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Contractor’s Top Strategies for Managing Through Tough Times

February 3rd, 2012 by

Get to Know Your Lending Agreements and Lenders.

The current downturn in real estate has spread throughout the economy, causing tougher lending standards throughout the construction industry. Contractors need to get ahead of this curve by reviewing capital requirements and bank covenants against their business plan for 2012 to ensure that compliance issues are predicted and re-negotiated ahead of time. Lenders hate surprises. If possible, negotiate a larger credit line to provide a cushion even if it means giving additional collateral or guarantees. These can be re-negotiated when this business cycle turns around.

Update Your Business Plan, with Recession in Mind.

Re-evaluate every aspect of your business plan from a new point of view-how it should change if the economy takes an additional sharp downturn in 2012. Every contractor should go through the exercise of running financial projections that model what happens if your revenues are 10 or 20 percent less than in the previous year. Look critically at each business line to see if this is the time to exit those that are marginally profitable or unprofitable. If your business is considering expansion into a new line of business or a new geographic area, consider partnering with an existing business to minimize risks.

Retain your key people.

If you think times are tough, think about how they would be without your key people helping you manage your business. Every contractor should take aggressive steps in the areas of reward systems to make sure that your key people feel appreciated and well cared for. Most surveys show that compensation, while important, is not in the top two or even three critical factors in job satisfaction. Look at compensation as a qualifier that keeps your key people from looking around, but then look to earn their loyalty through innovative benefits, deferred compensation, team building and participation in plotting the strategic direction of your construction company.

Evaluate Your Bank.

Contractors should critically evaluate the strength of their bank and that bank’s knowledge of and commitment to the construction industry. When credit tightens, banks that do not have a deep commitment to contractors may pull back from an entire industry, regardless of the underlying credit-worthiness of their customer. Be prepared to move banks before that happens.

Control expenses by out-sourcing.

Having resources in-house can be an expensive luxury. Whether it is technology, fleet management, human resources or a host of other skill sets, contractors should look to out-sourcing to reduce risk, reduce costs and increase efficiency.

Watch for Acquisitions.

Contractors in financial trouble often step on the accelerator during a recession by bidding work cheaper and managing their risks more loosely. Contractors who have a solid financial base should be alert for acquisition opportunities, not only for their competitors who are facing liquidity issues but also for expansion or other purposes. Competitors may be available at bargain prices, or they may be forced to liquidate assets at less than fair market value.

Beware of short-term investments.

Overnight investment of excess cash has become significantly more complex as auction rate securities (corporate or municipal bonds with long-term nominal maturity  or preferred stocks for which the interest rate or dividend is reset by an auction agent through bid process known as “dutch auction”), once thought to be as liquid and safe as a savings account, routinely fail in auction. Contractors need to reassess the safety and liquidity of any short-term investments, particularly cash equivalents.

Review spending.

In this environment, contractors should closely review any expenses that are discretionary for opportunities to defer or reduce cash outlays. In conjunction with this, a capital expenditures budget should be reviewed. Equipment purchases that can be delayed without hampering ongoing business should be considered.

Actively manage employee benefits.

Once thought to be a fixed expense, contractors are awakening to the fact that they can reduce costs and achieve the same level of employee satisfaction with their benefit package by re-evaluating how those benefits are delivered and packaged. For example, health savings accounts may be an attractive option to your workforce. At the very least, re-visit cost sharing and funding of benefit levels.

Follow these ten tips to ease your stress during challenging business years.

Know the Score to Win the Game

February 2nd, 2012 by

Set, track and monitor your targets and goals for you construction company.

Imagine coaching a basketball team without keeping score. You would put in your best players, call plays designed to outscore the opponent and hope to finish the game with more points. But without a scoreboard, you would not know if you should change your strategy, call different plays or put in different players. It would also be difficult to motivate your players.

Business is like sports in many ways. You cannot win in business if you do not track your progress. To win the game of business, you have to be under budget, ahead of the plan, make money and beat the competition. When your employees do not have goals to meet, they will not work as hard.

Establish Goals and Targets for your Construction Business

Have you established goals and specific targets for your construction business? For example, do you have written goals for your current annual sales and net profit? Less than half of all small business owners set and track annual sales and profit goals. This is like running a business without trying to make a profit.

Specific company targets might include: sales revenue, gross profit, overhead, net profit, profit growth, debt reduction, average project size, number of new customers, new market penetration, proposal-hit ratio, stockholder distributions and company value.

Before you start a project, get the estimator, project manager, field superintendent and foreman together to set overall project goals. Hold a pre-job team meeting to get everyone on the same page.

Plan the project, and develop goals, including estimated versus final profit, proposed versus final completion date, production crew hours, equipment hours, general condition costs, safe work days, call-backs or punch-list items, customer satisfaction, increased  change order revenue and prompt payments. Afterward, follow up on these goals with weekly and monthly project team meetings. At the end of the project, hold a general review meeting to decide what areas need improvement, and refine your goals for the next project.

Follow the SWAT Method

You must have specific written targets for every important area of your business. Write down what you want to achieve, and use the SWAT.COM method to set your goals:

S Specific

W Written

A Attainable

T Time-Dependent

C Challenging and clear

O On-purpose and on-target

M Measurable


After you establish your overall company goals, write project and individual goals that will contribute to your company’s success. For example, if you want to improve net profitability this year from $100,000 to $250,000, improvement must start with your sales focus and finish at the project level.

Specific action goals to complement this overall company net profit goal should include the following tasks: 1) Secure four new customers who will execute contracts at a minimum gross profit margin of $50,000 each during the year. 2) Implement a field productivity improvement system to increase crew effectiveness by a minimum of 10 percent, and save at least $100,000 for every $1 million in crew costs over the next year.

Incorporate goals into your company’s  mindset. Your team should know their top priorities and deadlines to achieve the goals. Otherwise, they will get sidetracked by “urgent” job problems and miss the annual target.

Track Progress

Too often, business owners do not use a tracking system or provide feedback to their employees. Feedback will allow project teams and field crews to make strategic adjustments before it is too late. Use Monday morning team meetings to meet with your employees, and set weekly goals. Write them down, and give each team member a specific target to reach. For example, to stay on schedule for a typical week, you might set the following weekly goals: dig 500 lineal feet of pipe, complete all touch-up painting for the project, or get all outstanding change orders approved by Friday.

Also, meet with your team monthly to review progress on targets such as new customers, new contracts, sales revenue, company profit, cash flow and collections. At the project level, review the estimated final profit, job schedules, field productivity, customer satisfaction, quality, safety, general conditions and the labor and equipment budget versus actual expenses.

When you set goals, keep score, track your progress and let your team know the score on a frequent basis, you will win more games!

Try This
Use this example to develop and track your annual field productivity improvement goal: 
Goal: Improve field productivity 10 percent or 

$100,000 per $1 million in crew cost
Deadline: Design and implement a productivity improvement
program within one month.
Deadline: Save 10 percent over the next 12 months.
Action step #1 Get the project team together to develop the program.
Action step #2  Identify tactics, and develop a tracking system.
Action step #3   Set a project team monthly meeting schedule.
Action step #4 Implement a productivity improvement system.
Action step #5 Track progress weekly, provide feedback and
make adjustments.

Motivation Breeds Success

January 31st, 2012 by

The following article from inc.com gives you some easy tips on how to stay motivated.

Here are 14 quick strategies to get and keep yourself motivated:

1. Condition your mind. Train yourself to think positive thoughts while avoiding negative thoughts.

2. Condition your body. It takes physical energy to take action.  Get your food and exercise budget in place and follow it like a business plan.

3. Avoid negative people. They drain your energy and waste your time, so hanging with them is like shooting yourself in the foot.

4. Seek out the similarly motivated. Their positive energy will rub off on you and you can imitate their success strategies.

5. Have goals–but remain flexible. No plan should be cast in concrete, lest it become more important than achieving the goal.

6. Act with a higher purpose.  Any activity or action that doesn’t serve your higher goal is wasted effort–and should be avoided.

7. Take responsibility for your own results. If you blame (or credit) luck, fate or divine intervention, you’ll always have an excuse.

8. Stretch past your limits on a daily basis. Walking the old, familiar paths is how you grow old. Stretching makes you grow and evolve.

9. Don’t wait for perfection; do it now! Perfectionists are the losers in the game of life.  Strive for excellence rather than the unachievable.

10. Celebrate your failures. Your most important lessons in life will come from what you don’t achieve. Take time to understand where you fell short.

11. Don’t take success too seriously. Success can breed tomorrow’s failure if you use it as an excuse to become complacent.

12. Avoid weak goals.  Goals are the soul of achievement, so never begin them with “I’ll try …”  Always start with “I will” or “I must.”

13. Treat inaction as the only real failure.  If you don’t take action, you fail by default and can’t even learn from the experience.

14. Think before you speak.  Keep silent rather than express something that doesn’t serve your purpose.

The above is based on a conversation with Omar Periu, one of the world’s best (and best known) motivational speakers.


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