Construction is a tricky but rewarding type of business to manage.
Managing any business requires being knowledgeable in many things and an expert in some things, but when you run a construction firm, you have more concerns than most. Construction is among the most dangerous of businesses and faces a labor shortage while enjoying increased demand. In addition to time-honored construction techniques, understanding the latest technology can help make your business safer and more efficient, in the office and on the site.
While our construction management guide cannot fully cover the myriad concerns, it offers a brief survey of the most important issues for construction firm owners, with tips and suggestions.
Building Your Team
Hiring qualified workers has become a challenge in the construction field, as fewer young people are entering trade careers and the older generation is aging out or moving on to new occupations. Nonetheless, if you maintain a reputable company that values its workers and offers competitive wages, then you stand a better chance of attracting and retaining good workers. Regardless, you may have to train them, even on the basics, so keep in mind that in addition to skills, you should look for dependability, willingness to learn and a good fit for your company.
As someone experienced in construction, you know the kinds of laborers you need on the job, but the people you hire for behind the scenes in the office are just as important. Be sure you have competent, loyal employees who can handle sales, marketing, personnel, contracts, administration and bookkeeping. These positions keep your company moving before, during and after a construction job. It helps to hire people with experience in the construction field. For example, your bookkeeper needs to understand subcontractor invoicing as well as payroll tracking and business taxes.
Training is vital to your business. You can't always guarantee you'll be able to hire the most qualified craftsmen, but with a good training program, you can develop the skills of your employees while ensuring they do things to the quality and style that suits your company. Studies have shown that employees are more likely to stay with a company that encourages their professional growth.
Just as training helps retain good employees, so will good benefits, fair wages and a safe working environment. Having steady work year-round, offering extra training or other opportunities during slow periods, and (if you must let people go) signing bonuses for returning laborers helps bring back the best.
Company culture is vital to any modern business as well. Simply defined, a company culture establishes the ways (officially and unofficially) people treat each other. While the underpinning focus is respect and trust, how that is expressed defines your company and who will enjoy working there.
Getting the Job
Marketing is a continuous endeavor, especially in today's online society. Your marketing efforts not only attract customers and impress potential clients, but also draw new employees. Therefore, begin by making sure you display yourself as a reputable, customer-focused company that takes care of its employees. Have a clear mission and vision of who you want to serve. A construction company specializing in utilities and government buildings needs a different face than a company specializing in housing for middle-class families.
More and more, consumers research the companies or products they are working with online, so it's imperative you carry that reputation to the internet. A well-designed website is a must. Be sure to include a clear statement of what you do, customer testimonials and pictures. Highlighting employees is a good way to show prospective hires that you value your people.
In addition to your website, use online marketing in the form of local directories and targeted social media ads. Direct mail can help secure new customers. Don't lose track of previous clients. They may have additional jobs for you or can refer you to a friend. A regular newsletter is a business standard but gets ignored if it doesn't contain information that interests the clients. Rather, send periodic notices of specials, announcements about something major happening with your company, or even something as simple as a holiday card to keep your name in the front of their minds.
Networking is a vital part of marketing. As company owner, you should be involved in your community, whether by sponsoring a local little league team or attending Toastmasters. Participating in your local business professionals association can get you leads and connect you with subcontractors and suppliers in the area. Working with nearby high school or community college vocation programs is a great way to bring up the next generation of laborers, with you positioned to hire on the best. Encourage your people to network as well; everyone should have a business card and working familiarity with the scope of the company's offerings.
The art and science of successful bidding goes far beyond what we can discuss in a single article, let alone a few paragraphs. The key is to balance your expenses with the financial needs of the client while remaining competitive. Begin by having a clear idea of the costs involved in the projects, including labor, permits, supplies and office work. Project management programs and budgeting software can help you track and compile these numbers along with timelines and project milestones.
Next, get a feel for the competition and the comparables. What did similar projects in the area bid for, and did they stay on budget? Most experts say that underbidding the competition can backfire, because it sends a signal that the firm is a novice or anticipates cost overruns once the contract is signed. Also, don't overpromise. It makes a better impression to overdeliver.
Securing the contract
Contracts are legal documents. While there are boilerplates you can use, it's always a good idea to have them vetted by a lawyer, especially if you have any amendments.
One thing to include both in your contract and your operating procedures in the office is a clear method for approving changes. Changes can affect schedules, profits, and even compliance with local and state regulations. Therefore, be sure that all departments involved in a build know if a change had been made, and limit those who can approve alterations.
Budgeting and funding the project
Budget should be considered in the creation of the bid, but it's also an important aspect throughout the year, in both slow and busy seasons. Many construction businesses are seasonal, so it's important to keep those highs and lows in mind as you determine how to spend the profits you make on a project.
Loans or lines of credit
Most construction firms don't have the ready cash to handle a big project. If that is your case, then you may need a loan or a line of credit. Lines of credit (LoCs) are similar to bank loans, but they work more like credit cards in that you only pay on the amount you use and can use up to a specified amount until the term runs out. This means you can spend, pay back and spend again. You can review our financing guide for more information.
Regardless of how you get financing, you want to have everything in order so that you can secure the loan or LoC at the best rates and terms. Keep a sound budget, avoid the temptation to overspend when you are running in the black, and maintain a clean company reputation.
Lease or buy equipment
In some cases, it may be more effective to lease your equipment than to buy it outright. While purchasing gives you the advantages of ownership and equity, leasing helps increase cash flow (making it easier to get a loan) and covers maintenance and transportation to the site. A general rule of thumb is to lease unless you will use the equipment more than 60 percent of the time. See our buying, leasing and renting guide for more information.
When you budget, consider the price of insurance, permits and bonds. Bonds alone can account for 0.5 to 2 percent of the total project cost – a significant amount, particularly in large projects.
Taking care of the customer
The personal touch goes a long way in securing customers. Even before the contract is signed, you or your trusted manager should go step by step through the contract with the client, making sure they understand each section and that any objections or changes are handled immediately. During the build, provide updates and get feedback on progress. Once it's done, customers should have the opportunity to inspect and comment. In addition, calling a few months after the fact to get feedback not only makes a great impression but also gives your marketing folks a chance to gather some reviews from a satisfied customer.
On the Job Site
Having the laborers to handle specific tasks is just the first part of a strong construction workforce. You need supervisors and managers who not only understand the details of their particular teams' jobs but how they fit into the overall construction and the customer's requirements. You also need a clear chain of command and lines of communication. In addition, all laborers need to understand their roles and be encouraged to practice safety at all times.
We already discussed whether to buy or lease equipment, but no matter how you obtain it, you are responsible for damages and general care while it is in your possession. Therefore, you need to consider fleet management: protecting your equipment from the extremes of weather, ensuring personnel only use machines they are qualified on, and making sure employees are familiar with proper operations and safety requirements of individual models. It's also important to use the right tools for the job.
Editor's Note: Thinking of leasing construction equipment? If you're looking for information to help you choose a lease that's right for you, use the questionnaire below to have our sister site, BuyerZone, provide you with information from a variety of vendors for free:
Construction is historically the most dangerous profession in the United States, with the highest percentages of fatal accidents. The four most common causes of death are falls, electrocution, collisions, and getting caught in or between machinery. As the owner, you must set the standard and the example. Our construction safety guide gives more information, but start with the Occupational Safety and Health Administration (OSHA) regulations, then look to the biggest threats on your particular project. No matter what the project, promoting the overall attitude of care and watchfulness keeps the environment safer.
Regulations and compliances
While it's a no-brainer that you'll need to comply with local, state and federal regulations, it is important to remember that these can vary from state to state and over time. When starting a new project, review the local laws and requirements in that area to be sure you comply, and apply for the proper permits. You'll also need to apply for surety bonds, which protect your clients if you don't finish the work.
Regulations cover more than the project construction itself. You want to stay familiar with energy efficiency standards, OSHA regulations, Housing and Urban Development (HUD) standards, and the Environmental Protection Agency and other environmental standards, such as for the disposal of hazardous or construction waste.
You're not alone
Despite all the aspects a construction manager needs to keep in mind, one of the toughest tasks most face is delegating. However, you can't do it all. Seek out employees that are not only qualified but share in your vision, and support them with training and career opportunities as you trust them to take on tasks.
However, you don't need a full-time staff for every duty. These days, you can find a pool of online companies that take on clients for tasks such as human resources, payroll, accounting, website design and upkeep. Look for those with clients in your industry.
In addition, software exists to handle tasks such as tracking expenses, inventory, customer relationship management and even marketing. The best software offers integrations with other common business programs so that your office runs smoothly and efficiently.
Running your own business is a rewarding endeavor, and construction especially so because the things you create have substance and may last for centuries. Learning how to properly manage your construction firm helps ensure success for your projects, security for your employees and stability for your company.