6 Tips for Setting up a Successful Construction Business

March 06 2020   11 AM  

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Over my career as a carpenter, from apprentice to running my own carpentry company, I have had some great successes but equally I have stuffed up on some big jobs. That's life, it's about learning from the failures and implementing structures to stop them happening again and copying the success stories so as you can continue to see more of them. 

When you’re running a construction business, everyday presents a new set of challenges, whether that is at pre-construction phase, preparing cost estimates and sending quotes to win jobs and ordering materials or trying to manage jobs once they’ve started or recovering payment from the builder or owner once the job is done. Putting processes in place will maximise your ability to succeed and limit the downside of any setbacks you may encounter. 

What follows are some nuggets from my time as a carpentry contractor and also a few things I learned from speaking with our clients that I wish I knew when I was on the tools. Maybe you're just starting out on your path and are looking for some tips or perhaps you are a veteran and there is no harm in hearing what others like you are doing. 

TL;DR

Accounting for Tradies
Finding a reliable Accountant with construction experience and get setup on Accounting Software. Take time to research the one that works best for your business and implement it yesterday. Maybe you already have one but are you using it to its maximum potential?  From payroll to getting paid, once you get the hang of it it will change your life

Takeoff Software 
By adopting takeoff software and creating professional quotes you can get your name in the hat for some bigger jobs. If you take the time to understand the job and submit an itemized quote you will come across as the obvious choice for the job, even if you are more expensive you will beat the guy who sends the text with a $$$ value for the job. 

Get References
Before jumping into a job with a new contractor, ask people they have worked with previously what they are like to work with. You can run a credit check. This is not going to save your ass every time but you could ween out the jokers before you break your heart and bank balance. 

Project Milestones
On larger jobs that take time, agree payment milestones. That way you can manage your cash flow better and if something happens down the track you are not left in the lurch for serious cash. 

Pick up the phone 
By setting up a voicemail correctly and making time to get back to potential leads you can significantly increase the jobs you get and the contacts you make. 

Get a sounding board 
By having someone you can have an honest conversation with about some of the trials and tribulations facing your business you will be able to get an outside perspective and they may be able to offer some sound advice. It doesn't  have to be someone in the trades but someone you trust. 

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Accounting for Tradies
First and foremost - find yourself a reliable accountant with experience working with construction businesses. Setting up your business correctly on day one is key. That structure may be as a sole trader, partnership or PTY LTD.

In this day and age the accessibility of getting set up on a good accounting software makes it essential if you want to run a smooth operation. By taking the time to research and upskill on any of the available softwares will save you endless headaches. From paying your own staff, getting paid by contractors and then at the end of the year having a record for the taxman. 

We love Xero. This system gives us a great overview of our business and the state of our finances. Knowing your cash flow will help you better plan for the future of your business and make it a success. You can see every invoice, whether paid or outstanding and what I used to do every Thursday was prioritize what needs to be followed up on. Set your team up and pay them from the xero account and again the whole process is seamless and it is taking one more variable out of the equation. You worked X here is $Y and the money is in your crews account on the same day keeping everyone happy. 

By getting set up on one of these systems it will give you visibility on everything going on from a cash flow point of view in the business. I was able to see when the going is good which allowed me to go after, with confidence, some bigger jobs but it also helped me identify potential risks on the horizon and plan accordingly.

Takeoff Software
You will live and die by your takeoffs and how accurate they are. By submitting a professional quote it can be the difference between winning and losing a job. It can also be the difference between a job well done or a kick in the teeth because if something is unaccounted for that was on the plans you better believe you're wearing that cost.

Again there are some great tools coming online for contractors of all shapes and sizes. Here is a link to a blog we did on some of the ones currently available. ConX is set up for the small to medium contractor, effective and affordable you will be able to pump out award winning quotes and get a feel for the job at the same time to give you that extra confidence you are able to complete it and make some money doing so. If you are still printing plans and getting your quantities that way making the move to upskill on a program like ConX will again change the way you do business, and give you your weekends and nights back. Plugging ourselves obviously but we have a team of people here that have been through thick and thin so get in touch and we can see where ConX can help your business. 


Get References
A lot of us have been there, or at least know someone who has, when a contractor goes under or there is some dispute about whatever and you are left holding the bag. Unfortunately this industry is rife with subbies getting burnt having completed the work to a high standard and then left with nothing to show for it. There is no sure way to completely mitigate against this but you can definitely take steps to catch early warning signs and avoid a complete disaster. As a newbie it can be hard to turn down work when you are hungry for the job and the chance to prove yourself but if you take a few steps before jumping into it you can save yourself from potential heartache. 

Run a background check if you have never worked with them before. Creditor Watch is one example - If you see that the company is struggling financially or is on a bad debtors list and the banks are chasing the, guess who is last to get paid once the job is complete. It's probably better to leave that one alone or else get some pretty airtight payment terms in place. 
Something I would encourage you to do before working with someone new - put the feelers out and ask around about them and what they are like to work with. It may put you out by an hour or two but again could benefit you in the long run. Reputations precede you wherever you go, something we will talk about again, but if a contractor is looking for you to get started on a job and you haven't worked with them before there is no harm in putting the feelers out. Ask them straight up what other projects have you done similar to this and you can ask around people you may know about how this contractors is to work with. You can be damn sure they will be asking people about you. 


Project Payment Milestones
Depending on the size of the job it is a good idea to request the first payment or a % of the total payment on the delivery of materials to site so you are not taking all the risk when it comes to outlying cash. If you need to spend $30K on materials you can ask the contractor to help cover those costs. It's all about how you approach that conversation. If you kick the doors into the PM’s hut and demand cash up front there is going to be a lot of  resistance. If you ask to speak to the contractor, explain your position and how it will benefit the project long term a reasonable contractor will at least be willing to  engage and make sure that everyone is happy. If they laugh you out of the room, again are these guys going to be pleasant to deal with when you are chasing them for the remainder of the cash owed to you. 

Set out clear milestones for payment before you begin. This isn't ideal for smaller jobs but when you have your crew working on a site over a long period it will cover you in the long run. It is a good idea to have payment terms upon completion of certain aspects of the project that way you are not waiting 30 days after the job is complete to get 100% of the money. I've seen it happen before, guys spend 6 weeks on a job, paying their guys every week and then 30 days after completion there is a delay in payments, it puts massive stress on the company during that period as they have not allowed for any delay in payment. It can be the difference between life and death. Where if you are waiting on 30% it is far more manageable to deal with. 

Pick up the Phone
This may sound stupid but you would be surprised at the amount of people who do not return phone calls or haven't got their voicemail service set up properly. For the sake of this example, lets say your average profit margin per job is $5k (insert whatever number works for you). Every time your phone rings that has the potential to be $5,000 in your wallet. I'm not suggesting you down tools every time your phone vibrates but by setting up your voicemail and making time at the end of the day to reply has the potential to make new contacts and earn you money.

One of the best voicemails I have heard is - “Hi Keith here, I can't get to the phone but if you send me a text with your details and why you are calling I will get back to you as soon as possible” 

More often than not if the person ringing really wants you they will shoot you a text and you will be able to prioritise the best leads to follow up with. If you are not set up already get the finger out, you will be surprised by how effective it can be. 

Get a Sounding Board
We’ll sign off with this but in my opinion it is one of the most critical to any successful operation, have someone you can talk to in confidence. And I don't mean sitting at the bar on Friday after work giving out about X Y or Z. I mean some you can go to and have an honest to Jesus conversation with a fresh set of eyes for a problem. Sometimes we are so entrenched in our problems that we cannot see the wood from the tree’s. By having that person, spouse, mate, business partner who you can bounce ideas off of or share a problem you will be surprised how a different perspective can open a new world of problem solving opportunities. A few years back I was shooting the breeze with an accounting pal of mine about my car repayments and how I was stressed out about it. Matter of factly he told me a solution I wouldn't have thought of in a million years and it felt like a weight came off my chest. People in all walks of life face the same problems as us and many of them have fixed it in their own industries. So don't think that only a construction worker can fix construction problems. 

This list is not a definitive list. We would love to hear from you about what you have implemented in your business to make it run more efficiently. The more we share in this industry about best practices the better off we will all be.

And if you need help with the pre-construction process, look no further thank ConX to assist you - Measure plans and prepare quotes with ConX Measure and find new jobs through ConX Tendering.