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Business Practices of Successful Contractors

January 13th, 2012 by

Which business practices do successful contractors have in common?

When observing highly successful individuals, regardless of the industry, there always seems to be a set of characteristics or business practices shared among the individuals. The following business practices are used by several highly profitable and successful construction companies. Follow their lead for success in 2012.

Establish Goals
These business owners have a clear direction and purpose for their business. This path keeps them focused on their primary priorities and prevents them from getting sidetracked on work that does not provide a high financial return. Unfortunately, many construction business owners do not have established goals. Of 2,500 construction companies that were surveyed, less than 20 percent of business owners said they write, track and set performance goals. Every successful business should take one or two days per year to hold a management retreat to develop and write goals and implementation plans for the upcoming year. Your vision will become clear when you take time to do this. For example, if you have a goal to grow your company 25 percent next year, writing down the goal will force you to develop an action plan to make it happen. As you track your progress every month, you can make necessary adjustments in your customer targets, marketing strategy and sales tactics.


Develop Strong Managers
You cannot build a profitable company without a solid management team. Top business owners hire strong people to make daily decisions, and they build an accountability and responsibility system to allow their employees to develop with the company. Determine what type of employee you need to hire next to grow your business—for instance, do you need a professional office manager, estimator, project manager or salesperson? Investing in a strong management team will give you time to focus on other important business issues, such as building sales, creating new services or investing in expansion plans.

Conduct Accountability Meetings
Every successful business has regular meetings to communicate with their managers and employees and keep them focused on the big picture. Top companies focus on achieving results and measure actual job performance in their weekly meetings. These contractors have weekly superintendent and foremen meetings to review productivity goals and accomplishments over the past week and discuss plans for the upcoming week. This keeps their field crews focused on field production, budget versus actual, schedule milestones, safety goals, and quality targets. Your estimating and business development managers should meet every Monday to review their customer targets, bid-hit success ratio, upcoming proposals, and strategies to develop loyal customer relationships. Project managers should meet every month to review their job-cost updates, receivables, cash-flow problems, schedule milestones, project issues, procurement process, submittal progress, and change orders on every project. These regular meetings will help your team accomplish project and company goals.

Invest in Yourself
Top business owners have a desire to continually improve and learn about better ways to do business. They talk with their mentors and associates about new business opportunities, issues and critical decisions.They stay involved in industry associations and attend annual conventions for training workshops and networking opportunities. This gives them an opportunity to learn from their peers, see the latest equipment and software, and find new ways to build business. Smart business owners also read books and trade magazines to keep up with the latest trends and learn innovative ideas.

Sell Your Service
Successful business owners have customers who pay for their work based on trust, performance, and exceptional knowledge, rather than low price. To attract and retain customers, you must build customer relationships, create effective business development systems, and have a market niche that sets your company apart.

Create Additional Income
Top business owners have survived the economy by finding additional income sources that can provide a steady cash flow during good and bad times. These business owners took a portion of their profits and reinvested it into income-producing ventures like rental properties, service businesses, and manufacturing companies. They have part-time responsibilities managing these investments, and in the meantime, the investments continually produce ongoing income.


January 12th, 2012 by

All construction companies are facing similar challenges as 2012 kicks off. In order to ensure success in 2012, industry experts encourage companies to adopt smarter management practices.


In the words of Mark Shapiro, “smart management begins with integrity.” Shapiro is the chief brand officer of E-Myth Worldwide, a business consulting company. He believes that most customers don’t expect contractors to do what they say they’re going to do; for this reason it is incredibly important to make sure you and your staff regularly communicate with customers to ensure that the customer’s expectations are met. To effectively manage a business, one must have a plan. Shapiro points out that construction companies often fail to develop a vision for their business. He encourages companies to focus on what they want their business to look like three years from now.
To develop your vision, answer these key questions:

-What will your business focus be?
-What market will you serve?
-What industries will you serve?
-Who do you like serving, and who has the money?
-Where will you do business?
-How many employees do you need?
-What kind of advertising will you use?

The answer to these questions are the kind of strategic decisions that result in a vision, and a vision helps make all future decisions for the business.


The key to profitability in the construction industry is following sound financial management practices. It is crucial for contractors to find a financial manager or part-time controller to help manage the financial side of the business. Of the companies that fail, more than 90% of them will fail due to the following three mistakes: competing solely on price, using change orders improperly, and writing bad contracts. A solid contractor must have a system for estimating jobs and a thorough understanding of their overhead and cost of doing business. Many experts agree that the single most important thing for a construction company is managing overhead. Having a full understanding of the costs enables contractors to set the right markup.


The construction industry is a cyclical one, and now it is more important than ever to be sure not to become financial weak. Companies must maintain their financial viability to avoid losses and obtain outside financing necessary to grow and build new projects. It is wise to continually measure your company’s staying power- constantly test what you are doing to make sure it will sustain the business long term. An easy way to do this is to pick one or two measurable characteristics, and regularly review them. Examples of these characteristics are working capital, your balance sheet, and net worth. Construction owners must be willing to take advice from experts who have construction-specific experience. An expert can act as a coach, and steer the business in the right direction.


“Management always begins with self-management,” Shapiro says. It is important that you take time now to get organized. Execute the following tasks to organize yourself: create a calendar and to-do lists, avoid clutter, clean your email, create a filing system, return calls, and be able to find anything in your office in less than 10 minutes. When you do all of this, you can then focus on how to manage your business, properly delegate and put systems into place.


2012 Construction Outlook

January 11th, 2012 by

Reports from the CFMA’s economic consultants show average results from 2011, and a shaky outlook for 2012. 

From the beginning of 2011 through August, construction spending totaled $511.4B, which is 3% below the same period in 2010. In August 2011, total construction spending reached a seasonally adjusted annual rate of $799.1 B, which was .9% higher than August 2010. Publicly financed projects grew 3.1% in August, while privately financed construction grew just .4%. The reason the public sector has outperformed it’s counterpart is that many of these projects are related to the U.S. stimulus package passed in February of 2009. With the stimulus-funded projects steadily declining, growth of the U.S. nonresidential construction sector will become increasingly dependent on privately financed projects. A boom in the private sector is not likely to occur in 2012, however, due to slow job growth, elevated vacancy rates, and continued disciplined lending. State and local capital budgets will most likely be constrained for the next fiscal year, which will provide a roadblock to any significant growth within the U.S. nonresidential construction segment.

The outlook as a whole may not be great, however, certain segments show more potential for growth than others. In the previous 12 months, construction related to the nation’s power industry has grown more than 21%. Another promising candidate for expansions is healthcare, due to the fact that the number of Americans with insurance should increase in the coming months.

The CFMA publishes a quarterly confidence index for the construction industry; the report is called the CONFINDEX (Construction Financial Executives Confidence Index). According to the third quarter report, 51% of survey respondents expect some improvement in construction industry business conditions in 2012. Compare that to just 33% of respondents that expect conditions to be roughly the same. Just 16% of respondents expect the industry’s business conditions to decline.

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