3 Mistakes Construction Contractors Make–And a Tool to Help
Three Mistakes Construction Companies Make in Their Business
Construction contractors are tough, resilient, and relentless at building a successful business. They are hard-working and committed to doing the right thing and rewarding their team. Construction companies also tend to be just a tad bit competitive, LOL, so they want to be the best.
To keep you on the path of success, we are sharing the three areas that, if off track, cause the business to suffer.
Not keeping score
We’ve had owners and managers tell us that they didn’t want to even look at their numbers. We’ve been told
- The numbers can’t be trusted. They are not correct, so why should I bother?
- I don’t know what I’m looking at, anyway, so it is a waste of my time.
- There is nothing I can do about them, so why look? It is all in the past.
There are times that we didn’t want to keep score either. We were scared of the results and that they would tell us bad news. It can be scary to face numbers.
For us, it was about presenting numbers in a way that was easy to read and understand. We wanted something that enabled us to know whether the numbers made sense and were accurate. We wanted to build in some leading indicators so that we could change the future. We also wanted our management team to be able to use a score so they knew it they were winning, but not disclose too much financial information.
We started using a scorecard to
- Provide easy to understand metrics
- Turn numbers into pictures and graphs
- Spot trends or errors and items to correct
- Predict the future for cash flow and backlog
Not looking ahead
Have you ever felt like you couldn’t control your business because it is based on the economy and not your efforts? Sure, there are times that the economy was not very friendly (2007-2008 – remember that time? Ouch!) but there have also been times where identifying gaps in schedules, cash flow, and revenue enabled the company to be profitable.
It can be frustrating to look to the future because it can feel useless.
However, there are still plenty of things that can be controlled so that you can cross those off your list of worries:
Cash flow planning – Knowing the future of your cash flow can help encourage sleep. With some simple charts, strategic cash flow management is in reach.
Customer contacts – How many customer contacts do you need to make on a monthly basis to secure the workload needed for the business? A simple metric allows managers to estimate future sales
Retainage – When is retention too high? Tracking history in a simple graph can give good indicators to the future and for WHEN to take action.
Not knowing what to watch
“Complexity is your enemy. Any fool can make something complicated. It is hard to make something simple.”
-Sir Richard Branson
Knowing what to watch is half art and half science in the world of financial data. It also can take time to build a scorecard that is meaningful or with the right metrics. When you don’t know what to watch, it is easier to watch nothing.
The need to have a done-for-you template that you can input your information and have a ready-built excel model to use is real. It took so much trial and error for us to determine the best things to watch in our construction business—and we are both CPAs. We had to build ours from scratch, but you don’t have to.
Imagine having a scorecard produced on a monthly basis that gave you
- What to watch
- In a graph format for speed and ease
- In a format that allows for sharing within management teams
We know that your business is constantly improving. A scorecard can also be rewarding to watch key trends and the story of success it tells.
If you’d like a template to track the major components of your business, we have a free template for you. Click here for the template to be delivered to your inbox.