Construction is a tough game, and business owners often focus on the wrong KPI’s. Here are 4 contradictions we often see with #construction businesses:
1. Revenue vs Cashflow: Big revenue figures are good, needless to say, progress payment drawdowns should lineup with expense due dates. Where possible negotiate down (or remove completely) any retentions; result = better cashflow
2. Labour costs vs Labour Efficiency: Labour costs can blow out on a jobsite. Some questions to consider:
a. Can we work differently to improve completion times?
b. Do my staff have all the tools necessary to complete work on time?
c. How can we reduce call backs and defects?
3. Material costs vs Jobsite workflow: Ordering materials on an “as and when needed basis” is a sloppy practice. Diligent estimating, job packs, and quality control can save thousands in materials wastage and over ordering.
4. Gross profit vs operating costs: Very little thought is given to whether gross profit margins can cover operating expenses and jobs can run at a loss before they have started. Tracking operating costs monthly and even narrowing it down to an average hourly rate guarantees that gross profit mark ups result in net profit after operating costs.