busy keeps your key people overworked and without time to plan, prepare, think, manage professionally or get change orders approved before they do the work. Busy overloads project managers who then don’t have enough time to document project issues properly and eliminate problems before they happen. Busy doesn’t allow you time to sit down with foremen to review their job cost production reports weekly and make adjustments to improve crew results.
Busy doesn’t allow you time to find better customers or projects with less competition or higher margins. Busy doesn’t allow your estimators to review past job cost results to make sure their current production bid rates are accurate. Busy forces quick decisions without proper research or due diligence, like hiring the wrong person or saying yes to demanding customers. Busy doesn’t allow staff to properly review and process invoices to make sure they are correct and not higher than they should be. Busy doesn’t make you more money.
The True Cost
Doing more work doesn’t make you more profitable and efficient or get more accomplished. In fact, it reduces a worker’s ability of take care of what is necessary to perform at his/her highest level. Project managers don’t have enough time to visit jobsites often enough to fend off potential problems or document and maximize change-order opportunities. When superintendents are too busy, they don’t make sure crews are being built to the right size, working with the right people or getting the right training. Crew leaders don’t have time to replace poor performers, which also causes jobs to take longer to complete and cost more money. When crews move on to the next job too early, this leaves jobs unfinished with big punch lists and callback items to fix. All of these challenges cost you cash.
When you are too busy and don’t have enough help to run your company, you end up putting out fires all day. This won’t allow you to make more money, get in control, improve your bid-hit ratio or fix the problems that cost you the big bucks. The key to making more money is dedicating time to getting more organized and systemized. For example, holding structured field crew meetings to track performance and train and organize your field crews will make you more efficient. Building a standardized system will allow everyone to do things in a consistent way.
8 Steps to Make More Money
When you are beyond busy, implement the following ideas, systems and procedures to increase your bottom line.
- Admit it; you need more help to get all the work done well. As the workload increases, most company owners tend to load more tasks onto themselves and their people and expect everything to work out and still deliver the same bottom-line results.
- Stop asking employees to do more. Take a realistic look at your overhead budget and management staff to determine if your overhead expenses have grown at the same pace as your sales revenue. You cannot do more work efficiently with the same number of team members.
- Take a look at your organizational chart and determine what is not getting done. Who is overworked and has too many tasks or projects to manage properly? Many growing companies need more people and help with project management, estimating, construction administration, accounting and field supervision.
- Develop a scorecard to track workload per key manager or supervisor. Managers and supervisors should not have more than 5 to 8 people under their area of responsibility to do an effective job. Determine the positions you need to add, and hire for your current needs. What will allow your company to move to the next level? Appoint a hiring coordinator to manage your hiring program, place ads for people, set up interviews and coordinate adding the people you need to do a better job.
- Stop bidding every job opportunity that comes along. The goal is to grow with higher margin customers and better projects versus doing more work at low margins. Meet with the estimating staff weekly to review future bid opportunities, projects currently bidding and those you have already bid that need follow-up. Develop a "bid-grid-sieve" of the right kind of projects you want for the right customers against competitors you are willing to compete with. Don’t get tempted to offer bids on projects or customers you don’t want or cannot win, unless you lower your prices to unprofitable levels.
- Make pre-project planning part of your companywide standards. Implement and require a pre-project turnover meeting before you start any new project. Have the estimator, project manager, superintendent and foreman attend these meetings. Allow them enough time to review the bid, estimate, contract, scope, schedule, proposed subcontractors and suppliers and requirements to achieve the project goals and objectives. Then, allow time to adequately discuss and prepare the construction work plan, schedule, proposed crew and manpower requirements, equipment needed and develop a working budget with goals for completion.
- Stop the overtime money drain. Working more than 50 hours a week reduces productivity, morale and results. Not only does overtime cost you more money to do the same tasks, it reduces the output per hour from an overworked crew. Plus, overtime that wasn’t figured in your bid estimate comes right out of your profit margin.
- Set aside time to hold a monthly strategy meeting to analyze overall financial performance, project results and needs. When you are too busy to look at what you are doing, you find out too late that you need to make adjustments to improve performance. Also, take time to review what changes are required to improve your company.
Stop taking on more work than you can handle. Build a team that can perform the work you want to do. Don’t sacrifice doing what you know you should do to perform with quality and professionalism.