As a builder, the construction process might seem like the only part of your business that matters. It’s crucial to remember however that successful building ventures go far beyond bricks and mortar. Proper business management is the backbone that supports a thriving and successful business.
Failing to manage your building business efficiently can lead to a series of detrimental consequences that can hinder growth and profitability. In this article, we’ll explore the pitfalls that can trip you up, and how to avoid falling into them.
1. Believing the Build Process is the Business:
One common misconception that many builders have is assuming that the construction process is the entirety of their business. While delivering high-quality projects is undoubtedly vital, effective business management involves much more. Builders must also handle financial, administrative, and marketing aspects of their enterprise. Neglecting these areas can lead to financial instability, administrative chaos and missed growth opportunities.
2. Struggling to Find Time to Price Projects:
Pricing projects is a critical aspect of any building business, yet it often takes a back seat when your daily workload is already bursting at the seams. As appealing as it may seem at the time, leaving pricing to after-hours or weekends can result in rushed, inaccurate estimates and overlooked details, leading to potential financial losses. Business owners must prioritise dedicating adequate time during regular working hours to ensure precise project pricing. This way you’ll ensure you’re focused on the task at hand and have all the resources available to make sure your estimate is accurate – and delivered on time.
3. Relying Solely on Meterage Rate for Pricing/Quoting:
Using a meterage rate as the primary basis for pricing and quoting might seem convenient, but it can be a recipe for disaster. Every project is unique, and relying solely on a standard rate may overlook crucial variables that impact costs. To avoid under-pricing or overpricing projects, builders should adopt a comprehensive pricing approach that considers project-specific factors. Check out our recent article on the reality of building estimates for a comprehensive guide on how to make sure you’re covering all bases.
4. Keeping No Cost Records:
Inadequate cost records can create a black hole of financial information. Builders must diligently track every expense related to their projects, including material costs, labour, subcontractors, and other overhead expenses. Without proper cost records, it becomes challenging to assess profitability accurately and identify potential areas for cost-saving measures.
5. Lack of Profit & Loss Statements for Build Items:
Profit & Loss (P&L) statements provide a clear view of the financial health of individual build items. Failing to generate P&L statements can obscure the profitability of different projects or aspects of a project, preventing builders from making informed decisions on resource allocation and cost optimization.
6. Neglecting Cost Records for Design Changes and Variations:
Change is a constant in the construction industry, and design alterations and iterations are inevitable. However, failing to keep track of the costs associated with these changes can lead to unexpected expenses and disputes with clients. Builders should implement a robust system to document and communicate cost implications for design alterations to maintain transparency and avoid financial strain. For more tips on how to streamline this process – and keep clients happy – read our essential guide.
7. No Reporting Method for Cost Items to Clients:
Transparency is vital for maintaining strong client relationships. Without a reporting method to communicate cost items clearly, clients might perceive a lack of honesty or trustworthiness. Providing regular, itemised cost reports to clients not only enhances transparency but also fosters confidence in your professionalism – and allows you to keep track of exactly what’s being spent, and where.
8. Lack of Budget Statement During Build:
Once a project is underway, keeping a budget statement becomes crucial for effective cost control. Without tracking expenses against the initial budget, builders risk overspending and eroding away at their profits. Regularly updating the budget statement allows for proactive adjustments and ensures that the project stays on track financially.
9. Failure to Record Executed Works:
Recording executed works is more than just paperwork; it’s an essential tool for measuring project progress and performance. Builders who neglect this practice may find it challenging to evaluate project success, identify areas for improvement, or leverage past achievements to win new contracts.
How to get it right:
In the competitive construction industry, proper business management can be the difference between success and stagnation. By avoiding the pitfalls mentioned above and adopting efficient business practices, builders can set themselves up for sustainable growth, increased profitability, and a stellar reputation in the market.
What’s more, there are tools available to help. ProntoCalc is a construction calculator that enables builders and contractors to provide more accurate estimates for their clients. Our tool makes it easy to calculate quantities and costs for various building materials, reducing the likelihood of errors or miscalculations.
Building a successful construction business requires not only mastery of the physical build process but also a commitment to effective management that underpins every aspect of your venture.
ProntoCalc offers a 14-day free trial so that you can try our tool before committing to a subscription. Sign up today and start providing more accurate estimates for your building projects.