Monthly Archives: September 2019

Are Your Contracting Business Projects Overspending the Budget? Here’s What Might Be Wrong

Budget overrun is a frequent problem for contractors. You bid on a project, your bid is accepted, and then it’s a race to try to keep your costs down. There are several things that can make you spend more than you expected, and some of them are easier to account for than others. By planning ahead, you can minimize the likelihood that you’ll need to adjust totals over time. Here’s a few areas to focus on.

1. Don’t Skip the Details
Like guessing how many candies are in a jar, rough estimates of your project costs are bound to be wrong. Sometimes, a quick back-of-the-napkin tally can be off by hundreds or even thousands of dollars. Instead, make sure that you’re giving enough time to investigate the costs you predict for each stage and line item for the project. Confirm that prices on materials or equipment rentals haven’t gone up. Double-check that you haven’t missed a digit and made an $8,000 item look like it costs $800. The more investment you make in the original estimate, the less likely you are to make a mistake.

2. Overestimate, Don’t Underestimate
When you’re trying to establish your contracting business (or get a leg up on the competition), it’s tempting to say that you can get it done quicker and cheaper. But if this requires you to skip sleeping or force your employees to work much longer days, it’s not a realistic goal. Whenever you can, overestimate how long you think the project will take. Give yourself a margin of 10-20% on materials, in case you need more or they’re harder to get. It’s always easier to show a client that it cost you less than to ask for more money.

3. Budget for Non-Project Business Costs
There are a lot of expenses you have to pay to run your business that do not fall within the confines of the project. If you’re not budgeting for them in your estimates, they will come out of your profit margins. You may have a variety of bills that are not related to the specific project, such as:

  • equipment maintenance and repair
  • training and certification
  • administrative expenses
  • insurance

Take the total costs you expect for these and other concerns, and divide them by the size of the project. For example, if you have a project that’s going to take about a month, you’ll divide the total by 12 and add it to your bid.

4. Plan for Bad Weather
Earthquakes. Wildfires. Landslides. Huge snow storms. California has a lot to contend with when it comes to weather. Depending on the season, you might need to budget extra time in case you lose a day due to one of these events. Check weather patterns by the month and keep close tabs on the forecast. Giving yourself a few extra days’ worth of labor costs on the project will help you come in under budget and on time.

5. Negotiate and Approve Budget Changes Early
Every now and then, even the most careful planning will fail to return the right numbers. A sudden loss in supplier could force you to find someone else at a higher price. An unpredicted weather-related disaster might set you back several weeks. As soon as these events become clear, you should act quickly to renegotiate. Waiting until the end of the project runs the risk that you’ll have to fight to collect the difference from an unwilling client. The earlier you get started, the more likely you are to get the go-ahead to continue with an adjusted budget.

Earning money with your contracting business starts with a budget that you can stick to over time. The more accurate you are from the beginning, the less you’ll lose profits because you went over by too much. To start building your career as a contractor, visit CSLS today!

Tracking Equipment Maintenance for Your Contracting Business

It seems like every time you start a project, something else breaks. Equipment is expensive, and whether you rent or buy, you still need to ensure that everything you have is ready for use. Equipment maintenance takes time and doesn’t bring in the big bucks, but there are plenty of good reasons to make it happen. Here are a few tips to understand why regular maintenance is important, and how you can set a reasonable schedule to track it.

Make Maintenance a Priority
When you get into the busy season, it can be difficult to imagine having spare time for equipment maintenance. You may be running almost nonstop from dawn until dusk, and you need those tools and machines sometimes on a daily basis. Paradoxically, this is why upkeep is so important. If you can’t think of giving a day toward maintenance, you definitely can’t afford to lose the machine for a week or more. If you’re running on tight margins, paying out for repairs will cut into your bottom line much more than scheduled upkeep. When you make it a priority in the first place, you can avoid the bigger issues that cut into your project timelines.

Document Your Equipment Upkeep Needs
You probably keep some kind of inventory for supplies. Your equipment needs the same level of attention. Tracking the state of your assets is a good business practice, no matter what industry you’re in. If you don’t have a lot of equipment, you might wonder what is the point of documenting the fact that you have a drill. The benefit of documentation is that you know what you have, and you can make a plan to maintain it from there. Write down:

  • all of the equipment you own for your business, including administrative tools
  • when you bought it
  • how long it should last with good care
  • frequency of upkeep
  • the last time you maintained it

This will give you a single point of reference for planning.

Research Maintenance for Rented Equipment
With such a robust market for equipment rentals, you may not have much owned equipment at all. You still have to keep track of it. Rented equipment can save you a lot of money, but only if the tools are in good shape. When you research rentals, follow up with the company to find out when the tool or machine was last maintained. If you’re keeping the equipment for a longer duration, find out if upkeep is part of the service, or if you’re on the hook to do it before you return it. If a company can’t show you how often they attend to their inventory, look elsewhere.

Balance Work and Downtime
It can be tempting to do it all at once, but you need to find a balance. Try to schedule major maintenance, upgrades or repairs for the slow season, usually winter. Otherwise, book a small amount of time each month to inspect your equipment. If you have to send something away for maintenance, mark it as unavailable in your inventory. It’s not a bad idea to build some redundancy in the system, particularly for smaller items. If you have a bunch of hand tools that run on batteries, make sure you have enough batteries to go around.  

Make Equipment Maintenance Efficient
Since asset management applies to almost any business, there are a ton of tracking programs available. If you have an app or software for your inventory, it may have classifications to help you manage your equipment as well. Many systems also let you track how you use tools. You can set up a system that uses barcodes that your employees can scan every time they pick up a piece of equipment. This will help you track which tools are getting used more often, which may indicate a need for inspection more frequently. It can also make it easier to identify when a piece of equipment is having problems, because people aren’t using it as often as they should.

Equipment maintenance is important for your business success, even if it feels like something you can put off. Making it a priority helps you finish projects and avoid expensive repairs. To start building your career in construction, contact CSLS today!