Small companies are always struggling to find more profits with less time and resources. Construction and architectural companies are faced with these same struggles, but they often have the additional challenges of high equipment costs and the competition of bidding on jobs against a tight pool of opponents. Trying to maintain a tight leash on costs while growing the business and staying competitive can be a daunting task. There are a few small business areas where additional attention now can mean more profitability in the long run.
Understanding of your company’s overhead- Look at all those expenses that you would still have to pay if no one worked for a week, like rent, utilities, equipment loans, salaries, web site, internet and other costs. Once you have a firm grasp on your fixed costs, it will be easier to bid on jobs and more importantly, make a profit from the jobs you win.
Accounting on and off the job site- Trying to juggle your small business accounting on napkins and post-its from the field or an antiquated accounting system can cost your business thousands or even tens of thousands in lost time and missed revenue. Invest in a productive and efficient small business accounting software program like QuickBooks. Consult with a small business accountant about the best way to set up your accounts and how to generate reports. You’ll need to access this data time and time again, so an investment in solid advice at the start will enable you to do the job right the first time. After you have a good accounting practice in place, you’ll be far better prepared to process invoices in a timely manner. Better accounts receivable means better cash flow.
Change Orders- Sustaining a tight control on client’s change orders can be the difference between being profitable or not. Change orders are those requests that fall outside the scope of your original contract and can add up to hours of re-estimating work and lost time if you’re not careful. Failure to keep up with change orders can also mean that your business is losing considerable dollars and opportunities for profitability because you’re doing work that you’re not being paid for. Change orders serve as an excellent source of increased revenue, too. Because you already have the original contract, you don’t need to compete with other construction firms to win the business – you’ve already got that! Put a tracking system in place to organize, manage and complete change orders in the field and translate those modifications into actual billable time on the accounting side. Which takes us to the next step – accounting.
Job Analysis- Having a good estimating and accounting system will also save you the repetition of freshly estimating every job. In construction as in many other businesses, there are similarities from job to job. Having an electronic reference will equip you with a track record from which you can gauge the profitability of your pricing structure including the raw materials and labor required for each job. When you take the opportunity to reflect on previous projects, it will enlighten you to the success of the job, stumbling blocks and enable you to learn from mistakes so you can be more profitable with future contracts.
Training- This portion of your small business management translates into many aspects of your business. Invest in your staff by providing growth and enrichment opportunities. This benefits both the employees and your company, resulting in employees who are more loyal, resulting in less turn over. Absence of employee retention can wreak havoc in a small business, especially when those individuals in strategic positions leave the company. The cost to search for and hire replacements can impact your company both financially and emotionally as the strain of double-duty roles on the remaining employees can be exhausting. By providing in-house training on responsibilities, roles, safety and procedures, you will have a more efficiently operating organization. Set aside time to draft procedures and maintain them will streamline repeated questions, curtail errors and in the case of safety, can prevent costly and serious injuries on the job site. Procedures aren’t etched in stone but they should be documented, reviewed by your team and then revisited regularly. As procedures change, they should be revised with a journal log so you can see who updated the procedure, what changes were made and why.
A business is a business, but each type of industry has different obstacles where the company can become stuck if the right reinforcements aren’t in place. Construction firms have unique needs; speak with an experienced small business advisor in your area to learn how you can become more profitable.