Take your construction company to the next level

This article is part of a series sponsored by Old Republic Surety.

There are many ways to grow your business, but the first step is to understand how you got to where you are and then decide what you need to do next to take your company to the next level.

Start by evaluating your operations, key personnel, subcontractor and supplier relationships, finances, and business plans. What works and what doesn’t? What changes need to be made to grow your company?

It is often difficult for contractors to perform this self-assessment. Most contractors get into the construction industry because they enjoy building things. They are not involved in the management part, whether it’s scheduling projects, tracking costs, or supervising people.

However, mastering the operational aspects of the business can play an important role in securing larger projects and qualifying for larger bonds. A smooth-running business leads to higher profitability, greater efficiency, higher-performing employees and a stronger reputation.

So, go ahead and ask yourself some tough questions about where you’re heading. Be sure to include the following five questions in your list. You’ll find that answering “yes” to them will open the door to new business, better results, and enhanced connections.

1. Do I have the accounting system I need to grow? Basic cash or accrual accounting can only take you so far. In order to grow your business, you need to prepare financial data based on completion percentage. A CPA for construction can help you set up proper accounting systems and provide the year-end financial statements that surety companies and banks expect. Implementing accounting controls will help you balance cash flow, reduce the need for borrowing, shorten the time it takes to collect accounts receivable, and increase retained earnings. As you grow, you’ll also need to hire a dedicated accounting staff and use accounting software that’s right for your business.
2. Do I have a system for job tracking, estimating and pricing? Without timely, accurate data, your company can’t adequately predict and track costs, stay on schedule, or price work correctly. As you grow, reporting becomes more important for controlling costs, avoiding underbilling, identifying scheduling bottlenecks, and completing work-in-progress reporting. You need to purchase software designed specifically for construction companies, and then make sure your project managers are using your reporting system. The right reporting not only helps you run your business better and make profits, but it’s also critical to improving your ability to connect. Guarantors rely on this information to make sound underwriting.
3. Do I have the right people on my team? It’s no coincidence that successful construction companies have experienced project managers, skilled professionals, and committed employees. These companies invest in their employees. They do everything they can to attract and retain talent: offering competitive pay and benefits, providing career development opportunities, and creating a positive company culture and work environment. They also have onboarding and training programs, written HR policies, and employee handbooks. Are you making your company a place where people want to stay, even if they find work elsewhere? If not, what needs to change? Don’t let low morale, poor management, or high turnover ruin your chances of landing new and larger projects.
4. Do I have a business continuity plan? What happens if a key person in your organization becomes incapacitated or leaves? Who will manage the company? Have a plan for when the unexpected happens, whether it’s the owner’s death or a natural disaster. Contingency planning is critical for every business, but is especially important in the construction industry because businesses often rely on the leadership of a single person or are impacted by weather-related events. Work with an attorney, insurance professional, and your bank to develop a plan that will keep your business running if the worst happens. Identify key personnel and successors and develop a leadership transition and succession roadmap.
5. Do I hire a construction lawyer to review the contract and get legal advice? The contract guides you every step of the way on the job, your relationship with the owner, how much you will be paid, the work you must complete, and the penalties you will incur if you don’t complete the project on time. Understanding contract language and how to negotiate a contract is key to protecting your business. Get the legal support you need from professionals who know the construction business. Reviewing contracts, mitigating liability risks and complying with regulatory requirements are important safeguards you need to grow your business.

To get to the next level, don’t be afraid to identify areas where you can improve your company. Your sponsor can provide insights into best construction practices and refer you to CPAs, attorneys, and bankers who specialize in the construction field. Invest in your business and you’ll be more successful.

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