But seriously there are 7 things you can stop doing now to save a lot of money on projects.
Today’s video is about the 7 Ways to Lose Money in Construction in 2023. You can watch it here or continue with this quick read.
But first off… It doesn’t matter what country you’re in…
The Problems are Still the Same
Let’s get to it…
#1 INACCURATE ESTIMATING
Obviously, if you don’t quote properly you’ll lose money. That’s a no-brainer.
But this is more about INCLUSIONS and EXCLUSIONS– so what do you include in your quote, and what do you exclude?
Remember that the final contract is ALWAYS different from the quote you provide.
So make sure the contract includes what you’ve quoted for.
The contract is EVERYTHING.
#2 BAD MONEY MODEL
A few little tweaks to your business model can make a HUGE difference.
In most 9-5 jobs payment works on a 30-day cycle. You work for 30 days and then you get paid.
In construction, you work for 30 days, then you submit your invoice and it could take over 30 days to get paid depending on the contract terms.
In some cases, it may be 60 or 90 days.
This puts you in a tough position in terms of cash flow.
A better model is to get a portion paid upfront. Then you want to get paid according to milestones on the project. And, if you can build in a maintenance fee then this is even better. This is where you ensure you have a long-term relationship with the client because you are the company that will provide the maintenance on the original work you’ve done.
The closer you can move to this model, the better.
#3 PURE CASH FLOW MISMANAGEMENT
This often comes about over scope creep and changes around the project.
On every project, there will be changes or delays. THESE COST MONEY.
You need to determine HOW QUICKLY ARE YOU GOING TO GET PAID FOR THE MONEY YOU SPENT TO DO THE WORK.
You need to ensure you manage all of your paperwork so that you get paid properly.
Capture your change orders immediately.
Get them approved quickly.
#4 INADEQUATE RISK REVIEW
This is when you don’t go over the contract properly and don’t know how to negotiate properly.
You also need to know which clauses are the ones that are going to cause the most problems in terms of risk.
You need to be contractually savvy and know how the terms and conditions of the contract will impact your business.
You can mitigate this by developing a set of commercial principles.
#5 OVEREXTENDING A PROJECT
Often, when things are good, people tend to take on too many projects.
What happens is then it’s hard to get the people and labour to complete the project.
This is particularly relevant at the moment because of labour shortages.
It’s best to be stringent with how many projects you commit to.
It’s better to be the company that is known for turning down projects, than taking on too many.
#6 HAVING ONLY ONE ACQUISITION CHANNEL
So many construction companies only get work by bidding.
This means you’re at the mercy of the market.
There are LOADS OF OTHER ACQUISITION CHANNELS YOU CAN BUILD IN:
- Referrals
- Partnerships
- Long Term Agreements
- Social Media Marketing
#7 MISUNDERSTANDING OF RELATIONSHIPS IN CONSTRUCTION
Construction used to be all about relationships.
And yes, relationships are important… BUT
CONTRACTUAL COMPLIANCE IS EVERYTHING
Also if there’s a close-out team then your existing relationships don’t hold up because you’re dealing with new people.
We want you to be the MOST SUCCESSFUL you can possibly be. That’s why we put together content with tips and advice that is tried and tested.
For more contractual advice, Quantum Contract Solutions is here to guide and assist you through everything contract related. Let’s reduce risk in your contracts and save time and money, just click this link to get our FREE case study to show you how clients just like you are doing it.
