Back office support can make or break your contracting company. Let us move your contractor bookkeeping service off the roller coaster of pain onto the merry go round of peace of mind with our U.S.A. based outsourced contractors bookkeeping services and contractor success M.A.P.
What Sets Your Construction Company Apart
This Podcast Is Episode Number 491, And It's About What Sets Your Construction Company Apart Let me start by saying it's good if you have competition. Indeed, competition pushes you to be innovative. It also means there's an established community for your services. If no one else is offering the service, there's a chance there's no market for it.
But, have you always wondered how a small construction company like yours could stand out from the crowd and its competitors? Awareness of what others in your industry have developed and provided leads to a newfound motivation and belief in making an impactful difference, whether within your company or your community.
The key to benefitting from the competition is knowing how to take on competitors. You measure your share in the particular segment you operate in and obsess about your immediate competition, just as contractors who did not market effectively did years ago.
But first, you need to step back and ask yourself these three key questions and make sure you answer them in a way that will define and liberate your construction company at the same time.
What am I offering? New construction, remodeling, or service and repair? Who is my competition? DIY, other contractors, money homeowners for a construction project? What is my fundamental competency - Residential, Commercial, or both? Challenging yourself is the key to answering these questions. Write your answers on paper or computer, sleep on them and then revisit them again and again until you get to the truth.
Define The Type Of Contracting You Offer And Who Is Your Competition
Be that homeowner doing a weekend project, Handyman Contractors, Remodel Contractors, Trade Contractors, and other contractors and House Builders. It may not be the same form, structure, and category that you operate. For example, Home Depot does not see itself competing in the building supply business but for a share of the home and commercial remodel and repair market.
This approach and behavior across the organization, too, saw themselves as fighting for a share of the building supply market.
Getting The Leads And Doing The Work Is Only Part Of The Answer
Not answering them and acting on the knowledge is one reason many construction companies shrivel and die. They focus on the wrong areas to innovate or improve. They focus on the wrong enemy and threat. As a result, they miss what they could be doing to succeed and prosper over time.
Here are three ways your small construction company can establish itself from competitors and stand out from the crowd:
1. Concentrate, then generate.
What separates wealthy contractors from poor contractors? They concentrate then generate.
Returning to the critical questions at the start, successful contractors know what type of contracting they are good at. SWOT Analysis is one tool used in strategic planning for construction companies to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in determining the particular target market.
Strengths - are projects that your construction company does exceptionally well and earns a higher than average gross margin that gives you an advantage over other contractors. What are they, and how can your construction contracting company expand on them?
Weaknesses - are projects your construction company does poorly at and breaks even or loses money. What are they, and how can your construction contracting company turn them into strengths?
Opportunities - are projects and markets not currently being served where your construction company can enter and turn them into strengths. Have you considered tapping into the "work-from-home" market during this time? Or commercial establishments looking to remodel to implement a better floor plan?
Threats - are elements outside your construction company that could cause trouble for you or your construction projects. What are they, and how can your construc
How To Raise Your Prices: Value Over Price
This Podcast Is Episode Number 490, And It's About How To Raise Your Prices: Value Over Price As prices continue to rise, you've likely noticed that your cost of doing business has increased as well. After all, the main point of any business is to make money, and you can't do that if you're no longer breaking even.
It's inevitable in every industry – you must raise your prices to continue making a profit. Many factors decide how much to charge, all of which are dynamic. The rising cost of goods, inflation, and a changing market are just a few reasons why any small business has to reevaluate its rates regularly to stay competitive (and to stay in business).
If you're overworked and overbooked, you're undercharging. People know your worth and are fighting for your time. It's time to increase your prices!
Although there's a lot to consider when raising your rates, make a point to reevaluate every six months. Here are some tips on how to increase your prices and how to tell your customers.
Accept that you have to do it
It's a daunting task to consider raising your prices, as the danger of losing customers will be front of mind.
But the bottom line is this: you cannot deliver quality service if you're not charging enough. It's that simple.
If you're spinning your wheels trying to make up for the difference, you'll lose customers anyway. You won't be able to deliver the excellent service you're known for if you're constantly overworked trying to find profits elsewhere.
Raising your prices is part of doing business. It doesn't make good financial sense to swallow the cost to appease your customers. With that in mind, know that you're doing the right thing for yourself and your clients.
Understand what's costing you more
At least once per year, consider what your business costs. Check which products or services are making money and which aren't. Then take it a step further and pinpoint the breakeven position for each area.
You will then be able to decide how much more you need to make to be profitable and comfortable. Evaluate all avenues – supplies, staff wages, bills, rent and utilities, training, etc. Doing this regularly lets you see which areas cost you more over time. Those that cost you more will likely benefit from a price increase.
Decide your approach
A blanket increase would make sense if costs went up across the board. However, if you find that only some of your services now cost more to operate, it might be a good idea to increase only those prices. Your customers will appreciate only the necessary cost increases being passed on.
Gauge the satisfaction level of your current customers
If you know that your clients are happy and believe they're getting excellent service, they will be happy to continue paying for that. They won't bat an eye when you inform them of your increase.
But, if they're not currently satisfied, a price increase will be an excellent excuse for them to leave. This isn't necessarily a bad thing–some of the lost profits from those customers leaving will be made up by the price increase to other customers. And clients that aren't happy could become long-term headaches for your company.
Give a lot of warning
If you offer subscription programs (such as system inspections and routine maintenance for homeowners), email your client base three months before your planned increase to let them know your plans. State the reasons for you're raising your prices now.
Emphasize that this change is necessary to continue delivering the high-quality service they're used to. Giving enough notice to your clients, so they have time to react and prepare shows you respect them.
Send a personal message to long-time clients or ones that hold significant accounts. This shows them that you care about their reaction and gives you a chance to listen to their concerns.
Keep the communication lines clear
Construction Company Employee Compensation And A Note On Taxes
This Podcast Is Episode Number 489, And It's About Construction Company Employee Compensation And A Note On Taxes There are a few different methods that employers use to pay their employees, and while they may have similarities, they each also have implications for your construction business and employees. On top of that, there may be a blended model at play, in which you offer two types of compensation at once, such as a wage and bonuses.
When paying employees, laws and the IRS have made the payroll function a time-consuming nightmare for the small business owner.
Small business owners spend an average of eight hours monthly performing payroll functions. That's 12 full business days a year that could be spent generating sales, prospecting for new business opportunities, improving products or services, or servicing customers.
How you pay your construction employees will impact your finances and your reporting requirements. Read on to learn the differences between the main ways of earning money in the workplace.
Most entry-level positions offer an hourly wage in exchange for work. An hourly wage might be $20. So if the employee works 8 hours that day, they would be compensated $160 for that day.
The minimums set by law vary depending on where the business operates. Typically, the minimum wage is directly related to the cost of living in that area.
Generally, a set number of hours can be worked in a week, and working beyond that maximum entitles the employee to a higher pay rate. There may be premiums associated with working undesirable shifts or an even higher pay rate that employees are entitled to for working on holidays.
Because of the number of hours worked, the specific days worked, and overtime, the amount an employee will potentially earn each year can vary widely when paid with hourly wages.
A salary is the standard compensation for management and upper-level positions. It is an agreed-upon annual total, where a certain number of hours worked per week is expected – typically 35 to 40. Other requirements will be outlined, such as how many days per week are expected.
Depending on the schedule, the total salary is divided into equal payments for each pay period. Often, compensation is agreed to as an annual figure, with each paycheck equally divided by the number of payments. If you pay an employee a salary of $60,000 yearly once a month over 12 months, you will pay $5,000 each, not accounting for any deductions.
How a company manages its payment schedule will vary from company to company.
Other pay, such as overtime, commissions, or bonuses, are separate from salary. Many companies don't offer overtime pay for extra hours worked, but they may offer commissions or bonuses for performance.
This is a form of compensation that is based on performance. The amount an employee receives can vary drastically, depending on how well they perform in a pay period.
The commission is typically a calculated percentage of goods or services sold. It is meant as an incentive to drive employees to make sales. For example, you may offer to pay $100 as a commission for each deal closed. An employee selling ten service subscriptions in the pay period would receive a $1,000 commission.
All earnings made by commission are counted as taxable income.
Some salaried or hourly positions offer a commission on top of regular earnings. However, some positions, especially those in sales, can be based solely upon commission. This means that employees don't get paid if they don't sell anything.
A bonus is a compensation type that is not guaranteed. It is usually tied to some company goal, driven by sales or performance. A bonus might be awarded individually or to a team or other work group.
The idea behind a bonus is to create an incentive to meet a specific goal. It is rewarded when the goal has been reached or evaluated at particular times. Bonuses are offered on top of a wage
Accounting, Marketing, Quickbooks, bookkeeping, construction, contractor, contractor accounting, contractor marketing, contractor production, contractors, contractors success, contractors success map, employees, home, production, tax
This Podcast Is Episode Number 488, And It's About Ways To Get Rid Of Construction Accounting And Bookkeeping Confusions Doing something different is hard. Do you feel like everyone else is the most brilliant person in the room, and you just don't get it? Getting into a rut and repeatedly doing the same things is easy.
If those things work, then yes, continue to do them repeatedly. The problem is when something is not working, and you continue down the same path expecting a different result. The opposite of too much change can create another form of chaos. How do you know what is broken if you change a zillion things all at once?
Looking for ways to make your job easier is the goal of all construction contractors. The last thing you want to hear from your staff or a trade contractor is, "Do you want me to do that over?" Your answer is "No!" (thundered, with many extra words). What you expected was that your staff did it correctly the first time.
In accounting, the first piece of the confusion comes from Construction Accounting Vs. Regular Accounting. Not everyone knows what construction accounting is, and easy to assume all accounting is the same.
Why is there confusion? From a tax standpoint, most construction projects are all lumped together, and after the Cost of Good Sold, Expenses, and Depreciation, you either made money or didn't. The Tax Accountant rolls up the numbers to compete for the annual tax return. Therefore, if the information is not needed to be broken down for taxes, then the Tax Accountant is not concerned.
As the Construction Contractor paying the bills, you are constantly concerned about which jobs are "Making Money or Losing Money." "Why does it seem like I am watching the money fly by and zooming out of my checking account? It never seems like there is any money left over!"
Second, confusion always comes about the material. A construction contractor may purchase material and resell it to their customer. Thereby thinking it is a reimbursable expense. (You lose money when doing this).
Remember all invoices to the Customer (Retail, General Contractor, Spec Builder, Developer) are income. Every line item on a customer invoice is All INCOME. If the words are on the invoice, then the invoice is either taxable or non-taxable based on other factors. Washington State, for instance, has a clear explanation.
Purchases for the material are Cost of Goods Sold or are expenses if you are short-cutting your accounting. I have seen financial statements that are backed out because they will reflect reimbursable income as a negative number and thereby show it as a deduction. (The net effect is double dipping on the expense side) The cause is the accounting software not correctly set up.
New Construction Home Building is another area of confusion. In the mind of many construction contractors, a Spec home is any new house being built for resale. That is true; it is a New Construction House. It is a Spec Home for the Owner and Developer (who might be the General Contractor running the job). The question is on the construction accounting side.
The question to be answered is "Who owns the house?" - It is a Spec House in the accounting system for the owner. For the General Contractor who is building a New Construction Home for a Developer, it is NOT a Spec Home. Why might it seem the same as both are New Construction Houses?
If the General Contractor Does Not Own the house, then from an accounting side for that specific General Contractor, the house is a Custom Home with an owner who is not The General Contractor.
Recognize expenses when the house sells. If the General Contractor, Developer Owns the new House being built, then it is a Spec House in the Accounting System. All costs roll up into WIP (Work-In-Process) and convert to COGS when the house is sold, not before. Otherwise, expenses one year; sales the next equals taxes.
In Washington State:
All Construction Contracto
Five Effective Ways To Retain Employees And Keep Your Company Healthy
This Podcast Is Episode Number 487, And It's About Five Effective Ways To Retain Employees And Keep Your Company Healthy Traditionally, employers have relied on giving employees raises to retain their staff and reward them for being hard-working and loyal. Raises can get expensive, and there is often an upper limit for what you can offer regarding increasing salaries and wages.
Keeping your employees happy makes business sense. You want to keep your good employees, and it costs money to find, hire and train new staff. Beyond that, satisfied employees who feel valued are more motivated and productive.
Here are some ways to keep your employees happy that don't rely on higher salaries.
1. Pay for professional development
Good employees want to improve their skills and grow professionally. Often, other priorities get in the way of upgrading skills. Paying for professional development, for example, by having a fund people can access or by bringing in experts to run workshops, shows your staff you care enough to invest in them. Meanwhile, your construction business benefits by having staff trained on the newest procedures and technologies.
An employee's development plan is an action plan that focuses on helping staff improve their knowledge, capabilities, and skills in areas related to your business.
Creating such plans shows your staff you're invested in their future, which increases employee satisfaction. It helps them understand their role and gives them a framework for expanding their talents. It enables you to develop your staff, promoting from within and encouraging your employees to grow with your construction company.
2. Encourage work-life balance
Employees want a fulfilling life, but finding a balance between work and home isn't easy. Having an employer that encourages a work-life balance makes it more accessible. Avoid messaging (texting, phoning, or emailing) employees after work hours and clarify that people should enjoy their personal time. Encourage employees to take their sick leave and use their vacation days. Be a role model by striving for work-life balance yourself.
3. Be transparent
Being open and honest with your workers fosters a sense of trust and belonging among your staff. Have regular meetings where you discuss your organization's goals, strengths, and challenges and receive input and feedback from your team. This encourages engagement and shows your workers that their perspective is valuable.
4. Having a set of values that applies to your staff
Sometimes organizations create noble values that they apply to their customers but don't apply to their workers. Employees see clients and customers being treated well but then wonder why those values don't apply to them. Create a set of values that applies to your staff. Set out how you want your team to feel. Do you want them to feel valued? Supported? What does that look like in your organization?
5. Ask your staff what they need
It's challenging to come up with solutions that everyone will find meaningful. Ask your staff what would be valuable to them–and what would make them happy enough to stay. For example, they may be pleased with additional vacation days or more banked sick time. Listen to their suggestions and consider whether any options they mention could work for your organization.
Nobody likes to feel like a cog in the machine. Anything could be going on behind closed doors. There are, of course, expectations to meet in every job. However, employers would do well to remember that everyone working for them has an entire life outside the company. A construction company that supports and shows compassion to its contractors is likelier to keep the good ones from burning out.
While increasing salary is one thing you can do to keep your employees happy, there are other things they may value that you can offer. Employee development plans are a great way to invest in your employees, keep them motivated, and he
Are You Charging Enough? Why You Should Raise Your Prices
This Podcast Is Episode Number 486, And It's About Are You Charging Enough? Why You Should Raise Your Prices There comes a time for every small business to raise its prices. While it may seem scary, remember that it's your job to keep costs fair for you and your customers. That means you have to charge prices that work for you and allow you to remain in business.
Am I Not Charging Enough?
Knowledge leads to profits and cash flow. What makes knowledge powerful? Use of knowledge. In this cutthroat construction industry, you may not be able to outgrow your competition forever, but you can always outlearn them.
Knowing The 80/20 Rule For Construction Contractors will surely help:
20% of your customers typically generate 80% of your net profit 20% of the goods or services you sell contribute 80% of your revenue 20% or 2 out of 10 of your staff create 80% of the value for your customers The frightening consequence of the 80/20 rule is that 8 out of 10 hours we spend at work drive almost no value to the bottom line, and the most significant drain is trying to save money doing our contractor bookkeeping instead of reviewing the Key Performance Indicator (KPI) Reports.
The essential value good bookkeeping brings to a business is an understanding of where your 20% is hidden.
By generating daily reports that uncover the best clients, jobs, services, or products, you will soon see how you can refocus your internal efforts on doing more good work.
You could be asking the same question and still looking for reasons why you should raise your prices:
1. Your costs have grown
The thing about inflation is that everyone will feel the pinch – including you. If your construction business supplies are now more costly, you must pass those costs on. Otherwise, you're losing money, and your business will be on the hook.
Nobody likes raising prices on their customers, but it's a necessity. You have to be able to cover your costs and continue supplying your customers with what they expect.
2. You're too busy
If you find that you're consistently booked 10-14 days out, it's a sign that you're delivering good value for money. People know your worth and are fighting for your time. That's great! But it also means that your service-based business has evolved.
This tells you that your customers are satisfied. And if they're happy, they'll likely spend more on your services. You may lose some clients in the process, and that's okay. You're now attracting higher-quality clients who know your value and are glad to pay more.
Beware of getting carried away, however. If you raise your prices by too much too fast, without adding any value, you'll find yourself in trouble. As your skills improve, you'll automatically provide more value for money. This is when raising your prices is justified and will be met with acceptance.
3. Enough time has passed
Even without adding more value or skills, raising your prices is okay. It's recommended. A good general rule of thumb is to increase your costs by 5-10% every year and a half or so.
This may sound like a lot, but consider that the average inflation rate falls within this bracket. If you don't raise your rates and the cost of your supplies hasn't gone down, you're losing money.
4. Your competitors are doing it
Yes, it feels great to offer your customers a fantastic deal. But don't be the one left with rock bottom prices when your peers have all raised theirs. This translates into you working harder to earn the same amount of money.
Be aware of what's going on in your industry and adjust. Customers judge a business based on perceived value. If you're at the bottom of the pack price-wise, they're likely to skip over you to get a good deal. Price yourself accordingly to attract quality clients.
5. You've become more valuable
You gain more skills, experience, and knowledge as you work in your field. This translates to more value. If your business is better than it was a year ago, it's t
Randy knows construction
Randy does a great job in talking accounting in ways that make it accessible for the non-finncial person. His episodes are full of great tips you can really use!
Highly Valuable Info for Construction Pros
This podcast is a jewel for those who discover it and apply the principles that Randal teaches. Real estate investor who has managed several construction projects here. Whether you're the contractor who works with home owners, investors or property developers, this podcast contains extremely important advice for producing a profit at the end of the day. I'm an old hand at Quickbooks, but appreciate the insight Randal shares about knowing your numbers and making wise decisions, based on the best accounting and contractor practices he advocates.
If you run a construction company, this is a good podcast to listen to. The accounting topics are varied, but each pertinent to our unique business. My only major complaint about the show is that he records at such a low volume, it's very hard to hear. Very hard. On more than one occasion I've had the volume all the way up on everything, been sitting in a quiet room and still can't hear what he's saying. I've deleted some shows because I just can't hear them and he's pretty soft-spoken which makes it even harder to hear him.
If you can get past that, it's good stuff.