Cash flow in construction is no different than any other business. There must be more cash flowing in than flowing out or the business won’t survive.
As business owners, we need to keep an eye on what’s going on with the economy because it should influence our business decisions.
Overhead creep is one of those subtle things that business owners often don’t notice. It leads to cash flow problems real quick.
I’ve talked about the need for a contract, and the importance of a clear payment schedule, because without a well-written, clear contract, you’re headed for trouble.
A good payment schedule keeps you paid for the work you are doing. If you're using a 1/3, 1/3 and 1/3 schedule, you are financing most of the job out of your pocket.
All too often in construction sales, the focus is on selling a job. Let's rethink that; sell the design agreement so you can do the work needed before the job starts.
Why would any serious construction-related business owner want to be the lowest bidder on a project? Let’s look at what that means.
When we talk about making money, it's rarely about big chunks of change. One overlooked item that costs money is rounding numbers. For instance, your markup.
In our book we talk about the ratio of employees to dollar volume of business. Many contractors ignore this ratio and get caught up in the urgency of building a job.
Contractors have cash flow problems for two major reasons: poor money management, and poor payment schedules.