Why do some contractors do extremely well in their
construction businesses and some barely "limp along" year
after year, never really achieving greatness in their
business? The majority of times the answer is very simple;
they are great technicians at their trade, but they are not
willing to reach for greatness in their management
techniques. A great technician at a trade will always have
a good job; a great technician AND a great manager will
have an exciting and profitable business.
Good contractors keep accurate records and manage cash
flow. Great contractors review data with experience and
insight in order to better understand their firms'
performance and identify areas for improvement.
Computers are great at tabulating numbers. They've made it
possible for contractors to keep track of far more
information than earlier generations would ever have
thought possible. Today job costing, estimating, and
accounting can be done with an amazing degree of accuracy
and detail.
But managing your company's finances goes beyond simply
keeping track of income and expenses and making sure that
more money comes in than goes out. Good judgment must be
exercised, and decisions must be made every day. That
requires an understanding of financial statements and the
ability to use that information to make better decisions,
both short and long-term.
For example, compare day-to-day productivity with long-term
productivity. When you include call-backs and reworks in
performance, you might find it better to budget additional
hours upfront to get the job done right the first time.
Also, along this line, how many times have you started into
a job and realized that you had bid the job much lower than
you should have bid to make a profit, but after realizing
your error, jumped into the job on "all fours", took the
"bull by the horns" and managed to squeak out a meager
profit? After getting by with the skin on your teeth, you
vowed never to get yourself into that situation again only
to find yourself there sometime in the future.
The majority of time that this happens is because after
having the initial problem and carefully managing the job
and working our way through our mistakes to make a small
profit, we had to jump right into the next job and we never
took the time to truly analyze our estimating shortcomings,
and as a result we never saw the next train wreck coming.
We have all heard the saying, "Insanity is doing something
the same way over and over again and expecting different
results." I am afraid that many of us think that is exactly
what the "other guy" is doing when in reality our not
"closing the back door" of our estimates and tracking
historical data against bid estimates is exactly that!
Forecasting is another key activity. It might be considered
planning for future financial management. While no one can
predict the company's future with certainty, it's important
to make some thoughtful estimates from time to time. Those
'best guesses,' such as whether to buy or lease equipment
or improve your internal computer software tools, can be
factored into decisions made each day.
Great contractors understand the cause-and-effect
relationships of their successes and their failures, and
that "pinching pennies" today often leads to expensive
corrections tomorrow. By actively managing the company's
financial affairs rather than just keeping good books,
contractors can build and maintain a strong foundation for
future prosperity for both the company and its employees.
----------------------------------------------------
Phillip P Gilliam has been helping professionals in
construction estimating software, marketing, finance and
business management for over 37 years. Phil has a wife and
three daughters and resides in Florida. He attended WSU in
Dayton, Ohio and obtained a CmfgE in Robotics. He presently
is the CEO and President of Discover Software Inc.
http://www.easyestimating.com
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