Getting Ahead of Delays to Help Construction Business Profitability*

It can be challenging to run a profitable construction business, especially for solo operators who do it all: labor, client relations and administration.

The Bureau of Labor Statistics reported that fewer than half of construction businesses on record were around 10 years after startup. Around two of 10 operations were noted as insolvent after their first year of business.

According to the Contractor Financial Management Association, an average contractor might expect mid-single-digit earnings before paying taxes. That means that for every $1 million billed annually, an average business could wind up with $50,000 in the bank.

I wouldn’t blame contractors for profit challenges, but I would encourage them to consider doable actions that can offset the impact of financial headwinds.

McKinsey Global Institute noted productivity as an ongoing issue in construction with historic labor-productivity growth of only 1 percent a year.

Time is precious. Money saved is money earned. If productivity is profitable work done over time, then spending time and profits on improving it may not make sense. I would suggest that contractors first consider ways to save time by getting ahead of common occurrences that may contribute to delays. (Anyone who has had to use a hole saw to enlarge an existing hole cleanly, or who has had to replace a pilot bit in an old arbor, knows how onsite workarounds and repairs can unexpectedly delay a job.)

So, I suggest focusing on time as it relates to productivity.

To follow are some ideas that construction business owners and practitioners might consider, or revisit, to maximize productivity. These are merely ideas for a reader to consider.

1. Standardizing storage systems for loadouts

An organized work vehicle may be more efficient and safer than a disorganized vehicle. Productivity could be improved with storage system tweaks that make common tools and accessories, consumables and administrative supplies easy to find and handle. Large totes and containers from a discount store could be fine as long as they serve their purposes. Clearly labeling what’s in what might be a good idea.

2. Standardizing job specific tools and materials in loadouts

Pros know what they need to bring to jobs. It could be useful to have a durable list of that stuff that gets checked off before and after job site work. Consider keeping a standard assortment of tools and consumables always available, organized, labeled and in good service.

3. Plan ahead for tool malfunctions, workarounds and accidents with basic tools and specialty accessories like these…

• Extra gloves, eye protection and ear protection
• Allen wrenches, box wrenches, adjustable wrenches, a ratcheting socket set, wire cutters and a screwdriver set
• Hole Troll^® guides if you’re using hole saws, or extra arbors, pilot bits and a vice
• Heavy duty double-sided (mounting) tape and electrical tape
• Flexible magnetic pickup tool and magnetic work tray
• Portable wet/dry vacuum
• Paper towels, shop rags, buckets, funnels, water hose, cleaning supplies, a dustpan and broom
• A flashlight, extra batteries for any portables, and chargers
• Your phone charger and battery backup
• First-aid kit for minor scrapes.

4. Standardize a playbook for every job with important information that workers can easily reference, including at least the following (example below).

• Worksite address with basic directions
• Work start date and projected end date
• GC’s name and contact info
• Language translator contact info if needed
• Worksite weather conditions (high and low temp, rain/sunny/cloudy)
• Parking instructions
• The address for one or another nearby offsite location for food, restroom breaks, meetings, etc.
• Adding online map links and rough distances to key locations could be a good idea
• List the worker names, contact info, call dates and work hours
• Locations of nearby hardware and/or materials dealers

Regardless of how a business is doing, I would suggest that regular operational improvement is a worthy goal. Look at how People, Processes and Technology resources are contributing to productivity. If something is working well, consider investing in ways to increase the capacity of that resource to do more of the same. If a resource is not working as efficiently as it should, perhaps consider simple ways to cost-effectively improve performance.

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If you're interested in construction industry research and insights, here are some websites you may like:

• bls.gov
• mckinsey.com
• cfma.org

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