10 things the best performing builders do

 

 

10 things top builders swear by (and why they actually work)

Building and construction is one of the most competitive industries. But it’s not always the big jobs and teams that are the ones leading the pack.

Our business advisors recently sat down with our top performing builder clients with one big question: Out of all the tools, tricks and techniques out there, what actually works and you now swear by?

Their answers might surprise you.

 

Keeping your Work In Progress (WIP) up to date

It might seem like extra admin when you’re flat out, but keeping your Work in Progress is more than just keeping an eye on project progress.

Monitoring and updating your WIP can give you insight into:

• Your overall project performance
• Project profitability
• Budgeting issues or risks
• Resourcing and material gaps
• Potential cash flow problems

The more insight you have, the more opportunities you have to make strategic changes before the project ends (and it’s too late).

 

Weekly toolbox meetings

These are not only a great way to bring your team together and share safety reminders, changes or workplace risks but can improve your site and team communication. 

Builders also reported it had additional benefits: it unlocked more efficiencies and increased productivity – both onsite and in the office. This regular communication gives your team the chance to share roadblocks, project issues and suggest process improvements.

 

Cash flow forecasting

While some builders regularly prepare and track their budgets, it’s less common for builders to use cash flow forecasting. Those that have adopted this as part of their process found this to be an eye opening experience.

Where traditional budgeting focuses on expenses, forecasting gives you a forward view. By taking into account everything from everything coming in and out as well as trends and insights from historial data, you can get actively predict future financial positions. The result? More strategic decision making and better risk management.

> Signs your cash flow could be in trouble

 

Knowing your break even point

This isn’t just the point where you make or less money. Your breakeven point is a key indicator of your business health and profitability.

By understanding your break even point, our building clients found they had more insight into:

• Profit planning and goal setting
• Knowing how much contracts need to be signed and completed just to keep the doors open
• Understanding the real impact of margin tweaks
• Business strengths and weaknesses
• Operational improvements
• Pricing, product and resource decisions

> How did I calculate my breakeven point?

 

Doing regular risk assessments

When you’re down in the building project weeds, it can be hard to objectively review your business for risks and we often end up ‘dealing with it’ when they come up.

By doing regular risk assessments, our builders were able to identify potential risks and make strategic operational and financial changes to avoid them or reduce their impacts.

However, some risks are out of our control. This is where knowing where these uncontrollable risks could occur can help you put mitigating processes and measures in place to minimise their impact when they happen.

 

Understanding the difference between margin and markup

Are you adding margin or markup? If you’re not sure, you’re not alone. Many of our new builder clients thought they were the same, and it’s a common misconception.

Where a markup is the amount you add to your price before you sell it, your builder’s margin takes into account all associated costs in your project. The amount of margin also depends on your type of project, your project volume, material costs and other specific project factors.

> What margin should you be adding to your building project?

 

Using online accounting software

Using software such as MYOB or Xero brings all your financial reporting, quoting, invoicing and payroll needs into one place. Cutting down on software costs isn’t the only benefit: it enhances business insights.

Suddenly, you have:

• Historial financial data to pull trends and insights from
• Proactive financial reporting to make better decisions
• More insight into cash flow needs and financial obligations
• Get a more comprehensive view of your business health and profitabilty

 

Weekly goal setting

Goal setting might seem like an annual business activity, but builders that started doing weekly goal setting found it helped:

• Better allocate resources
• Manage timelines more accurately
• Identify and deal with roadblocks faster
• Drive project efficiencies
• Increase quality control

It also improve team collaboration and communication, both onsite and with offsite teams.

 

Regularly reviewing pricing

When we started working with some builders, they hadn’t reviewed or increased their pricing in years or only when project costs skyrocketed too much to ignore it. But regularly reviewing your pricing and making incremental increases, you can increase your profitability and drive business growth.

Here, having financial records up to date and leveraging WIP reporting has a big impact. Using these insights, you can find out what projects were profitability, where there were money leaks and project risks you need to put measures in place to avoid next time.

It can also open up opportunities

 

Automating systems and processes

This goes beyond going paperless or moving to online accounting tools. By looking for ways to automate your systems, better document processes and streamline your operations, you’ll unlock precious time for your team. Ensuring they are where they need to be, not doing manual tasks or fixing manual entry issues.

While some operational efficiencies can come from your team, others might be hard to uncover if you’re working in the business day to day. This is why this is a key area of focus for our builders business improvement program.

 

Want to explore some of these for your business?

These are just a handful of the tools and techniques building and construction clients have uncovered during our business improvements program.

> Learn more about our building and construction improvement services