Monthly Archives: January 2020

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!

Airbnb vs. Hotels: How the War for the Best Place to Crash Affects Your Contracting Business

There’s nothing like a little competition to get businesses working harder to build bigger and better. And the competition between hotels and short-term private rental companies like Airbnb is anything but little. Airbnb, which began as a way for owners of existing properties to rent them out for money, is now delving into construction. Hotels are streamlining and expanding to compete. Here’s how the battle could affect your contracting business.

Private Rentals Increase Demand for Renovations
Airbnb boasts more than 5 million homes available to rent in tens of thousands of cities worldwide. The business concept bursts with income potential. If homeowners have a decent living space in a high-demand area, they may be able to secure hundreds of dollars a night for the days when they aren’t occupying the house. Make a few minor upgrades, such a mid-range kitchen or bathroom upgrade, and Airbnb hosts can increase the price significantly. It’s changing the way that people conceive of the purchase and ownership of residential property, which may have long-term effects for construction as an industry.

Real Estate Investors Spur Demand for New Housing
If a person making a few renovations to their own home can make it much more likely to land a healthy income from short-term rentals, you can imagine how quickly real estate investors got involved. Across the country, investors are looking for existing homes or units to buy and fix up so they can rent for a higher price. They often have more access to capital for renovations than private homeowners, which allows them to hire contractors to do more extensive work. This increases demand for a variety of fields in construction, as well as other industries. For example, property management companies are expanding to specialize in short-term rentals through sites like Airbnb.

Hotels Attempt to Compete
The industry really feeling the pinch from such an influx of private rentals is undoubtedly hospitality. Hotels are trying to stay in the game with new buildings, specifically bigger ones with better features. Hotels now have to compete with possibly tens of thousands of private rentals within a 20-mile radius. The only way they can realistically do this is by building better and faster than they ever have before. Hotel chains are emphasizing modular construction especially as it allows them to expand and get to completion weeks or months earlier.

Cities Try to Curb Airbnb Real Estate Investors
Overcrowded and underhoused cities in California have been looking at this battle with wariness. A market that encourages investors to buy up and renovate units even in high cost-of-living regions like the Bay Area could dramatically cut down on the available housing. Some experts estimate that Airbnb alone accounts for a 10 percent increase in rent in New York City. Cities like San Francisco and Los Angeles have already set limits on the ways that people list properties on sites like Airbnb. But elsewhere in the state, the push to build housing for people to live (and to rent when they’re traveling) increases demand for new housing starts as a whole.

Both Sides Emphasize Speedy Completion of Projects
If this feels a little like an arms race, it is in a way. Everyone wants the best of the best and they’re not afraid to pay for it. For contracting businesses looking to take a piece of all this investment money, the focus must remain on efficient processes and good results, with a little extra fact-checking along the way. If you can spot an investor with a good plan, you may be able to take part in projects that open doors for you.

The battle between private rentals and the hospitality industry is only beginning to heat up, with lots of potential effects for construction. To find out how you can take advantage of increasing demand in this industry, contact CSLS today!

Building Construction’s Future: How the Industry Is Working to End the Labor Shortage

You read a lot about construction’s labor shortage and ways that the industry is trying to get around it. Although new approaches like automation and modular construction can decrease the numbers needed for a particular project, eliminating jobs isn’t sufficient. In order to survive the thousands of professionals who retire from construction each year, the industry needs plenty of skilled tradespeople ready to replace them. Here’s how the industry, with help from local governments, is trying to ensure this happens.

Education Programs
Whenever you read anything about the labor shortage, you may see an emphasis in skilled workers. After all, if you need an electrician or someone who can fix an elevator, you can’t just grab the first person who walks by. After decades of demeaning skilled trades as beneath the hallowed halls of academia, colleges are realizing that they need these programs more than ever. States like Illinois are investing millions of dollars into training and apprenticeship programs that will help interested people develop the skills and experience they need to meet the demand. Here in California, colleges pursue grant money to help them create certificate and non-certificate programs to get students involved.

Improved Working Conditions
When millions of people in construction lost their jobs with the housing crisis, the professionals who remained were left with a particularly complicated situation. Once housing and urban development began to rise again, they needed a lot of skilled workers in a big hurry. They’re still working on this. The industry has been in a period of rapid growth for nearly a decade and it’s so far behind.

By this point, the problem is not so much that people left the industry to do other jobs. It’s that a diminishing pool of new workers came to replace them. Employers are starting to seriously rethink what they need to do to get people to start in the industry in the first place. This means higher pay, better benefits, safer working conditions and a higher degree of predictability in employment.

Expansion of Modular Construction
Modular construction is one way that construction business owners have found can streamline the jobs they have into something that Millennials and Generation Z actually want to consider. Let’s face it: There are parts of California that are a positive delight year-round, but there are also plenty of places that are simply nasty in winter, summer or both. Modular construction has the benefit that so much of the work is completed offsite, in controlled settings. This allows employees to keep a schedule that works better for them, in a place not governed by weather and daylight, possibly closer to home. The use of technology to get work done faster is an added bonus.

Changes to Zoning Regulations
The thing about urban sprawl is that it affects where people live, as well as their jobs. Jobs in construction still operate mostly from the site, which means that distance plays a factor. If you knew that you would have to commute 100 miles each way to do your job, you might consider a different industry. And if you don’t live anywhere near the places where contracting businesses are thriving, you’ll either have to move or find a way to commute. As a way to combat this, cities are looking at their existing zoning regulations and trying to find ways to make different methods work. Flexibility opens up more options for housing, which can positively improve the choices you have for where you live and work.

The construction labor shortage is likely to continue for several years to come. This means that if you get into the industry now, you’ll have a lot of opportunities to grow. To get started, contact CSLS today!

Is Your Contracting Business Too Risk-Averse?

Working in construction is full of risks. Even if you ignore all the safety concerns (which you shouldn’t), there are all kinds of risks you take in your business each day. Although you want to minimize the effects of taking chances, this can sometimes make you too eager to avoid taking risks at all. Here’s how to know that your contracting business is too risk-averse, with some ideas on how you can branch out.

You’re Stuck Using Old Technology
There have been tons of innovations in the construction industry in the past 10-20 years. In fact, every year reveals a huge introduction of products on the market, from sustainable building technologies that save you money to tools and apps that make your job easier. It’s all very exciting but also terrifying, because when you adopt something brand-new, you’re putting your business success on the line. Sticking to the things you picked up years ago may feel safer, but it’s more likely to render your services obsolete. Instead, you should invest some time to test out new technologies and research the latest innovations. If you get a chance to try them out, you may feel more comfortable putting a few of them into your workflow.

You Consistently Bid Too Low
It’s easy to understand why many contractors bid low on a project. They’re worried they won’t get it if they bid the price they actually need to receive. The problem is that this can be risky no matter how you look at it. Bidding low may help you secure more work, especially when business is slow or you’re still trying to get established in your area. But over time, razor-thin profit margins will make it harder for you to grow and improve. Bidding the lowest often gets labeled as the safe bet, when it’s actually one of the most-effective ways to kill a budding business. Research competitive rates for similar projects in your area and use those numbers as a jumping-off point for your own bids.

You’re Usually Taking Someone Else’s Lead
Let’s face it: Construction as an industry is not particularly bold when adopting new innovations. There’s some wisdom in it, too. If you’re too quick to take risks on the latest gadget or building concept, you might find out that it was a big waste of money. But refusing to take the lead on changing practices that aren’t working for your business may cause you bigger issues down the road. Keep in mind that everyone makes decisions differently, depending on their goals, the local economy and what’s available to them at the time. Even if your long-term mentor with 40 years of experience goes in one direction, you don’t necessarily have to follow. Being willing to experience things for yourself and make your own decisions is a huge reason to start a contracting business in the first place. It’s all right to let yourself do just that.

You’re Not Practicing Risk Management
Part of being risk-averse is a serious desire to avoid unexpected harm, which makes sense. If you don’t know what the risks are, you’re more likely to feel stuck in neutral. Risk management is designed to help you bridge the gap between never trying anything and jumping the gun on every project. If you’re not evaluating your business practices for the level of risk they represent, outside of safety, you’re missing a big opportunity to guide your decision-making in a better direction. Sometimes, just knowing what you can expect and what is likely to happen will help you feel easier branching out from your comfort zone.

Starting a business is a risky venture, but there are lots of ways to make it work. By finding a balance between risky and risk-averse decisions, you will have a higher likelihood of a sustainable business. To learn more about what it takes to run a successful contracting business, contact CSLS today!

How Your Contracting Business Can Use Technology Without Letting It Eat Your Lunch

It’s a fear that people have had for centuries. Develop a piece of technology that replaces a skilled worker, and soon it starts replacing skilled workers. This is why industries like construction tend to be so hesitant to adopt innovations. But staying stuck in the 19th Century or even the 20th Century isn’t the best way to go, either. Here’s a few ways you can incorporate technology into your business with less worry that it will render your services obsolete.

Why Is the Construction Industry Averse to Technology?
Most of the technological devices you use to do things used to be done by someone manually. You might not complain too much if you are able to use gasoline and an engine to power a vehicle instead of horses. The horses may not be upset by this, either. But if it’s a professional doing the work that can now be done by a machine, that’s where people tend to worry. Innovations in building practices, as well as technological developments, require fewer workers at the jobsite to accomplish bigger projects. In short, people tend to fear adopting technology if they think it might make their own positions unnecessary.

What Counts as Technology, Anyway?
If you ask people from different generations what counts as technology, you might get widely differing answers. Many people tend to look at tools that existed when they were young as just tools, while everything that came after is technology. In truth, everything from a hammer to your smartphone qualifies as technology. The tools you use nowadays might be far more advanced than your predecessors building in the 19th Century, but they’re still tools. If it makes your job faster, safer and more accurate, it’s worth considering.

Why Should Workers Learn to Use Construction Technology?
If you’ve already been working in the industry or even your chosen field for several years, you might wonder why you should change your processes at all. It’s a matter of remaining relevant. Think of something you use every day off the jobsite, like a smartphone. Clients and construction professionals in their 20s and 30s may be far more comfortable using their phones to communicate or fill out a quick estimate to provide concrete information in real-time. Pros who still need to go back to the office to fill out a form and mail it might be hours or even days behind. Even if you don’t choose to take in all the technology, it’s important to know what it is and how you might use it.

How Can Contracting Businesses Test Out New Technology?
There are so many tools out there for you to try that you might not ever get through them all. The Internet of Things is revolutionizing every aspect of our lives, so it’s not surprising that it has made it into construction. When you go to a construction conference, be sure to give yourself plenty of time to browse the floor. Many businesses producing tools for construction will demonstrate their latest products or let you try them out. This will help you determine which ones are right for your business.

How Quickly Should Contractors Adopt Technology?
Being willing to adopt technology doesn’t mean you have to incorporate every innovation the moment it comes out. That’s unrealistic if not impossible. Instead, keep an eye on the fastest-growing technological areas as they relate to construction. These include:

  • 3-D modeling/printing
  • Virtual Reality/Augmented Reality
  • Artificial Intelligence
  • Automation

Be careful about your purchases, especially if they commit you to using a proprietary system. This might limit your options if you decide to pursue something else. It’s easy to start with tools that work on devices you already own, like your smartphone or computer. Once you get more comfortable with the offerings in one area, you may have an easier time making a choice about other products.

Developing an understanding of construction technology is one way that your contracting business can meet the needs of construction in a new decade. To begin building your contracting career, visit CSLS today!

What Your Contracting Business Can Do During a Construction Dispute

It’s going to happen eventually, and it might even happen a few times a year. You end up in a dispute with a contractor, subcontractor or client. Some disputes are easy to resolve, while others might put a halt on the project. Since time is always money for your contracting business, trying to avoid disputes is one of the best things you can do to keep the work going. Here are a few tips you can use to get everyone back on the same page.

Keep Communicating
Communication is a big key to keeping a disagreement from becoming a formal dispute. Without it, what you have is two parties who are left trying to make decisions independently. This means that you have to work together on a regular basis before you start the project, in order to hammer out the plan and confirm that the specifics will meet everyone’s requirements to proceed. You need to keep up this communication throughout the project, possibly as often as every day. Even if you feel like the other party is acting unreasonably, be sure to focus on professional interactions. Maintaining an open path to discussion increases the likelihood that you’ll find a fair compromise.

Get Details in Writing
Having a phone conversation or a meeting in which you discuss specific aspects of the project is often a requirement for construction work. It also can be insufficient. Both sides may think that they remember what they agreed to do. Without documentation, it’s your word against theirs. If your previous contract didn’t include enough details to proceed, now’s the time to try to fix that. Follow up a verbal conversation with an email or other written record to show what you discussed and confirm that everyone now understands what is going on.

Address Inconsistencies Promptly
Contracts often include a lot of jargon or vague terms that could be interpreted in a variety of ways. It’s tempting to ignore them and see if they actually become a problem, but this can make the situation worse. Disputes are more likely to cause bigger issues over time, particularly if some aspect of the initial plan led to work that’s no longer meeting the requirements of the project. To avoid investing too much time going in the wrong direction, carefully analyze all the terms in the contractt. Ask questions or clarify if something seems unclear or likely to cause problems.

Solve Problems for the Future
When you first start a contracting business, it may feel like you are reinventing the wheel every time you begin a new project. Although this should dissipate in time, your approach makes a big difference. Getting through a tough dispute should prompt you to evaluate what you could change to avoid the problem in the future. Some issues are truly not of your doing, but there are ways you can minimize their effects. If the dispute is related to design, which is an increasingly common issue in construction, revising the way that you create and collaborate about design could pave a smoother path for the future.

Consider Mediation
Many contracts stipulate that relevant parties will attempt to negotiate a satisfactory arrangement before escalating the dispute. While getting together and figuring out how to move forward can often solve the problem, it isn’t always effective. In this case, you may want to hire a mediator to ensure that each side can communicate their concerns. Having an objective third party might be enough to get everyone on the right track. It may also save you the time and effort spent bringing it to arbitration or litigation. In those cases, you’ll need to hire a lawyer to advise you of your rights and obligations.

People are human, and sometimes they disagree over the details of a construction project. Learning how to navigate disputes is part of keeping your business afloat. To begin building your construction career, visit CSLS today!