Tag Archives: Contracts

Win More Contacts At Your Price!

Every construction company business owner wants to charge a higher price for their services and products. And especially today, I’m sure you are looking for the magic ingredient that will give you more jobs at your price. But why should customers award your company a contract? In this tough economy there are less jobs to bid and more competition. Many of your competitors are pricing jobs at prices lower than their costs. They are trying to keep their doors open and crews busy hoping something good happens soon. Ask yourself this question:

Why should customers award your company contracts at your price or higher than your competitors?

It is what it is!
Perhaps you are starting to realize that it’s not what it was. The new economic reality is here to stay for at least 3 to 5 years. If it hasn’t hit you yet, get ready. Just a few years ago you could do a pretty good job and get lots of work from your customers. But today, your old sales strategies won’t get you enough work to stay profitable. It takes more than doing a good job, producing quality work, and bidding projects per plans and specifications to win contracts. Now, you must do more and offer something different than your competitors to win contracts. You need to renovate, innovate, change, improve, and upgrade your estimating systems, bidding strategies, proposal format, presentation methods, customer contact approach, marketing plan, and sales tactics to be successful today.

I started my construction company in 1977. At that time there was not a lot of competition and getting work was relatively easy. Through my business contacts, I could find a nice job to bid, call the customer, meet them, get a set of plans to bid, do the take-off, estimate the job, and then turn in my proposal with a reasonable mark-up on it. A few days later I would call to see if I could meet with the customer to review our bid. At the meeting we would negotiate the terms, inclusions, exclusions, and agree on a final price. Simple. 

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Construction Risk Is a 5 Letter Word! (part 2 of 3)

The biggest risk and opportunity to make or lose money is… LABOR! Let’s look at a typical job breakdown to see what happens if labor runs over budget by 5%.

Typical Construction Contract Budget

Labor $40,000
Materials $40,000
Equipment $10,000
Subcontractors $10,000
Subtotal $100,000
Overhead @ 10% $10,000
Profit @ 5% $5000
Contract Amount  $115,000

The 5% Factor = 100% More Net Profit!
Most construction companies only make an average annual net profit between 2% to 3%. If you can IMPROVE your LABOR costs by only 5%, you can IMPROVE your net profit amount to 4% to 5%. This can be as much as a 100% increase in your bottom-line!

If you can improve your labor by 5% in the example above, your net profit will increase to $7,000, or from 5% to 7% net profit. And if you improve your labor by 10%, your net profit will increase to $9,000, or from 5% to 9% net profit. This is real money and will put you far ahead of your competition and give you some breathing room to invest back into your company.

But, if you overrun labor by a small 5% amount, you’ll spend $2,000 more than your labor budget and reduce your profit margin to only $3,000, or to 3% net profit. If you overrun you labor by 10%, your net profit will be reduced to only $1,000, and 1% net profit.

Is your crew working efficiently?
Consider how productive your crew is everyday out in the field. Studies of typical construction field crews show revealing facts and much room for improvement. Field employees spend some of their time planning the work. Then they produce the work. Some of the time they support the work doing layout, seeking information, fixing equipment, looking for tools, repairing tools, locating the right material, and asking questions. And of course some of the time is wasted goofing off, standing around, starting late, quitting early, extending their breaks, smoking, making personal cell phone calls, waiting deliveries, running out of materials, or taking care of their dogs loose on the jobsite.

Typical Construction Field Productivity

2% Planning work 0.2 hrs /day
40% Producing work  3.2 hrs /day
25% Support  work 2.0 hrs /day
33% Wasting time 2.6 hrs /day

Do these results shock you? Go out to any job site and look around for a few hours or days. Just sit and watch what really goes on. You will be under-impressed and appalled. So where do you start to improve productivity? It starts with identifying the areas that take away form your crew’s efficiency. Look for things that slow down production, create down time, or allow them to be less than productive. Some things that hurt your field productivity include:

– When the superint./foreman leaves site
– 5 trips to hardware store per day
– Run out of materials or small supplies
– Tools break or don’t work properly
– Wrong equipment for the job
– Waiting for right equipment to show
– Smoking while working
– Cell phone calls
– Dogs running wild
– Not starting on time
– Quitting early
– Breaks and lunch time extended
– Bad attitude employees

Win the race!
NASCAR is a good model to follow. At each pit stop, there is no time to waste, as every second counts and can cost the team millions of dollars if they loose any time. How can you get your crew to win the race and become:
– super efficient
– super fast
– super productive
– super organized

Focus on the 5% factor!
The dilemma for most contractors is a downward spiral and never ending treadmill. When you try to do it all yourself, you aren’t focused on field productivity. You get too busy taking care of small tasks that need to be done but don’t make you money. When you’re too busy to meet with your supervisors regularly to help them plan properly, problems continually happen. You only have enough time to react and fight fires. This causes your crews to stand around and wait for you to get them answers or needed materials.

You know you are losing money and your crews are inefficient as they waaste more time than they should. But you don’t have enough time to stay out on the jobsite all day to tell them what to do and keep them working faster. So you rely on untrained foreman to get the work done. These supervisors have no incentive to work at a high productivity rate, so they do what they feel is fast enough based on their experiences over the years. Besides, what’s the worse that could happen to them? You come out a few times a year and tell them they’re over budget and try to get everyone working a little faster. Not much of a productivity improvement program.