Two construction companies, Company A and Company B, can do similar work for the similar customers using similar labor, materials and subcontractors yet Company A will earn twice the bottom line profits over Company B.
The difference is Company A focuses on Strategy and Tactics. Company B only focuses on Tactics. To paraphrase Sun Tsu "If the Strategy is correct then a number of tactical errors can be made and the enterprise will be successful; however, efficient operations cannot overcome bad strategy"
Every Ten Minutes A Day Of Waste You Have In Your Construction Company
Is Destroying Your Profits, Your Future And Your Life!
Harsh Words - And yes I know you are a tough contractor who is accustomed to people trying to sell you something and get in your pocket all the time so you learn to ignore a lot of crap!
Well You Are Right I Am Trying To Sell You Something - I am trying to sell you on you and the importance of taking care of your construction company profits so they can take care of you, your future, your family, your employees, your suppliers, your subcontractors and a whole lot of other people who don't have the guts and determination that you do to keep on running your construction company in all kinds of weather and economic conditions.
Let's Get To It - There are 100's of improvements that can be made in any construction company and 20% of the improvements will have the most impact. 80% will have the least impact. See The 80-20 Rule For Construction.
Below I have listed the two biggest drivers of profit loss and the easiest ones to analyze and fix. Review them and leave a comment and I will personally respond to you.
Profit Drain #1 In-House Bookkeeper Until a construction company reaches at least $5 million in annual sales it cannot afford to hire a qualified construction bookkeeper or construction accountant.
The owner Hires A Cheap Bookkeeper part-time for $15.00 an hour 10 hours a week in an attempt to save money without understanding the actual cost is $25.29 per hour. See the chart below:
Every 10 Minutes A Day Of Unproductive Office Labor:
Costs Your Company $273.93 Each Year
At 10% Profit You Need To Sell $2,739.30 More To Maintain The Same Profit Margin
In Some Cases we can do more work for less money by providing you with construction bookkeeping and accounting + payroll processing + monthly and quarterly tax reports + year end W-2, W-3 + profit and growth management consulting + financial and job costing reports + paperless data storage and more. As an added bonus we can show you how to use simple strategies to make more money faster!
Profit Drain #2 Cheap Tools And Equipment Invest in the best tools and equipment you can afford because in the short run you will save money. Construction workers who take pride in their work and will produce better results faster with fewer repairs if they have quality tools and equipment.
Make More Money Faster with productivity gains. See the chart below:
Every 10 Minutes A Day Of Unproductive Construction Worker Labor:
For Employee #01 Costs Your Company $1,544.42 Each Year
At 10% Profit You Need To Sell 15,544.20 More To Maintain The Same Profit Margin
For Example your best construction worker asks for a tool that costs $1,200.00 and will last 3 years. The standard response is "we can't afford it!" The fact is you can't afford not too!
Highly Profitable construction company owner's will ask their construction accountant to calculate the projected the Return on Investment (ROI) is and then consult their Strategic Business Plan to make an informed decision.
In This Example it may make sense to finance the purchase even if it means using a credit card with a 12% interest charge because the Return on Investment (ROI) is $3,289.36 or 245% ROI. See the chart below:
Two Contractors Doing Similar Work for similar customers with the similar direct and indirect construction costs will have massively different net profits for the year. Their KPI Reports will be more favorable which means a more stable construction company. Size matters when it comes to piles of money and bigger profits!
Construction Success is a few simple disciplines practiced everyday
Construction Failure is a few errors in judgment repeated everyday
Click Here To Learn About Developing Your Construction Company Strategy
QuickBooks Expert Specializing In Construction Bookkeeping Services
About The Author:
Randal DeHart, PMP, QPA is the co-founder of Business Consulting And Accounting in Lynnwood Washington. He is the leading expert in outsourced construction bookkeeping and accounting services for small construction companies across the USA. He is experienced as a Contractor, Project Management Professional and Construction Accountant and Intuit ProAdvisor. This combination of experience and skillsets provides a unique perspective which allows him to see the world through the eyes of a contractor, Project Manager, Accountant and construction accountant. This quadruple understanding is what sets him apart from other Intuit ProAdvisors and accountants to the benefit of all of the construction contractors he serves across the USA. Visit http://www.fasteasyaccounting.com/randal-dehart/ to learn more.
