Masonry Magazine January 2014 Page. 44
BUSINESS BUILDING
By George Hedley
Stop Giving Money Away
Every dollar counts, and every penny wasted is precious. Losing small change on your construction projects can add up to thousands of dollars at the end of the year. So, what are you to do?
Maximizing profit must be a top pri�ority, right along with getting your pro�jects completed on-time. Setting aside a little time to focus on increasing your net profit will boost your bottom line and allow you to make a lot more money.
When you're too busy working on the jobs, scheduling crews, or carrying out work tasks, you don't take or have enough time to focus on finances, fman�cial tools, and strategies that can help you hit your goals. Consider implement�ing these two proven strategies to maxi�mize your bottom line and grow your bank balance.
Accurate general conditions
General conditions in construction include the onsite administration, super�vision, temporary facilities, temporary protection, and soft costs required to get your projects built. Estimating accurate general conditions for projects can be a simple task, when the estimator is accountable to get it right.
Most estimators use unit prices that arc rarely checked against the actual final job costs. For example, creating a budget for temporary toilets seems easy. An eight-month job should cost 8 x $100 per month = $800. But, when the field superintendent sees there are 40 men on the job, more than one toilet and more than one servicing a week are required. This might increase the actual job cost by as much as $200 per month. These extra costs will add up to lots of lost cash.
The estimator's No. I job is to calcu�late an accurate estimate of what it will cost to build each project. After every job.
he must look at the actual job costs to see if he miscalculated or under-estimated any of the project line items. Before pric�ing every job, the estimator should get with the project manager, field superin �tendent or foreman to determine what will be required to run the project he currently is bidding.
Charge for all the changes on change orders
Change orders are written documents amending the original contract agree�ment behveen parties memorializing an additional or changed scope, price, time, schedule, terms or work item on a con�struction project. Most often, they require additional money for the addi�tional work required by the change.
As contractors, if you had $10 for every extra work item your company, project manager, field superintendent or foreman did without a signed change order before the work was perfonned, could you have retired several years ago? vVhen your cus�tomer asks for extra work, why is it so hard to get it in writing?
Everyone knows the contract requires signatures on change orders prior to starting extra work. But when you post�pone getting a formal approval for extra work until days, weeks or months after the event occurred, you have no leverage with your customer. Your customer is in a great position to offer a reduced, dis�counted price with you; change his mind; or decide the additional work wasn't really extra and should have been included in the o riginal contract.
To avoid this problem, present a com�plete cost breakdown for every proposed change order your customer requests in advance ofstarting the work.
Don't shortchange your company by not asking for everything you deserve. I see most change order requests present�ed as labor, materials and hard costs, plus a markup without extra required soft costs for the many items listed above. lf your company does $5 million in annu�al sales, of which $250,000 is performed as change orders or on a cost-plus basis, not charging for everything you spend can cost you as much as $25,000 or more per year in lost revenue or net profit for things that you actually had to pay for.
Making money is not easy in con�struction. Look for every advantage you have to boost your net profit margin. Take the time to implement these tools and send me an email of the other tools you use to increase your net numbers. Email GH@HardhatPresentations.com to get your copy of "Project Manage�ment Forms For Contractors." IMAS
George Hedley works with contractors, entrepreneurs and business owners to build profitable growing companies. As a construction company owner, he has built more than 500 projects valued at more than $500 million and was name Construction Entrepreneur of the Year. He is a leading construction business expert, professional business coach. popular professional speaker, best-selling authOr of �Get Your Business To Work!" and presenter at his Hardhat BIZSCHOOL online university. To find out how George can help your company, signup for his e-newsletter, be part of a group BIZCOACH program, orJoin a peer mastermind BIZGROUP, visit his
websites: www.HardhatPresentations.com or www.HardhatBIZSCHOOL.com, or email GH@HardhatPresentations.com.
George Hedley, HARDHAT Presentations
800-851-8553
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42 MASONRY � January 2014 � www.masoncontractors.org The Voice of the Masonry Industry