Key Characteristics of Profitable Construction Companies

by Rob

in LTK-LTG Seminar, Podcast Episodes

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Download the slideshow handout. Steve_Ball_HeadshotThe slides have been converted to a .pdf.

This program was recorded on May 8th 2014. Our speaker was Mr. Stephen K. Ball,  director of Gross Mendelsohn’s Construction & Real Estate Group. The entire program is 55 minutes and 29 seconds in length.

The following is a summary of the “key” takeaways from the seminar as reported in a blog published by Chris Haiss, from Gross Mendelsohn & Associates. Please enjoy the recording and all of Steve’s insights.

6 Characteristics of Profitable Construction Companies

Key Takeaways from Our Seminar for Contractors

Last week I attended a seminar given by my partner, Steve Ball.  The seminar, called “Key Characteristics of Profitable Construction Companies,” was full of insightful points about effective construction company management. Thanks to our friends at the Maryland Construction Network for inviting Steve to present to their members.

Here are a few highlights from Steve’s presentation:

  • They know when to walk away from a job.

No matter what business we’re in, we are constantly asked to lower prices for the work we do. Value your work and know what it’s worth. Know how low you can afford to bid and still make a profit. One key to being profitable is knowing when to walk away from a project before it even starts.

  • They know that the integrity of the company’s leaders is critical for long-term profitability and success.

Steve pointed out that when people like you and trust you, they will do things to help you when you’re not looking. In other words, when a company’s leaders are good to employees and treat them fairly and with respect, most of those employees will go out of their way for the company and its leaders. Your company’s profit will be driven in large part by what your employees do for you when no one is looking.

  • They know that having a merit-based performance review system in place will make them more profitable.

Your employees are more important than even your customers. Your profit is based on the work your employees do for you. Without high performing employees, you will have little to no profit.

A merit-based performance review system will help build profitability in your construction company. Recognizing them for their performance will help keep good employees working for you longer.

Read more in our blog post, “Why Construction Employees Really Leave.”

  • They know that “profit” is not a dirty word.

Culture shifts in recent years have led many to consider “profit” to be synonymous with “greed.” Profit is not a dirty word. If you don’t make a profit, you can’t do anything else. You can’t buy supplies, you can’t pay employees and you certainly can’t feed a family.

  • They know to limit certain employees’ freedom with pricing.

Let’s face it – not everyone is good at bidding jobs. Some employees want to give away too much, and don’t understand the costs connected to contract performance, such as variable and fixed costs. This lack of understanding will cause you to lose profit, or worse, not make any money.

You must first know what you can afford to bid in order to make a profit. Then, give the people who are responsible for bidding the tools and training they need to prepare good bids.

A burdened hourly rate calculator is one tool that can help you develop accurate hourly rates for your employees. Download it here.

  • They do “whatever it takes.”

Steve pointed to former NFL coach Chuck Noll’s words, “whatever it takes,” when describing the mindset that profitable construction company owners should adopt.

No one should be above doing grunt work to get a job done. Owners and management team members should be ready to make tough decisions, and remain disciplined and focused. One example of this is taking a disciplined approach to change orders.

Leaders of profitable construction companies also make the time for weekly work in process meetings, for example, to review where jobs stand. Highly profitable companies take this a step further and use a tool like a contractor’s work in progress calculator to keep up to date on the profitability of current jobs.

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