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Building A Dream Business

How Does the “Job List” Help Us See the Future of Our Construction Company?

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That’s a Question We’re Going to Continue Answering in This Week’s Solution

Previously we discussed the importance of building your business on a solid foundation and how it can prevent your business from falling down around you. We talked about the different parts of that foundation and their purpose.

Next, we talked about construction companies that are avoiding these foundational building blocks because they are out of their comfort zone. It’s amazing how people in the construction industry will use all sorts of power tools and equipment but are afraid of paperwork.

Then we began breaking down the “Job List”…one of those foundational building blocks. In that post we looked at how it can tell you…

  • Which types of work were consistently the most profitable
  • How you were doing at meeting your financial goals for the year
  • When you should have the signed projects finished to stay on track
  • How well you’re doing at getting proposals signed
  • What the average price of your projects are

We began with how the “Job List” can help with creating and recording project numbers, tracking project bid amounts and tracking dollars of signed proposals.

Now let’s continue looking at how the “Job List” can help us plan for the future.

When we look at the total project bid amount and the total signed amount we can see where we are in relation to our financial goals for the year. (See the previous post for more details on this).

Next is…

Tracking dollars collected from projects – This collected amount (column K) is exactly what it says it is. It is where we enter the amounts collected from each project weekly. This total gives us a comparison to our signed amount (column J) and let’s us see if our projects have increased or decreased after signing.

Percentage of jobs signed – This percentage, 60% (cell I-24) is the percentage of proposals that have been signed. This is cell B-22 (15) divided by cell C-22 (9). This information lets us know how we’re doing with our pricing. If the number is below 15%, we’re not selling well. If our number gets too high, above 50%, we may not be charging enough.

Percentage of dollars signed per dollars bid – Knowing this percentage helps us as we’re looking forward, to know how we’re doing in relation to reaching our financial goal for the year. Based on the percentage of 53% (cell J-26), knowing that if our goal for the year is $400,000.00, we need to have done twice that many dollars of proposals.

Percentage of dollars collected per signed – Just like tracking the amount of dollars collected is pretty straight forward, this percentage of 93% (cell K-28), is the same. This simply lets us know if we’ve collected everything that was bid. If not, there may be some outstanding receivables, or we may have made changes during production that reduced our receivables number. It’s also possible for this number to be more than 100% which means that there were changes made during production that increased our receivables.

There are still five more areas of information that the “Job List” provides but to keep this post from getting too long today, I’m going to stop here. I know that this feels like a lot but it’s not nearly as overwhelming as it seems.

Just like there’s a lot to constructing a building, the same is true for building a successful business.

The five remaining areas are –

  • Average dollar amount of projects bid
  • Average dollar amount of projects signed
  • Average dollar amount of projects collected
  • Projected timeframe for doing signed projects
  • Projected date work should be done

Of these next five areas I think the last two are the most revealing.

I’m looking forward to bringing this “Job List” topic to a close in the next post.

The Final Step in Raising the Construction Contractor Accountability Bar

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This is How the Construction Contractor Evaluation Works in the Real World

It’s time to bring this process of evaluating construction contractors to a conclusion. Like most things needed to run a successful business, this process of evaluating and holding the construction industry to a level of excellence isn’t as simple as we’d like it to be.

This doesn’t mean it’s not worth the effort.

We started this series by pointing out the fact that there is a problem and that construction contractors have a worse reputation than used car salesmen. Second, we discussed why a system for rating company’s and individual’s performance would allow us to move average toward excellent. Next, we looked at what the process would include and what would be rated. Last week, we concluded with how a numerical rating would allow for accurately scoring the performance of those being evaluated.

This evaluation system will give us some clear and concrete information to help us make better decisions regarding construction projects.

  • The first thing it will do is give our production team a clear understanding of what is expected of them.
  • Second it will give each company and/or individual a report for each individual project.
  • Third it will give production teams a rating to see how they compare to the standard of excellence.
  • Fourth it will let us as the general contractor see how we rate in comparison to our standard of excellence.
  • Finally, it will give us a process for comparing companies and individuals when we are going through the process of determining who will be doing specific construction projects.

Here are some examples of the evaluation process in action.

This process will start by providing companies and individuals with the evaluation process so they will know what’s expected of them. It’s unfair to have something expected without knowing what those expectations are. The contents of what is included in these expectations can be found in Part 3 and Part 4 of posts.

Let’s start by rating Painting Company A on the project that they just finished.

These are the areas to be scored, with each specific sub-section scored independently and averaged will give the score for each area.

_____ Time management – 54

_____ Attention to detail – 67

_____ Communication – 51

_____ Quality of work – 75

_____ Respect for the budget – 76

Overall project average – 65 meets standards

You can see that this company scored lower in a couple of areas and higher in others, ultimately scoring in the mid-range of meeting standards. When this company receives this report…there needs to be some attention given to the areas with the low scores.

The next thing we’ll look at is how the accumulation of scores given to subcontractors can give us, as the general contractor, a way to see how we rate in comparison to our standard of excellence.

Let’s say we’ve done a small bathroom upgrade that included a plumber, an electrician, a painter, and a carpenter. Here is each subcontractor’s overall project average score.

Plumber’s project average – 77

Electrician’s project average – 71

Painter’s project average – 65

Carpenter’s project average – 76

General Contractor’s project average – 72

This score of 72, while it falls within the area of “meets standards”, it’s below where I expect us to be. If we’re doing our job right and meeting our expectations…we should be scoring closer to 85

It looks like we have some work to do.

Finally, this system will provide us with a way to make the best choice when deciding between multiple subcontractors. For example, if we are looking for a painter to do a job, we can compare scores from previous projects or overall averages.

Painting Company A’s project average – 65

Painting Company B’s project average – 69

Painting Company C’s project average – 76

As you can see looking at these averages, there is a clear front runner. What you can’t see is what specific section scores make up these averages. For example –

Company B scored high in the areas of Attention to detail and Quality of work but scored low in Time management and Communication. While Company C scored a constant average in all areas. With this information, we, as the general contractor, can determine which painting company would be the best fit for the upcoming project.

There is no question that the construction industry has our work cut out for us to get the bar raised to excellence. Rome wasn’t built in a day and getting the bar raised that high won’t be either.

Remember, Rome was built by laying one brick at a time.

I hope this series of posts about the construction contractor evaluation has been enlightening and helpful.

We hope to have the finishing touches on this Construction Contractor Evaluation system done before much longer. When it’s ready we plan to make it available at Solution Building. Once it’s ready, get your copy and…

Join me in raising the construction industry bar.

Why We Need Numbers to Help Construction Contractors Achieve Excellence, Part 4

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How Else are We Going to Know How High the Bar Actually is?

Over the past several weeks we’ve discussed how low the bar is regarding the construction industry and the need to raise it. We talked about how most people working in construction aren’t even aware that there’s a problem. Then we looked into how an evaluation system could improve those standards. Last week, we broke down what construction contractor excellence should consist of.

This week we’re going to look at the hard part of the process…putting numbers to performance.

The number of goals made or correct answers given provide a numerical value of a person’s accomplishments. Evaluating performance is harder, it’s about expectation and perception.

The variation of perception is one of the main reasons this process gets left undone.

What’s acceptable to me, may not be acceptable to you and vice versa. This is why a system for giving a fair evaluation is important.

The rating part of the process –  

  • This is an objective form of reasoning used to analyze and evaluate companies, contractors, and individuals in each of the five (5) different rating categories.
  • Evaluations must be based on the company’s or individuals actual performance, not the comments or opinions of others.
  • The evaluation must reflect the combination and culmination of events during the entire project. Single events of outstanding or faulty performance should be considered in context of the overall project.

The following tendencies need to be recognized and avoided in order to keep the ratings as objective as possible.

  • “Halo Effect” – rating the company or individual the same in every category based on a general opinion of their performance. Each category must be evaluated separately and objectively.
  • Bias – rating a company or individual based on whether or not the person doing the evaluation likes or dislikes the company or individual being evaluated.
  • Undue credit for length of service – rating a company or individual based on their length of service instead of the quality of their performance. In other words, thinking that they must be exceeding industries standard because they have been doing this work for 15 years.
  • Loose ratings – giving higher ratings out of a desire to please and remain in a positive light with the company or individual.
  • Tight ratings – rating companies and individuals below standards due to the person doing the evaluation being a “perfectionist”. If all the companies and individuals are rated too low, it reflects on supervision!

We need a consistent and simple way to score each of the five (5) areas of accountability that we discussed last week; time management, attention to detail, communication, quality of work and respect for the budget.

Each area was divided into various sub-sections that scored independently and averaged together make up the score for each area being evaluated. These five (5) scores then averaged together give us the overall score of the evaluation.

The following notes offer a further explanation of ratings and describe standards of performance. They should be taken as general illustrations of the standard expected rather than as comprehensive definitions. Evaluators should use their judgment in determining other factors which should be taken into account in particular situations.

Here is the numbering system for rating each area –

  • FAR EXCEEDS STANDARDS 4.7 -5.0 –

This is the highest level of performance. Few companies or individuals will score at this level. It is only attained by top performers, if ever. This performance rating is characterized by an exceptionally high quality of superior craftsmanship done in a timely manner. They constantly seek out and assume responsibilities above and beyond expectations and contribute new ideas or ways of improving operational and/or procedural matters.

  • EXCEEDS STANDARDS 4.0 – 4.7 –

Evaluations in this range are very desirable. Companies and individuals who score in this range demonstrate above average performance in their position. Performance approached that of excellent in craftsmanship and production. Require a degree of supervision that is less than typical of most companies and individuals. They make significant contributions to production and periodically seek out and assume responsibilities beyond expectations.

  • MEETS STANDARDS 3.0 – 3.9 –

Performs in a responsible and comprehensive manner, however, improvement should be expected on future evaluations. Requires a higher degree of supervision than should be needed. Performs work in a professional manner and makes acceptable contributions to production.

  • NEEDS IMPROVEMENT TO MEET STANDARDS   2.0 – 2.9 –

Companies and individuals scoring in this range are considered marginal. Performance of is barely adequate. Requires extensive direction and review to keep projects moving forward. Companies and individuals scoring in this group should be informed that if there isn’t improvement they will NOT be used on future projects.

  • FAILS TO MEET STANDARDS 1.0 – 1.9 –

Companies and individuals should never score this low. Performance in this range is nowhere near acceptable standards. The performance is low and chances for improvement are unlikely. Every project that this company or individual is on is sending a message to customers that job performance and quality are not important!

Once each of the areas has been rated based on the performance on the project and the overall average has been determined, that number is multiplied by 20 to give us the overall score.

These scores then will be as follows:

            94 – 100     FAR EXCEEDS STANDARDS

            80 – 93       EXCEEDS STANDARDS

            60 – 79       MEETS STANDARDS

            40 – 59       NEEDS IMPROVEMENT TO MEET STANDARDS

            < 40          FAILS TO MEET STANDARDS

Today’s post along with the three previous ones will provide a construction contractor evaluation system that will begin raising the bar to a level of excellence.

Like most things, this can seem a little overwhelming, but so did your first construction project when you started it.

Just start building the wall one brick at a time and before you know it…it’s done.

The key to building anything is having a good plan and following it. This construction contractor evaluation system is a part of such a plan.

Here at Timber Creek Construction, we’ve been looking for a process to hold ourselves and our production team accountable. Implementing this plan is how we’re going to do just that.

The Next Step in Raising the Bar of Construction Contractor Accountability, Part 3

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How Do We Get the Bar Raised to the Level of Excellence?

Over the past couple of weeks, I’ve talked about the need to raise the bar of what is expected of construction contractors and how at Timber Creek Construction we’re working on a process to accomplish that.

I used to believe the ultimate goal was achieving perfection. Then I was informed by my wife that striving for perfection was a bad thing because perfection is impossible. The fact that perfection is unattainable leads to disappointment. I struggled with this for a while before determining that…

EXCELLENCE is the goal, not perfection.

Growing up I was taught that there is a level of excellence to be achieved in everything we do. There was no need for a “system”, excellence was just the standard…not so much anymore.

As a general contractor it is my responsibility to provide customers with excellence.

In order to raise the industry standard of excellence, there needs to be an effective way to communicate these expectations with customers, sub-contractors, and individuals working on construction projects. There needs to be a system to evaluate how well these expectations are being met.

Last week I ended the discussion stating the need to rate each construction company and/or individual doing construction, based on their performance and actions for each project.

Here is what we will be included in the process. This is what will be expected from us and our production team in an effort to achieve excellence.

  • The purpose of this evaluation system is to share what the standards are for our construction company and what is expected of contractors and individuals. This evaluation system is designed to hold ourselves and others accountable for our decisions and actions as they relate to construction projects and the industry as a whole.
  • The use of an evaluation system is sometimes misunderstood by the person or company being evaluated. This procedure is designed to assist you and/or your company in making the best possible choices and decisions regarding construction projects.
  • This system is intended to be positive and constructive for each contractor, individual and company. Sometimes evaluations are perceived as negative; however, the intent is not to find fault, but rather to develop better contractors, individuals and companies.
  • Most contractors and individuals want to do good work, which is what our company and customers want. This does not mean only working harder, but also working smarter. The objective of this evaluation is to reinforce the appreciation of performing above and beyond industry standards. It is to assist in improving performance and quality.

Here are the areas of accountability that will be evaluated and what will be included in each area.

Time management – spend time wisely

  • Show up and start projects on or before the time and/or date determined and scheduled.
  • Be productive with the use of time while at the job site and/or working on the project. Make the amount of time spent working worth the travel time. Don’t spend more time traveling than working.
  • Work consistently on the project once it is started, unless there are extenuating circumstances such as waiting on materials, other contractors or weather.
  • Have the project completed on or before the deadline for completion.

Attention to detail –

  • Do the work as described and explained in the Scope of Work.
  • Keep the job site organized and clean throughout the duration of the project
  • Follow the “Construction Contractor’s Golden Rules”
  • If you open it, close it.
  • If you turn it on, turn it off.
  • If you unlock it, lock it up.
  • If you break it, admit it.
  • If you can’t fix it, call in someone who can.
  • If you borrow it, return it.
  • If you value it, take care of it.
  • If you make a mess clean it up.
  • If you move it, put it back.
  • If it belongs to someone else and you want to use it, get permission.
  • If you don’t know how to operate it, leave it alone.
  • If it’s none of your business, stay out of it.
  • If it will brighten someone’s day, do it.
  • If it will tarnish someone’s reputation, DON’T do it.

Communication –

  • Let everyone you are directly involved with or is connected to your portion of the project know what to expect.
  • Make or return calls in a timely manner.
  • Send and sign proposals, contracts, change orders, scopes of work, budgets, etc. in a timely manner.

Quality of work –

  • All work is expected to be done above current industry standards, striving for a level of excellence.
  • If work is unacceptable and needs to be redone, make this a priority as needed to help keep the project on schedule.

Respect for the budget –

  • Be aware of and stay within the budget, both labor and material. If situations arise where changes need to be made that are going to deviate from the budget, let all affected parties know before proceeding.
  • Manage materials to minimize waste. Return unused materials to supplier or general contractor to be used on future projects.
  • Honor payment agreements and don’t ask for draws ahead of schedule.

I know this seems like a lot of information to digest, but it’s really pretty simple. And although it’s basic, it might not be easy. Because if it was easy…everybody would already be doing it.

This is what it’s going to take to raise the bar to the level of excellence, which is our goal, after all.

Next week we’ll discuss the evaluation part of the process and how it will be shared with those being evaluated.

I know, you’re on the edge of your seat looking forward to next week’s post.

An Eye-opening Process to Hold Contractors to a Higher Standard, Part 2

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The First Step is Raising the Bar High Enough So an Earth Worm Can Get Under It

I talked last week about how poorly the construction industry is viewed and the contractor’s unawareness of how low construction standards are. It’s pretty sad when the bar is so low that an earth worm can’t get under it.

We discussed how important it is for a professional builder to –

  • Communicate clearly
  • Listen intently
  • Respect other people’s time
  • Be responsive
  • Be accountable

And how we should live and work using the “golden rules for construction contractors”

As a general contractor I’ve allowed myself, sub-contractors and laborers the latitude to leave the bar where it is. When this is permitted as acceptable, it leaves the bar laying in the dirt.

Standard is just average. Average should not be what we’re striving for. Currently the industry average needs to be raised. Let’s work together to get the bar out of the dirt. We need to determine what acceptable standards are and then incorporate a process to evaluate performance as compared to the standard.

We should be working to achieve more than average. We should be striving for excellence.

Usually, we have every intention of doing better. Good intentions are easy, actually doing better is the hard part. It doesn’t help when we aren’t even clear on what’s expected. We need an accountability system to be designed and implemented. A process for sharing and explaining clearly what the expectations are and a way to evaluate how well they are being met.

Now the hard part begins…what is this evaluation system going to be, how is it going to work?

If no one knows what the standards are…it’s going to be hard to achieve them.

We need a way to evaluate the performance of everyone involved in the construction process. We need a system to –

  • Share what our construction business standards are and what is expected from ourselves, contractors and laborers.
  • Assist individuals and companies in making the best possible choices and decisions regarding construction projects.
  • Provide positive and constructive evaluation not intended to find fault, but to develop better contractors, laborers and companies.
  • Minimize differences in opinions and focus on the work done, not personalities and/or our differing perspectives.
  • Evaluate ourselves, contractors and laborers at the completion of each project.
  • Provide construction customers with the best work possible by not only working harder but also working smarter.
  • Reinforce appreciation for performing above and beyond industry standards while constantly raising that level of standard.

This system needs to have a way to rate each company and/or individual on their performance based on a culmination of events and actions of each project. These ratings then need to be accumulated in an overall performance rating to be used to compare to other companies and/or individuals when choosing who will do future projects.

We need to determine what areas we will be held accountable for and rated and reviewed in? We also need a numerical rating system for doing the evaluating.

We’ll get into these areas in the next post.

As I’m writing these weekly solutions, I’m developing an evaluation system that I’m going to implement at Timber Creek Construction. Once I get it finished, I plan to make it available at Solution Building for other companies that would like to help raise the bar in the construction industry standards.

How Can We Raise the Bar of Construction Contractor Expectations?

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With An Eye-opening Process to Hold Contractors to a Higher Standard

I read a study years ago that ranked building contractors below used car salesmen. This might not be a bad thing if used car salesmen didn’t have a reputation of…shall we say…not putting the customer’s needs first.

For builders to have been ranked below used car salesmen was very confusing and more than a little disturbing.

Then realized that I viewed customers differently than a lot of builders. For me they aren’t just customers, a project or just a way to earn money. These people have put their trust in me to build them their dream.

Over the years as I have discussed building projects with a lot of people, the number of times that I have heard construction customers say, “It was the worst experience of my life” is unacceptable.

A construction project should be among the best experiences, not the worst.

Many people only get the opportunity to experience a construction project once, especially if it’s a large one like building a new home. This makes it even more critical that we as construction contractors serve every one of our customers in a professional manner.

In a previous post about construction contractor etiquette, I shared a story of a friend meeting with a plumber. While they were in the kitchen discussing the project, the plumber who was chewing tobacco spit tobacco juice in her sink. Not just once mind you, but 3-4 times! He at least had the courtesy to turn the water on and rinse out the sink.   

When the customer told me this story, she was still surprised about this and the plumber…he didn’t even realize he had done anything wrong.

This kind of behavior is a problem and it’s no wonder that contractors have a worse reputation than used car salesmen.

Considering some situations that I’ve seen or heard, it is apparent that this problem needs our attention.

Whether it’s –

  • Standing in a customer’s upholstered chair using it for a ladder
  • Leaving an electric circuit turned off over the weekend which had a customer’s freezer plugged in to it
  • Laying down after lunch and taking a nap on a customer’s couch
  • Throwing food trash in the void behind a wall and leaving it
  • Or…spitting tobacco juice in a customer’s sink

These kinds of things are unacceptable.

The level of expectations for construction contractors has gotten so low that these kinds of actions have become the norm. 

The problem is the unawareness that there is a problem.

If this is going to change, we need to raise the bar. We’ve got to hold ourselves and each other, to a higher standard.

We need construction contractor etiquette.

The word etiquette doesn’t sound like a construction term. However, I think the definition of etiquette speaks to this issue perfectly. Etiquette is a code of ethical behavior regarding professional practice or action among the members of a profession in their dealings with each other and customers.

What would this code of ethical behavior look like for construction contractors?

It would be things that a professional builder would be expected to do:

  • Communicate – Let the customer know what to expect. Return calls, send contracts in advance, sign papers in a timely manner. Remember that they don’t do construction everyday like you do.
  • Listen – This is the most important part of communicating. You need to hear what the customer is saying. This is more than just their words. It means really listening to their hopes and desires and understanding their dreams.
  • Be on time – Show up when you say you will. If you’re going to be late, call and let the customer know. Respect their time.
  • Be responsive – Return communications in a reasonable amount of time. They just want to know that you hear them and care.
  • Be accountable – If you or someone on your team make a mistake, own up to it. Don’t blame someone else. Keep the job site “clean”.  Pick up your lunch trash and water bottles. Dust will be expected, but use plastic tarps, if possible, to contain the dust and/or clean areas if it gets out of hand. Be aware of landscaping.  Don’t park in yards or walk on flowers or other plants. If it’s necessary to work in these areas, do it with respect.

Some of this content is from Construction Etiquette by Stefaney Rants.

We need to use the Golden Rule for contractors and treat construction customers the way they should be treated, not the way they normally are.

GOLDEN RULES FOR CONSTRUCTION CONTRACTORS

  1. If you open it, close it.
  2. If you turn it on, turn it off.
  3. If you unlock it, lock it up.
  4. If you break it, admit it.
  5. If you can’t fix it, call in someone who can.
  6. If you borrow it, return it.
  7. If you value it, take care of it.
  8. If you make a mess clean it up.
  9. If you move it, put it back.
  10.  If it belongs to someone else and you want to use it, get permission.
  11.  If you don’t know how to operate it, leave it alone.
  12.  If it’s none of your business, stay out of it.
  13.  If it will brighten someone’s day, say it.
  14.  If it will tarnish someone’s reputation, keep it to yourself.

As professionals it is up to us to do something about this.

So, what are we going to do?

The first thing is to be aware of the problem. If we ignore it, it won’t go away; it will continue to get worse. This means that we need to hold each other accountable for our actions. As professionals, if we see something unacceptable being done, we need to call each other out with respect and in private. This isn’t about public humiliation. It’s about raising the bar. It’s about the customer.

In the second part of this series of posts, we’ll begin to look at the process for holding ourselves and each other to a higher standard.

Contractors get ready…the BAR IS BEING RAISED.

The “Job List” Is One of the Foundational Building Blocks of a Successful Construction Company

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Now, What’s the Purpose of This Building Block and Why Does it Matter?

Recently we discussed the importance of building your construction business on a solid foundation and how paperwork is outside of most contractor’s comfort zones. I know, I know paperwork is not a very exciting topic, but neither is concrete. And we all know how important concrete is in supporting a building. The same is true for paperwork and your business.

As we discussed previously, one of the three foundational piers is administration and finance. One of the building blocks in that pier is a Job List which offers valuable information for forecasting the company’s financial needs and production plans.

Wouldn’t it be helpful if you knew –

  • Which types of work were consistently the most profitable
  • How you were doing at meeting your financial goals for the year
  • When you should have the signed projects finished to stay on track
  • How well you’re doing at getting proposals signed
  • What the average price of your projects are

The Job List is an Excel spreadsheet that lets you gather and track information. It has preset formulas determining and sorting the information you need to make your business more profitable.

This document provides information for –

  • Creating and recording project numbers
  • Tracking project bid amounts
  • Tracking dollars of signed proposals
  • Tracking dollars collected from projects
  • Percentage of jobs signed
  • Percentage of dollars signed per dollars bid
  • Percentage of dollars collected per signed
  • Average dollar amount of projects bid
  • Average dollar amount of projects signed
  • Average dollar amount of projects collected
  • Projected timeframe for doing signed projects
  • Projected date work should be done

This list can seem overwhelming but doesn’t have to be.

Here is an example of what the Job List spreadsheet looks like.

Let’s go through the document and break it down into smaller bite size pieces.

Creating and recording project numbers – Having a numbering system can help you sort projects so that you can review which types and size of projects are the most profitable and what you do the most of. It may be that your most profitable ones are not the ones you do the most often. Having this type of information can help you to focus more of your attention on the right kinds of projects for you.

This Job List is a place to list project numbers in conjunction with the size and types of the projects as well as their chronological order. This document provides the numerical part of the project number specific to each project. The other portion of the project number is determined by job specific parameters not included on this document.

Tracking project bid amounts – Our Blueprint for Building a Better Proposal system provides the dollar amount for each project. Once a proposal has been finished, the information specific to that project is entered into the appropriate cells on the spreadsheet. This information includes Job Number (column E), the Customer Name (column F), Description (column G), Bid Date (column H) and the Project Amount (column I). Regardless of the system you use for preparing proposals, you should have a dollar amount that could be entered into this document.

As each new project amount is added in the project amount column, the total project amount at the bottom will update giving you a total dollar amount of the proposals you have done to this point in the year. Based on your company’s past history, this dollar amount should give you a clear picture of where you are in relationship to meeting your financial goals for the year. We will explain this further with the tracking dollars of signed projects.

Tracking dollars of signed proposals – Once a proposal has been accepted, the accepted dollar amount should be entered in the signed amount column. Initially this amount should be the same as the amount in the project amount column. Sometimes the dollar amounts of projects are changed due to change orders. This can be either an increase or decrease depending on the change order(s).

As each new proposal gets signed the dollar amount of the signed proposal should be entered into the correlating cell in the signed amount column. Just like in the project amount column, as each new amount is entered in the signed amount column, the total dollar amount at the bottom automatically updates giving you a total of work you currently must do.

With the total of the signed amount column and the total of the project amount columns, you should be able to get a clear picture of where you are financially in relation to where you want to be at year end.

Let’s say your goal for the year was to generate a gross revenue of $400,000.00. Using the example, you can see that as of December the 12th you were at $352,877.66. This is getting close, but not quite there. If you compare the signed amount to the project amount ($664,381.27) you will see that the signed amount is 53.11% of the project amount. Based on this percentage, to get the signed amount to $400,000.00, the project amount would need to be $754,000.00.

This kind of info is helpful when looking ahead to the future.

We’ve covered a lot here today. In our next post we’ll pick up at tracking dollars collected from projects.

I hope you’ve found this helpful. If you have questions, feel free to put them in the comments below and I will answer them.

Why is One of the Most Important Parts of a Construction Business Avoided So Much?

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Because Admin and Finance are Out of the Contractor’s Comfort Zone

Most trades people like doing physical work, not paperwork. They like building things, not sitting at a desk making proposals or putting numbers in spreadsheets.

Avoiding paperwork is one of the biggest reasons construction companies struggle to stay in business.

They may be the most skilled craftsman out there but they consistently struggle to keep the business afloat. This includes things like –

  • Losing money due to under bidding projects
  • Not enough money to pay taxes
  • Can’t afford to have repairs done to the company pickup
  • Projects running over budget
  • Upset customers due to poor communication
  • Disconnection with production crews due to poor communication

An example of this is an email I received just this past week from a foundation repair contractor.

“I need help with all aspects of the business end of the business, and definitely with organization and systems. It’s easier for me to pick up a house than it is to figure out what to charge for doing it.”

All these problems can be solved with a good foundation that includes paperwork.

Whether it’s a dislike for doing paperwork or simply not knowing how to do it, paperwork doesn’t have to be as scary as it first appears.

It requires doing something different. If you keep doing what you’ve always done, you’ll keep getting what you’ve always got. (Variation of a Steven Covey quote) This reminds me of the Geico commercial where the group of young people choose to hide behind the chainsaws, rather than getting in the running car.

Recently we talked about the importance of building your business on a solid foundation. I told you that this foundation consisted of three piers, one of which is Administration/Finance. Let’s break this foundational pier down and see what it’s built of.

Administration – The process or activity of running a business or organization that includes but is not limited to –

  • Computer Systems
  • Team Member Records
  • Team Member Policies and Benefits
  • Office Support
  • Office Maintenance
  • Information Archiving and Distribution
  • Data Processing
  • Communications
  • Contract Preparation

Finance – The management of money that includes but is not limited to –

  • Budgeting
  • Invoicing
  • Cash Flow Forecasting
  • Financial Reports
  • General Bookkeeping
  • Accounts Payable
  • Taxes
  • Banking

Each of the things listed here has a mix of administration and financial aspects. A good example of this overlap is the Blueprint for Building a Better Proposal, which we’ve previously discussed in a series of blog posts and podcasts.

As we move forward discussing this foundational pier, I will share some of the different documents and processes that we’ve developed and regularly use at Timber Creek Construction.

The first one we’ll discuss is called the Job List. This is an Excel spreadsheet that serves several purposes, some of these are:

  • Generating consecutive and project specific job numbers
  • Tracking current total project bid amounts at present
  • Tracking current total signed projects at present
  • Tracking current total collected projects at present
  • Percentage of jobs signed
  • Percentage of dollars signed per dollars bid
  • Percentage of dollars collected per signed
  • Average dollar amount of projects bid
  • Average dollar amount of projects signed
  • Average dollar amount of projects collected
  • Projected timeframe needed to do the work based on annual revenue goal
  • Projected date work should be done based on annual revenue goal

We’ll dig into the Job List deeper next time.

I know, I know…this seems a little scary, but it doesn’t have to be with some help. Just remember that if your business doesn’t have a good foundation, it may not stay standing.

Check back in later to learn more about the Job List.

It’s Christmas Time and This Is the Most Wonderful Time for Giving

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However, Proposal Systems are Not What We Normally Think of When We Think About Giving

Giving is an interesting word. For such a small and simple word, I had no idea how complex it was. In the Meriam-Webster dictionary there are sixteen different definitions with several sub-definitions for the word give. This is just as a verb, plus there are additional ones for uses of nouns, etc.

Just like the large number of definitions for the word give, there are a lot of great ways of giving.

One way of giving is the traditional wrapped presents under the Christmas Tree. And who doesn’t look forward to getting together with the people we love and sharing in the excitement of unwrapping that unknown gift?

Another great way of giving is sharing our knowledge and experience.

In my forty years in the construction industry, I learned some things. 😊 After struggling trying to figure out how to do accurate proposals, communicate clearly with customers and prepare a production budget, I knew there had to be a better way.

While a lot of construction companies are great at “constructing”, they often struggle with the business side of things. There’s a lot more to owning and operating a construction company than just building.

Unexpected costs, changes to projects and poor communication plague the construction industry.

It doesn’t have to be this way.

That’s why I developed the Blueprint for Building a Better Proposal system. This proposal system will give you the documents and instructions needed for preparing proposals that communicate clearly and accurately with the customer, while allowing you to be profitable.

This system includes templates for:

            Bid sheet – A Word document with all the construction sections and individual items already listed out with space for filling out the scope of the work to be done, dimensions, materials, locations, etc.

            Worksheet – An Excel spreadsheet with all the construction sections and individual items already listed out with optional overhead and profit markups already inserted in the appropriate cells.

            Estimate – A word document with spaces to fill in the pertinent information, i.e. customer’s information, what will or will not be supplied by the contractor, the scope of work, the estimated price for each specific element and a total estimated price.

            Proposal – A word document with spaces to fill in the pertinent information, i.e. customer’s information, what will or will not be supplied by the contractor, the scope of work, the proposed price for each specific element, a total project price, payment arrangements and project duration.

            Contract – A word document with spaces to fill in the pertinent information, i.e. customer’s information, list of referenced documents, construction funding information, property specifics, project start date and legal terms and conditions.

            Proposal-Contract – A word document that is a combination of a proposal and contract in one.

It also includes:

            Data Base – An Excel spreadsheet with prices for material and labor for a wide variety of specific construction tasks. This information can be copied and pasted to the worksheet.

            Instructions – Complete and comprehensive instructions for how to use this system and put it to work.

            Example documents – Complete Bid Sheet, Worksheet, and Proposal for a hypothetical construction project.

Back to the spirit of giving –

I want to give of my experience and knowledge because I want to see more successful construction contractors and more happy construction customers.

So, this Christmas we’re giving by reducing the $497 price of our Blueprint for Building a Better Proposal system by 80%.

The Christmas price is only $97!

This reduced price will allow contractors to give clearer more accurate proposals to their customers.

If you know someone in the construction industry that you think would like the chance to save $400 on this proposal system…give them the link to the Blueprint for Building a Better Proposal or give them the link to this blog post.

We also have a free document you can download called the 7 Bid Mistakes. It will walk you through the common mistakes that cost contractors a fortune and how to avoid them. And because it’s free…we’re giving it too.

Why It’s Critical to Build Your Business on a Solid Foundation

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Because If You Don’t…It’s Likely to Come Crashing Down Around You

If you own or operate a business, I’m sure you’ve experienced the feeling of your world crashing down around you. There are a variety of different reasons this happens. A few of them may be due to things out of your control. But, more often than not…it’s because of bad decisions we made.

Most of us that are self-employed started out learning our trade as an apprentice working for someone else. This is how I got started. The problem with this is that while I learned how to build a building, I wasn’t taught how to build a business. This is a critical part of why so many businesses don’t survive.

It doesn’t have to be this way if the business is built on a good foundation.

The foundation of a building is made up of two parts, the footing and the foundation. The footing creates an attachment point between the foundation and the soil. The role of a footing is to support a building and help prevent settling.

The foundation is the base of any building structure. The foundation transfers the load from the structure to the footing and also provides resistance from loads exerted on it. If the foundation of a building is inadequate or not maintained, the building will collapse.

The foundation of a good business is the same. If your business isn’t built on a solid foundation, it will likely collapse.

The footing for your business is who you are. It consists of your purpose, core values and mission. These are the non-negotiables. The things that, when faced with decisions, will be rock solid.

Your foundation is three piers supported by the footing while supporting the business. This is the business systems and operations. These piers are sales/marketing, production/operations and administration/finance. 

  • Sales/Marketing – Searching for and finding customers that you can help by providing your service and/or product through word of mouth, advertising and awareness. Meeting with potential customers, determining what they want/need and preparation of estimates, proposals and contracts.
  • Production/Operation – Organizing, scheduling and maintaining the project or product. Determining who the right people are to preform specific tasks. Knowing the parts that are needed and making sure they fit. Maintaining communication between all parties involved. Upkeep and maintaining facilities and equipment.
  • Administration/Finance – The preparation of documents needed to communicate, track and record all aspects of the business. The filling out and filing of income, expense, banking and tax papers. This leg is one of the easiest for ‘trades-people’ to neglect and one of the most important.

For a business to be successful for the long term it is critical to have these three piers in place and to maintain them.

If one or two of these piers get neglected when doing the busy day to day work…the business begins to lean and if not corrected in time, it will collapse.

These three piers are made up of several different pieces. I plan to break these pieces down and explain how they fit together and serve their part in supporting a successful business.

I will start with the Administration/Finance pier, because it is the most often neglected by ‘trades-people’.

It’s up to us as business owners and entrepreneurs to build and maintain our business. If we do this well…everyone benefits.