ForConstructionPros.com

Contractors have to bring an extra helping of conservatism to their business activities if they hope to make it through the typical construction business cycle. Times have changed. Business cycles have changed. Cash management procedures have changed. In short, it is easier today for you to get into financial trouble.

The tried and true business and financial axioms really apply to contractors; forgetting to apply them on a regular basis leads to serious problems. For example, take sayings such as:

• Cash is king!
• Every $1 of new sales requires additional permanent capital.
• Don't expect what you don't inspect.
• Time is money.
• You have to run the business and not work in the business.
• Plan to do what you need to do, and do what you plan.

Put all of these together and you can sum things up in two words: "focus" and "cash". Cash generation is really the only result that counts and you can only generate the cash you planned on producing by focusing on the plan.

Plan to reduce risks
Contractors are normally in one of two positions - great or poor - and seldom in between. We could probably push more firms closer to "great" if they would adopt somewhat of a more conservative business approach by paying closer attention to business activity and cash flow.

Notice I use the word "somewhat". After all, contractors normally accept more risk than other business leaders may be willing to accept.

Contractors take work where and when they can find it. They produce budgets and bids under tough circumstances. They are reluctant to walk away from a job that does not fit their expertise. They are not willing to lay off excess help. They take on too many jobs for the size of the company they have. They do not understand the capital needs of growing the business. They feel they have to go the extra mile to keep a long-term customer happy. Many do not plan properly, nor manage cash flow properly.