Contractor Roadmap to Improvement
by Mark Slavik, Cutter Croix, LLC
Most construction contractors got into the business to work with their hands not manage spreadsheets, computers and other office-related processes. However, like other types of businesses, construction companies need basic organizational and operational processes to effectively run their companies, satisfy customers, make a profit and stay in business.
According to the Surety & Fidelity Association of America, nearly 30 percent of contractors cite management issues as the primary reason for business failure and 36 percent site performance issues. The Small Business Administration (SBA) reports that the 60 percent of businesses that fail to survive beyond the fourth year fail because owners end their company since the business is too much work for their efforts and that most business owners want to improve their companies but struggle to find the time, tools, and support needed.
So, if you’re like most contractors, how do find the time and tools needed to improve your business? The answer takes us back to our youthful days of summer football practice; you work on the fundamentals of blocking and tackling. For a company, it’s all about improving those critical business processes that reduce costs, increase profits, grow company value and mitigate risk.
This article looks into identifying and understanding critical business processes, creating a methodology for process improvement, conducting a review of your company's current state and enlisting the help of a business coach.
National Construction Industry Outlook
"Uncertainty reigns."
That’s how Real Estate Roundtable (www.rer.org) president and CEO Jeffrey DeBoer introduced RER’s second quarter real estate executives’ survey on August 6. Whether you are referring to commercial real estate, as DeBoer was, or commenting on the overall global economy the sentiment sums up more definitively in two words what the entire financial press has been babbling about since the first quarter. While there are an entire battery of data and categories to illustrate and analyze what the status of the economy is at the moment, the next trend in direction seems to rest on one metric: jobs.
Over the duration of a full business cycle there are always short stretches of time when the markets seem to flatten out, when data suggests a marking of time rather than the continuance of a trend. We find ourselves in such a time in summer 2010. Here is a sampling of the information that reflects the current uncertainty.
Let’s start with the RER survey. Its upbeat note was that the preponderance of real estate executives responded that commercial property values had stopped falling in their markets for the second straight quarter. This almost certainly confirms that the precipitous decline in value of over 50% during the past two years has ended. At the same time, the same executives expressed doubt that property values were going to rise in the foreseeable future.
Click here to read the rest of this article.
What's it Cost?
One of the few benefits of a construction market that is stuck going sideways is the short-term impact on construction inflation. After a few price increases occurred for some basic items early in 2010, sluggish demand has drawn most prices back to last year’s levels, with the prospect of further price deflation likely as the year winds down.
July’s report on inflation showed that the Consumer Price Index was flat from June to July and up only 1.2% for the past 12 months. Producer Price Index (PPI) showed slightly higher rates of inflation, at 0.3% for the month and 4.4% for the previous year, but the PPI growth has continued to decline since the beginning of the year. PPI for products and materials that are used for construction actually declined from June to July by two-tenths of a percent. Like the overall PPI, the inflation for construction inputs continues to fall, slipping to an annual rate of 4.5%.
For contractors, and especially specialty contractors the declines have not occurred soon enough or steeply enough to offset the deflation from competitive pressures for their installed work. Of the major specialty trades measured by the Bureau of Labor Statistics only plumbing construction has risen more than one percent, and that trade’s 2.7% increase is owed entirely to the disproportionate inflation in copper and steel prices over the past 12 months. With each of those materials rising more than 25%, the slight increase in installed plumbing masks the decline in what plumbing subcontractors are able to charge for skilled labor, overhead and profit. Among the other trades, roofing has seen a 2.9% decrease; electrical has risen 0.3% and concrete 0.1%.
Click here to read the rest of this article.
Prior issues are available at our E-Newsletter Archive. If you would like to subscribe to this free quarterly e-newsletter, send an email to info@skodaminotti.com.
If you have any questions about any of these articles, post a comment below or please contact our Real Estate & Construction Group at 440-449-6800.
Powered by Compendium
Comments for Construction Connections: Fall 2010