Five Characteristics of Successful Contractors

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August 18, 2009

I'm often asked: "What do you see in the construction industry right now?" What this question usually really means is: "Am I better or worse off than my competition?" In every segment of the construction industry, I see companies that are successful and those that are struggling to make ends meet. Here are a few of the characteristics that the successful companies have in common, especially in the current economic environment.

  • Measurement and management. I recently attended a conference where the speaker reminded us of the age old adage, "You can't manage what you don't measure." It is important to have the systems in place in every department (estimating, field production, accounting) that provide accurate measurements so that you can make the appropriate decisions to get a project back on track (rather than waiting until the end of the project to find out if it was successful).
  • Cash flow. Successful companies do everything in their power to manage their cash flow before and after the invoice is sent out the door. Cash flow management starts with the estimating process, not when the invoice is prepared.
  • Specialization. Specialization by itself does not equate success; it is the companies that have managed their specialization that are successful. They know the segments of the market in which they are the most efficient, and have streamlined their operations to address those segments.
  • Strategic partnerships. Some companies have identified key customers that are still having success with whom they have developed strategic partnerships. Others have identified other companies (vendors, other skilled trades, etc.) in order to pool skills, resources and geographic advantages to create success.
  • Right sizing the company. The overhead structure in a company is designed to support a certain level of volume. Those companies that understood this principle and took the necessary, though difficult, steps to match their overhead with their decreased volume are still having some success. Those that delayed are finding that their overhead is consuming resources that are needed to keep the company running.

As you review your contracting operation, you might work to develop or enhance these five areas of your management skills. And, when you have a financial advisor who understands the construction industry, he or she can assist you. Just ask!

Dan Allman, CPA, CCIFP (Dublin office)

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