Construction Today - October 2009 - (Page 86)
PROFITABLE CONTRACTOR Institutional Business intelligence provides leaders with an objective view of operations and performance. BY DAVID P. PINEDA David P. Pineda is a senior business analyst with IPA. He has been analyzing 70 to 80 construction businesses a year for almost a decade. Located in Buffalo Grove, Ill., IPA and its related companies provide comprehensive business consulting services and business valuation services to companies in the United States and Canada. For further information, call 800531-3442 or visit www.ipa-c.com. M aking decisions that raise the bottom line depends on accurate, objective answers to a multitude of questions encompassing the whole operation. Which types of jobs are the most profitable? Which salespeople close these jobs? Why are some estimators more accurate than others? Which crews are the most and least productive, and who are their project managers? Which vendors provide the most economical, yet high-quality materials? Which subcontractors have proven undependable, and which tools unreliable? Business intelligence (BI) is a systematic way of collecting, analyzing and internally disseminating real-time data to answer these and scores of other questions. Owners with high business intelligence quotient (BIQ) see around their blind spots and lead from an objective viewpoint rather than on gut instinct and emotion. EVADE BLIND SP Business Intelligence for Success Owners of construction companies are often masters of the hammer-to-nail aspects of their trade, and such proficiency just about guarantees success – for a small company. But as volume and revenues grow, owners often become victims of their own success. Instead of one or two local jobs, they find themselves in charge of seven or eight in different cities, with managers and crews of varying productivity and efficiency. Suddenly, their gut instinct is no longer a reliable measure of progress and success. That leads to poor decisions; and the larger the company, the greater the financial impact of a wrong choice. As firms grow, owners have to be business people rather than people in business. They need BI on which to base decisions. Unfortunately, many owners have become so accustomed to running the company like a small business that they are stuck in a comfort zone. Here’s an example. The owner of a large construction firm had a very flamboyant personality. He was vibrant, effervescent and highly engaging. His comfort zone was the realm of ideas, but he was not good at details or execution. His employees loved his engaging manner, but were disappointed with the lack of follow-through. After an inspirational meeting, he would leave them with no itinerary Business Intelligence Drives Profits Companies whose owners have a low BIQ usually lose money because they concentrate on the wrong jobs or an unprofitable mix of jobs. That’s easy to do because in the typical construction firm, no formula fits all jobs. For example, of two projects in progress on the same street in the same town, one may have high material costs, low subcontractor costs and average labor costs. The second may have high costs for subcontracted work, average material costs and low labor costs. So which job has the highest profit margin? Companies that use BI can tell. One general contractor used BI to determine the most profitable type of job, which in his case was the one with low material costs. The firm had two salespeople who concentrated on selling those profitable jobs while two other salespeople sold anything they could, which compromised overall profit margins. BI gave the owner the ammunition to justify higher commissions and bonuses for the two salespeople who were selling the more profitable jobs. This inspired them to increase their sales and motivated the other two salespeople to refocus their efforts. CONSTRUCTION-TODAY.COM OCTOBER 2009
Table of Contents for the Digital Edition of Construction Today - October 2009
Construction Today - October 2009
Regional Spotlight: Southwest
Ledcor Construction Hawaii LLC
C.H. GUERNSEY & Co.
First Gulf Development Corp.: Meadowvale Corporate Centre
Jacobsen Construction: Workers Compensation Fund Headquarters
Novak Construction Co.
Affordable Concepts Inc.
HBD Construction Inc.: Edwardsville Crossing
Ledcor Construction: Napa, Calif.
Mared Mechanical Contractors Corp.
Myers & Chapman Inc.
Summit Contractors Group Inc.
Wilcox Construction Inc.
Special Focus: Mergers & Acquisitions
Hensel Phelps: Phoenix Sky Harbor Intl. Airport Sky Train
Circle Construction LLC
Electrical Contractors Inc.
Everett, Wash., Department of Public Works
Imco General Construction Inc.: Arlington WWTP
New Prince Concrete Construction
R.N. Rouse & Co. Inc.
Stanek Constructors Inc.
Fort Lewis: New Barracks, Army Growth Complex and Support Battalion
Torcon Inc.: Brookhaven National Laboratory’s National Synchrotron Light Source II
Bovis Lend Lease: FBI Denver HQ
Stuart Olson: University of Lethbridge Markin Hall
Bird Construction Co.: Shearwater Helicopter Base
Carbon Constructors Inc.
Consultants & Builders Inc.
Emerick Construction Co.: Rock Creek Middle School
Broadmoor/Boh Brothers Construction Co.: U.S. Coast Guard Integrated Support Command
Cahill Contractors Inc.: The Oakland Museum of California Phase 1
Flintco Inc.: Germantown Women & Children’s Pavilion
Gamma Construction Co.
Kreizenbeck Constructors: BSU Student Union
Pizzagalli Construction Co.: FAHC Radiation Oncology
Robins & Morton: Lincoln Hospital
Steele & Freeman Inc.
Tenderloin Neighborhood Development Corp. (TNDC)
W.G. Yates & Sons Construction: Armed Forces Retirement Village
BBL Construction Services LLC: The Glen at Sugar Hill Apartments
Chelsea Investment Corp.
Affirmed Housing Group
Westland Construction Inc.: Bridges at Citifront
Product Showcase: Plumbing Equipment
Hunzinger Construction Co.: Johnson Controls Headquarters
B.L. Harbert International LLC: S.O.F. 5th Special Forces Battalion Operations Complex
Duke Construction: Monarch Beverage Co. Headquarters
Irish Construction Co.
TMU LLC (Triune)
Last Look: Consultants & Builders Inc.
Construction Today - October 2009