If you’ve been in construction for any length of time, you know the more complex the project, the more likely it is that you complete it late and over budget.

Most contractors just accept that they will get to the end of the project with two percent profit or less and, in many cases, end a project in the red…

Even worse, with an unhappy client because the project was completed months after the deadline.

I know the frustration of working 12, 18, or even 24 months to complete a project late and over budget. I’ve been in construction management for the past 30 years, and it was out of that frustration that I created a unique formula to finish on time and on budget – every single time.

When you get hired for your reputation of on-time completion vs. having to be the low bid, profitability becomes easy.

In this post, I’ll give you a six-step formula for profitable contracting.

How well you implement this formula will determine how much cash you pocket and how many happy customers you create in the coming years.

These six steps are not unique to me, but everyone who understands them and implements them stays in the game for the long term.

Construction is about the long term. It’s not prudent to focus solely on the project you are working on now, although this project helps set up more down the road.

When multiple projects come to you without bidding, you have the opportunity to be excessively profitable because of the systems you put in place to perform at the highest level in our field.

Whether you are just getting started or you’ve been at this for 20 years…

Implement this formula, and you’ll put the days of pain, anguish, and stress behind you.

The reason I’m giving you the formula is that there’s a startling fact about contracting.

The vast majority of contractors file bankruptcy two times before figuring out what to do to survive in this business.

I want to allow you to change that statistic forever.

But let’s be real. Don’t you want to do a lot better than just survive?

If you are like me, you want to thrive, and that’s what you’ll be able to do if you learn to implement the tools necessary to run profitable projects.

Estimating Without Spreadsheets

Whether you are bidding or estimating, the process usually involves a set of plans and doing your best to accurately determine the quantities and cost of all materials, equipment, and labor for the work. The estimate usually begins with generating a takeoff list created from information found in the bid package.

One of the reasons many in the construction trade struggle with profitability is because they don’t see the difference between bidding and estimating.

Both require tremendous accuracy to be profitable, yet bidding seems to fall into the category similar to begging.

Bidding puts you in a position to put the lowest possible number in the box in the hope of getting awarded the project.

Let’s be frank. The client is looking for the lowest possible price to perform the work.

The old expression, you get what you pay for comes into play, but I think it’s better said, you won’t get what you don’t pay for.

Namely, the client wants the most value for their dollar, and the value you provide should be in your ability to finish on time and budget because you know how to estimate a project correctly.

Accurate estimating allows you to calculate what it’s going to cost to perform that step of a project and then add your profit margin and a little extra “just in case” money.

The problem with profitability is not whether you are bidding or estimating; instead, most manage their proposals on spreadsheets.

A spreadsheet works fine with one proposal but gets out of hand once you start managing multiple proposals because there’s no efficient way to automate different proposals prepared over time.

The way to overcome the limitations of spreadsheets is with what I refer to as live estimating.

Live estimating allows you to use an online platform to estimate on the fly and track, monitor, and change any estimate or bid with a click of a button.

When that prospect calls in 8 months after you submitted the bid, you can quickly review and update the entire project in a few clicks.

Time is money, and to quickly and accurately update a project while keeping track of all of your other bids in a single location is the key to profitability.

Realtraker gives you the ability to estimate projects quickly and accurately directly through their platform without clunky spreadsheets.

The beauty of Realtraker is it comes with Profit Genie built-in. With Profit Genie, in a single click, you can account for any change in materials, labor, equipment, or time and project the impact to profit through to the end of the job.

Why does this matter? Because when you know now the impact a change has on the bottom line, you can adjust going forward to make up for the loss. Most contractors have no ability to predict the effect of a change on their profitability, and this knowledge allows you to negotiate with vendors, suppliers, and subs.

Profit Genie alone makes completing on time and budget a reality.

Try it. You’ll love it. Go Here For A Free 21-Day Trial.

Managing Revenue and Cash Flow

One of the biggest challenges we face in construction is managing revenue vs. cash flow.

Revenue and cash flow are not weighed equally. Cash flow might look great, but if your revenue is low, you don’t get to keep much of the cash flow.

Look at it like this. Revenue is your money to spend as needed to operate and grow your business.

Cash flow is the overall money coming into your checking account, but other vendors and suppliers have their hands in the till.

If you spend more of your cash flow than revenue, you will take on debt, and you are for disaster.

When you get a draw, some is for materials, labor, equipment, payroll, and operations, but for most, this is where the guesswork begins.

You might have a pretty good idea of how much of the draw can be used for overhead, but for most; it’s merely an educated guess.

This is why so many contractors get into the endless cycle of robbing Peter to pay Paul. When they get to the end of a project, all they have left to show for it is a couple of percentage points of profit “on paper” and a higher credit line than when you started the project.

Having an online platform that allows you to analyze cash flow and revenue accurately so you don’t overspend is the saving grace you’ve been seeking.

Realtraker takes the guesswork out of revenue projections. You can operate by knowing from the estimate to draw how much revenue you need to run your business allowing you to isolate the cash you need to pay vendors and suppliers, so you don’t get behind as the project progresses.

Try it for yourself. It’s a lifesaver. Get a free 21-day trial by going here.

Projecting Long Term Profit

Change is inevitable.

No matter what stage of a project you are in, something always causes a change in scope or a delay.

How you manage changes and delays will determine how much you pocket at the end of the project and how your reputation looks to the client.

Finishing on time doesn’t just happen. It’s something that takes meticulous planning.

But profit planning seems to be an afterthought. Something that’s done at the end of the project when it’s too late.

I’ve managed projects ranging from $150,000 to $270 million; profit planning needs to be at the forefront of everything you do as a contractor, or else you’ll end up as a statistic.

It’s not an accident that most contractors file bankruptcy twice before they finally make it in this business.

The real question is not why; the real question should be…

Why isn’t profit the number one focus of your business?

You don’t go into business to create a job for yourself and others. Although that might be a nice byproduct, you go into business to make money.

The only way to be profitable is to accurately predict today what the impact of any change has on the long term profit of the project.

Let me clarify.

If you are clearing land and run into a substantial delay, but you cannot bill for the delay based on the scope of the work, how does this delay affect your profit?

If you have to guess – it’s not scalable.

Scalability requires predictability.

But what if you could accurately predict – in real-time – the impact to long term profit of any change in materials, equipment, labor, or scope?

Imagine, in the click of a button, seeing how a change now will impact the job’s profit and your ability to complete it on time.

Would that allow you to adjust as needed to make up for the profit in other areas?

Would that allow you to adjust the working hours so that you can assure an on-time completion?

Of course it does. That is why we created Realtraker.

Realtraker is the only online platform that allows you to efficiently manage construction projects, personnel, processes, performance, paperwork, and PROFIT – from the cloud.

With Profit Genie, in the click of a button, you have all of the information you need to make adjustments whether you are on your smartphone, tablet, or sitting at your desk.

Projecting long-term profit has never been easier and puts you in the position to control every project’s outcome.

To give Realtraker a try today. Go Here

Managing Project Contacts, Personnel, Subs, Vendors, Documents, and Equipment

There’s a lot to manage on any project.

It’s essential to have all of the critical stakeholders on the same page regarding real-time events, changes, and updates that occur day-to-day.

And although many services allow you to manage different aspects of a project, it seems that nothing seems to do all without gaping holes and tremendous expense.

Most platforms charge per-user fees, which works great for them but leaves you exposed because for you to keep all parties in the loop, you either pay their user fees or require your subs and vendors to foot the bill.

But here’s where the problems begin. Many subs and vendors are hesitant to take on a new platform’s expense, so they will opt-out.

Inevitably the one sub you have who won’t pay for the platform fees is the same sub who forgot to tell you last Thursday that you need more materials on the job on Monday.

When they call you Monday morning, it’s too late.

Now you have to wait until Tuesday or Wednesday to get them working again, provided they don’t head off to another job.

This is one reason why Realtraker is the only platform that does not charge per-user fees. You pay for the project, never for users.

We understand the critical importance of having ALL of the stakeholders on the same page in real-time.

Communication is the key to successfully managing profitable contraction projects.

If anyone is not in the loop, profit creep and delays are assured.

When there’s a quick and easy way for all stakeholders to participate at no cost to them, your project will run profitably and on time.

Realtraker allows you to manage projects, personnel, processes, performance, paperwork, and PROFIT from the cloud without per-user fees.

Unlimited users on every project.

Try Realtraker free for 21 days – Go here.

Daily Reports

Preparing reports is tedious and time-consuming, which is why so few take the time to create them.

Because reports take so much time and effort, you either:

• Skip them because you don’t have the time or energy to get them done yourself
• You pay someone to create them, but they still lack total buy-in from all stakeholders, so the reports are incomplete.
• Your reports get done weekly or monthly, so they offer little value in assuring on time completion or long-term profitability because, by the time you see the report, you are already substantially delayed.
• Daily reports are a need, not a want, but it’s more cost effective for personnel to perform other duties than preparing daily reports.

Once again, Realtraker comes to the rescue with “click of a button” reports. All stakeholders can access reports at the end of the day or first thing in the morning – whatever your preference.

Realtraker makes creating daily reports easy and will keep you in the black so that you can finish on time and under budget.

For a free 21 day trial of Realtraker, go here and get started today.

Realtraker allows you to complete complex projects on time and under budget.

Raj Kachu

Founder