Many construction entrepreneurs learn in their first years of business that things are relatively simple until you decide to grow your business. You probably started your small construction business with just your own two hands and the necessary tools. Then, as you attained more clients and were able to take on bigger projects, you found your niche and wanted to see how far you could take it. After a few years, it became obvious that you needed to bring on extra help, learn how to do business taxes, and invest in supplies, hardware, and work vehicles.
Now it’s time to get serious. You’re ready to take things to the next level, which is somewhat intimidating. The construction industry can be brutal, especially for young companies. According to the Small Business Association, about 50% of businesses fail within the first 5 years. Fortunately, you can learn how to combat obstacles other construction business owners have faced. As you prepare to grow your business, you should evaluate the risks, identify mistakes that unsuccessful businesses have made in the past, and try not to get in too far over your head without the right resources in place.
What Can New Construction Business Owners Do To Streamline Their Projects?
1. Have a Viable Construction Project Model
One common mistake that new business owners make is to start a project without having all of the necessary elements in place, especially when it comes to financial preparedness. Being unprepared for only one project can compound into serious issues that are hard to recover from.
One important factor to consider is cost. Try to identify which projects will require significant manpower, or which may heavily cut into profits. Create a detailed scope of services for every project you take on, and estimate the related costs for labor, materials, equipment, and financing. Once all of this is accounted for, you can determine a realistic profit margin. Armed with all of this financial knowledge, you’ll be able to build your business based on realistic numbers. Use cost-estimation software for construction to help with initial project planning. Once you have several projects and their financials under your belt, you’ll be able to easily determine which projects will help or hurt your margins. Decide which projects to take on based on which will give you the best margins.
2. Invest in Risk Estimation Tools
Construction business owners need to understand how to assess risks and factor these into each project. Once the initial financial planning is complete, perform a risk analysis on the project and determine if it’s wise to move forward. It’s okay to walk away from projects if the risk/reward ratio doesn’t add up.
Always consider these basic questions: Will the work disrupt operations in any way? Is your staff trained to complete this task successfully? Do you have stock and inventory on hand, or will you need to purchase from a vendor to get started? These are some of the questions that will give a strong indication of a project’s risk. Using a risk management tool will ensure that you’re asking all of the right questions and accounting for all cases of possible risk.
3. Don’t Make Accounting Errors
Make sure to hire an experienced accountant, ideally one that has experience in the construction industry. Quickbooks is an excellent tool for small businesses, but if accounting is overtaking your time running your business, look into hiring a specialist. An accountant can track your expenses, determine project budgets and handle company insurance. Find an accountant that specializes in construction that is close by, and capitalize on their industry knowledge.
4. Always Use Electronic Time Cards
Paper timesheets are an inefficient way to track employee paid hours. They’re messy, difficult to keep track of and depend solely on the memory and honesty of the employee. With electronic timesheets, your time tracking will become more accurate and simpler for everyone that’s involved.
Now that the majority of employees have smartphones, it’s easy for new construction business owners to adapt to new technology. Use a construction time-tracking app to streamline payroll processes. Not only will a time tracking app helps the accuracy of payroll, but there are also cost-cutting reasons to switch from paper time cards.
5. Get Relevant Certification
Most new construction business owners can’t (and shouldn’t) run a business without getting several certifications. Believe it or not, there are consequences and repercussions to delaying some certifications, whether it’s government penalties or worse (e.g. a stain on the business’s reputation). For example, not having every member of your warehouse staff certified in forklift operation could be disastrous. Not only is it a huge operation violation, but it can also endanger other staff members. If you are a General Contractor and are licensed according to the rules in your state, you’ll gain a significant competitive advantage and learn how to put in necessary safeguards into your projects
Always keep an eye out for relevant certifications. The Construction Management Association of America (CMAA) is a group that has multiple certifications available for construction business owners. Look into becoming a CCM (Certified Construction Manager), which grants instant credibility in the construction industry.