Let’s see, where do you start? I guess you start by asking, “HOW am I to make more money when I am probably at 80-90% of my work capacity right now?” Good question. Let me answer that by saying you can make more money -- several ways -- with and without investing a lot of money to do so. It can and has been known to happen. There are basically 3 ways to make more:
- Cut costs.
- Produce more with what you have.
- Increase your backlog by bringing in new business.
Heck, add them all together, make it work and you will be a happy camper, able to spend winters in Florida.
What got me going on this topic this month relates to a YouTube presentation that showed how the Empire State Building was built from start to finish. It’s an absolutely fabulous video. And then I picked up a construction-related McKinsey consulting report on construction technology that started out as follows:
“Construction sites in 2023 might in many ways resemble those of 1923, with manual bricklaying, paper blueprints, and scaffold towers. At $12 trillion, architecture, engineering and construction (AEC) is one of the biggest industries in the world, but also the slowest to digitize and innovate.”
Ring any bells for you?
The report goes on to say, “things are a changing,” and as a result there has been explosion in AEC tech like we have never seen before; $50 billion between 2020 and 2022. It’s a big number, but why is this investment happening now? A couple of reasons could be:
- Demand for long-term projects brought on by stimulus money.
- Need to decarbonize.
- Shortage of skilled workers
- Regulatory changes to move into a more connected industry.
In other words, the industry will be forced to consolidate to get maximum benefit from this new technology, and those that do adopt this technology will find themselves in a much better competitive position, expecting their project partners to be able to work with the systems in use.
I found it strange how one industry can be so far behind in terms of technology development and implementation. The report outlined why we are where we are:
- It is tough to reach scale in the industry because the average construction company contains fewer than 10 people.
- A project could involve up to 100 different players.
- Identifying the “real” customer is tough.
- Decisions are made at different levels and are not consistent.
- It’s an industry with below average operating results.
- Lack of investment funds available.
- Challenge to implement technology to maximize results.
As you can see, the only way to make this work is to consolidate the players to bring the technology to all levels. All the more reason for those smaller construction players to get involved and make efforts to partner up with their big brothers to become more efficient, and profitable, as a result.
Ask yourself if you will make it in this new environment. And ask yourself if you can make strides to move up the technology ladder. These are tough questions, but they are necessary if you plan on staying in the business. I have been asking readers to take steps to both reduce costs and improve efficiency, primarily to get through this economic roller coaster we are on. But now you have a second reason to implement such a program -- that being the use of daily, weekly and monthly data, presented in a format for your type of work, that will allow you to quickly make corrections that will cost you profits and cashflow.
What I suggest you do to make a move in this direction is the following:
- Get involved in your industry beyond your own office.
- Collect industry metrics to compare your results to.
- Read those Construction Pros emails.
- Review the systems available that will take you up a notch.
- Find an outsider who can help find out what others are doing.
- Meet with your business partners to see what plans they have and how you can provide data as they need it.
- Get your employees involved.
- Pick a metric or two to follow and analyze. Then pick another.
- Buy a share of stock from every public company that provides services, materials and products for your type of business. When things change, they will explain why and provide valuable info for you to use.
- Find three to five other non-competitive contractors to share business models, operating results and metrics. I CAN’T TELL YOU HOW WELL THIS REALLY WORKS!
- Take steps to grow the business and as a result, have additional revenues to cover fixed costs.
I wanted to get into “Growing Your Business” in more detail, but will save it for next month. You have enough on your plate already to learn how to manage your business and job performance.
I hope you now have a feel for what is going on in your world, and what is coming that will have an impact on your world. As I said earlier, you must keep up with those companies that you work for or be left behind. I would rather you be able to go to Florida for many years to come.