Cash flow can make or break a business for contractors – no matter how big or small your company is. You can report high sales and show large profits on your Income Statement, but unless you are bringing in more cash than you are paying out you will quickly find yourself struggling to keep your business moving forward. This is why you hear the phrase “Cash Is King!” used by many smart business people.
Tell me if this sounds familiar. You land a large job to renovate a home that promises to be a massive money maker and make your bottom line for the year go from red to black. You receive your signed proposal, and as the work begins you realize that the customer is going to be difficult. They change their mind constantly, have unrealistic expectations on timing, and - most importantly - they think that you are doing X but in reality, you are delivering Y. You’ve already sunk too much into the job to cut bait and you worry about bad reviews on Yelp, HomeAdvisor, etc. - so you soldier on. But to no avail. The homeowners have convinced themselves that you are trying to rake them over the coals, and refuse to pay for any change orders and are even mentioning legal action.
My years as a Project Manager taught me many things. How to prepare for a pre-con, how to manage people, how to streamline a project to meet projected goals, to name a few. Every project was different yet the same in so many respects.
Years ago I was working for a general contractor. We specialized in public construction. Municipalities, Housing Authorities and other State-owned properties. Roofing, siding, windows and carpentry were our focus. Before the beginning of a new project I had been approached by a rep from a lumber yard I had never worked with before. He took me out to lunch, did the whole schmooze deal. His pricing was good, and I thought we were on our way to building a solid business relationship.
Many contractors enter into the building business because they dream of doing big things. Big renovations. Ambitious building projects. Quality work creating happy customers and a great reputation.
Improving project estimating processes can enable surprisingly massive business benefits for contractors. And new tools and applications allow contractors to utilize the latest estimating technologies with little to no learning curve, offering a fast-track opportunity to greater revenue.
Change orders. An unfortunate everyday reality for exterior remodelers, change orders can impact everything from project logistics and timeframe to profit and customer satisfaction, and are essential to profitability. Effectively tracking them can mean the difference between consistently healthy margins and occasional (or even frequent) losses.