Taking Your Construction Company to the Next Level

There are many ways to grow a business, but the first step is to understand how you got to where you are, then decide what you need to do next to take your company to a higher level.

Begin by assessing your operations, key personnel, subcontractor and supplier relationships, financials and business plan. What’s working, and what’s not? What needs to change to grow your company?

It’s this self-assessment that’s often difficult for contractors to perform. Most contractors got into construction because they like to build things. They didn’t sign up for the management part, whether that’s scheduling projects, tracking costs or supervising people.

Yet mastering the operations side of the business can make all the difference in landing bigger projects — and qualifying for larger bonds. A smooth-running business leads to increased profitability, greater efficiency, higher-performing staff and an enhanced reputation.

So go ahead, ask yourself some tough questions about where you’re headed. Be sure to include the following five questions on your list. You’ll find that answering “yes” to them will open doors to new business, better results and increased bonding.

1. Do I have the accounting systems I need to grow? Basic cash or accrual accounting can only take you so far. To grow your business, you’ll need to prepare financials on a percentage-of-completion basis. A construction-oriented CPA can help you set up the appropriate accounting systems and provide the year-end financial statements surety companies and banks expect. Putting accounting controls in place will help you even out your cash flow, reduce the need for borrowing, improve the collection time on your receivables, and increase your retained earnings. As you grow, you’ll also need to hire dedicated accounting staff and use accounting software that’s tailored to your business.
2. Do I have a system for job tracking, estimating and pricing? Without timely and accurate data, your company can’t adequately forecast and track costs, stay on schedule or properly price a job. As you grow, reporting becomes even more crucial to controlling costs, avoiding underbilling, spotting scheduling bottlenecks and completing your work-in-progress reports. You need to purchase software that’s designed specifically for construction companies, then make sure your project managers are using your reporting system. Not only will proper reporting help you better run your business and earn a profit, it’s essential for increasing your bonding capacity. Sureties depend on this information for sound underwriting.
3. Do I have the right people on my team? It’s not by chance that successful construction companies have experienced project managers, skilled professionals and loyal employees. These companies have invested in their people. They do what it takes to attract and retain talent: offer competitive pay and benefits, provide opportunities for professional growth, and create a positive company culture and work environment. They also have onboarding and training programs, written HR policies and an employee manual. Have you made your company a place where people want to stay, even if they’re offered a job elsewhere? If not, what needs to change? Don’t let low morale, poor management or high turnover ruin your chances of landing new and bigger projects.
4. Do I have a business continuity plan? What happens if a key person in your organization becomes incapacitated or leaves? Who will run the company? Have a plan for when the unforeseen happens, whether that’s the death of an owner or a natural disaster. Contingency planning is essential for every business, but it’s especially important in construction where firms often rely on the leadership of a single individual or are at the mercy of weather-related events. Work with an attorney, insurance professional and your bank to put together a plan that will keep your business running if the worst happens. Identify key personnel and successors, and create a roadmap for leadership transition and succession.
5. Do I use a construction-oriented attorney to review contracts and obtain legal advice? Contracts guide your every move on the job, the relationship you have with the owner, the money you’ll be paid, the work you must perform, and the penalties you’ll incur if you don’t complete a project on time. Knowing contract language and how to negotiate contracts is key to protecting your business. Get the legal support you need from professionals who are familiar with the construction business. Reviewing contracts, mitigating liability risks and complying with regulatory requirements are important safeguards you need to have in place to grow your business.

To get to the next level, don’t be afraid to identify areas where you can improve your company. Your surety can provide insight into best construction practices and refer you to CPAs, attorneys and bankers that specialize in construction. Invest in your business, and you’ll be well on your way to achieving greater success.