Building a Successful Construction Company
The Practical Guide
Paul Netscher
Copyright Note
Copyright 2014 Paul Netscher
All rights reserved. No part of this publication may be reproduced or transmitted, in whole or in part, by any means without written permission from the publisher.
Published by Panet Publications
PO Box 2119, Subiaco, 6904, Australia
www.pn-projectmanagement.com
ISBN: 978-1500680008
Available from Amazon.com and other retail outlets
Legal Notices
It should be noted that construction projects are varied, use different contracts, abide by different restrictions, regulations, codes and laws, which vary between countries, states, districts and cities. Furthermore various industries have their own distinct guidelines, acts and specific protocols which the contractor must comply with. To complicate matters further these laws, acts and restrictions are continually evolving and changing. Even terminologies vary between counties, industries and contracts and may not be the same as those included in this publication. Its therefore important that readers use the information in this publication, taking cognisance of the particular rules that apply to their project s and area in which their company operates.
Each project has its own sets of challenges and no single book can cover all the steps and processes in every project. This publication covers a broad range of projects without being specific to a particular field of work. Some of the authors personal opinions may not be pertinent to certain projects, clients, circumstances or companies. Readers should undertake further research and reading on the topics particularly relevant to them, even requesting expert advice when required.
Therefore, the author, publisher and distributor assume no responsibility or liability for any loss or damage, of any kind, arising from the purchaser or reader using the information or advice contained herein.
The examples used in the book should not be seen as a criticism of people or companies, but, should rather be viewed as cases from which we can all learn. After all weve all made mistakes.
Any perceived slights are unintentional.
Cover layout by Clark Kenyon, www.camppope.com
Photographs: Cover - iStock, Title Page Ian Weir, Preface page Paul Netscher, Acknowledgements page - iStock
Preface
Managing a company isnt easy. Managing a construction project is hard. Put the two together and manage a construction company you have a challenge. By nature construction projects are short term, many are high risk and most are low reward. In addition the construction industry is always changing going from a few years when work is bountiful and then rapidly changing to years when work is in short supply. One would think the good years are easy! Unfortunately they often arent. Yes, it may be easy to find work, but suddenly skills, materials, subcontractors and even equipment are no longer available, or if they are theyve quickly become more expensive reducing the good profits the company was hoping to make. To grow and be successful, managers of construction companies need to be skilled and astute to guide their company on this rollercoaster ride. They need to be able to adjust their thinking and way of operating to suit the changing circumstances. Even one wrong move; undertaking the wrong project, submitting a quotation thats too low, misreading a contract, underestimating the schedule, making a major mistake on a project, or miscalculating the cash flow can quickly destroy the company, ending many years of hard work.
After 28 years in the industry Ive seen some companies grow and be successful year after year, while others have barely managed to keep afloat. A number have even enjoyed a meteoric rise and a few years of success before collapsing and going out of business. In this book Ive tried to pass on some of my experiences. This book isnt going to show you how to run a company (there are many other books that do that), rather, its aimed at giving practical tips on how to manage and grow a construction company and to maximize profits.
Acknowledgements
Thank you to all the people who have worked with me in the last 28 years. Many of you have in some way contributed to this book.
Thanks to my family for supporting me through this writing process.
Thank you to Sally for editing the book.
A special thanks to Tim for also editing the book and providing many invaluable comments.
Contents at a Glance
Contents
Introduction
Many people think theres lots of easy money to be made in construction. They may be working for a construction company and see owners and senior managers driving expensive cars, or they hear of companies doing well and declaring big profits. It seems to be a fast way to make money. So, many good tradesmen give up their jobs, invest their life savings and start their own construction business. Unfortunately, the truth is that for every rich and successful person in the construction industry there are probably at least ten others, business owners and managers, who arent as successful, working long hours and taking home an average salary. Furthermore, there are probably several business owners whove lost their companies and are once more working for a boss, sometimes even in another industry. Nearly all of these people are skilled and knowledgeable and Im sure every one of them worked hard. Many of them probably even completed successful projects, and yet, their company wasnt successful and eventually collapsed.
People who have owned or managed a construction company that has fared poorly often ascribe the poor performance to bad luck. Often its just one bad contract that has wrecked their company. It may just have been one client that didnt pay them, or it could have been one project that was affected by unseasonably bad weather. Ive worked on projects that have lost money, where we could attribute the loss to bad luck. Maybe there was bad luck! Maybe it did rain and possibly we did have equipment breakdowns. But, to be honest, if we analyse the reasons for the poor performance, we probably could have avoided the loss, or at least reduced it, if we had done things differently and managed the project better.
To be succes sful in construction means more than just completing numerous projects. It requires that the projects must be completed on time, to the required quality standards, with no safety incidents, and importantly, make a profit. But more significantly, the company must be paid for the work theyve done and be cash positive. Cash flow is one of the biggest challenges facing construction companies. Just because a project is profitable doesnt mean the company has money in their bank account. Furthermore, the company needs to build a good reputation, establishing relationships with clients, so they can obtain further work.
Construction isnt an easy business with clients that are sometimes difficult, demanding, inexperienced, have unreasonable expectations and even in some cases may be simply dishonest. Clients also set unreasonable schedules, have their own cost pressures (forcing construction companies to provide unsustainable savings), and appoint substandard design teams that provide poor quality drawings and information, often late, and arent responsive to the construction companys needs and queries. Furthermore, contractors often face a shortage of materials, additional red-tape, tougher safety and environmental legislation, a society that has become litigious, added competition, more complicated and complex projects and in some cases even political interference.
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