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Are You A Great Contractor or Simply A Good Contractor?
Are You A Great Contractor or Simply A Good Contractor? Why do some contractors do extremely well in their construction businesses and some barely "limp along" year after year, never really achieving greatness in their business? The majority of times the answer is very simple; they are great technicians at their trade, but they are not willing to reach for greatness in their management techniques. A great technician at a trade will always have a good job; a great technician AND a great manager will have an exciting and profitable business.
Good contractors keep accurate records and manage cash flow. Great contractors review data with experience and insight in order to better understand their firms' performance and identify areas for improvement.
Computers are great at tabulating numbers. They've made it possible for contractors to keep track of far more information than earlier generations would ever have thought possible. Today job costing, estimating, and accounting can be done with an amazing degree of accuracy and detail.
But managing your company's finances goes beyond simply keeping track of income and expenses and making sure that more money comes in than goes out. Good judgment must be exercised, and decisions must be made every day. That requires an understanding of financial statements and the ability to use that information to make better decisions, both short and long-term.
For example, compare day-to-day productivity with long-term productivity. When you include call-backs and reworks in performance, you might find it better to budget additional hours upfront to get the job done right the first time.
Also, along this line, how many times have you started into a job and realized that you had bid the job much lower than you should have bid to make a profit, but after realizing your error, jumped into the job on "all fours", took the "bull by the horns" and managed to squeak out a meager profit? After getting by with the skin on your teeth, you vowed never to get yourself into that situation again only to find yourself there sometime in the future.
The majority of time that this happens is because after having the initial problem and carefully managing the job and working our way through our mistakes to make a small profit, we had to jump right into the next job and we never took the time to truly analyze our estimating shortcomings, and as a result we never saw the next train wreck coming.
We have all heard the saying, "Insanity is doing something the same way over and over again and expecting different results." I am afraid that many of us think that is exactly what the "other guy" is doing when in reality our not "closing the back door" of our estimates and tracking historical data against bid estimates is exactly that!
Forecasting is another key activity. It might be considered planning for future financial management. While no one can predict the company's future with certainty, it's important to make some thoughtful estimates from time to time. Those 'best guesses,' such as whether to buy or lease equipment or improve your internal computer software tools, can be factored into decisions made each day.
Great contractors understand the cause-and-effect relationships of their successes and their failures, and that "pinching pennies" today often leads to expensive corrections tomorrow. By actively managing the company's financial affairs rather than just keeping good books, contractors can build and maintain a strong foundation for future prosperity for both the company and its employees.
About the Author:
Phillip P Gilliam has been helping professionals in construction estimating software, marketing, finance and business management for over 37 years. Phil has a wife and three daughters and resides in Florida. He attended WSU in Dayton, Ohio and obtained a CmfgE in Robotics. He presently is the CEO and President of Discover Software Inc. www.easyestimating.com
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