The Business of Construction

Who put the contract in contractors? And what exactly does that have to do with building and construction?

In the modern construction industry, business is the name of the game. With the era of ‘The Contract’ at an admin-loaded peak, how can up-&-coming contractors navigate the waters of construction management with ease… and with speed?

The Law of Cycles

A general day in the life of a construction contractor follows a similar pattern regardless of the kind of contractor you are, or the type of work you do. There are three main phases of work that make up the work cycle of a contractor. Obtaining new work, doing the actual building work and administration… there’s also a fourth, and that’s customer service and satisfaction, but I think this deserves a write-up all of its own. 

Firstly, obtaining new work is very important, because, no work equals no construction company. This phase generally covers: marketing your business and selling your services, as well as quoting and estimating and bidding for tenders. The key goal in this phase is to actually get the work, and more importantly to get the right work that fits for both your customer and your company, so it’s a very important step to get right.

Secondly, once you’ve got the work, you do the building and construction itself, this is the phase where the operations are organised and the physical work gets done, things like planning and project management, procuring materials and external trades, and building the project. The main focus in this phase is to get set up efficiently and get the project effectively completed on time, to get the quality right, and to get it done within budget. 

And thirdly, the Administration work is probably most contractor’s least favourite phase of the construction management cycle; but, it’s easily just as important as the rest, and it covers the likes of invoicing and receiving payments, contract management, accounting and other financial management, tax reporting, work, health & safety planning and reporting, and any other administration that needs to be done.

Having solid, efficient systems in place means the cycle runs smoothly and most major, and avoidable headaches can be prevented. The better your business runs, the more work you get done, the better the quality of your work and your customers’ experience, and the more business you get back through the door. 

The Business of Construction

So, why is this cycle so important?

In construction the small can out-manoeuvre the big, well in order for a smaller contractor to keep ahead of the bigger fish, the smaller guys need to really nail those three main phases of the construction cycle, they need to nail it to keep that speed and efficiency. That’s your competitive edge right there, because you’re not a big clunky cumbersome organisation with layers of internal bureaucracy and politics, so you can respond fast and take action quickly. 

But you can’t just rush through a job, cutting corners and compromising your work. In order for your work to be top-notch and completed on time and within budget, your systems and your processes need to be the solid foundation for you to work smarter, not always harder, your speed comes in your ability to respond to your client’s needs, and maintaining a close eye on quality control.

Get that right and that means you’re able to create quality, profitable jobs in an efficient and timely manner. The more efficiently and effectively you turnover “quality” jobs, the more projects you get done, the more happy clients you have, the more profit you can make in a financial year as your reputation and company grow. 

The Business of Construction

Industry Trends Contractors Need to Know About

In my last article, I discussed why the construction industry is the best industry in Australia. We looked at things like the ways in which the industry rewards experience and good quality work, and the fact that anyone can get started just about anywhere with relatively low investment, and we made a toast to an industry that’s here to stay.

Let’s also look at some of the trends in the Australian construction industry that you should be aware of on your journey. Some aspects of the construction game have changed dramatically over the last 50 years, and contractors have to be aware of these changes to keep their heads above water and successfully manage their businesses. 

This leads me to our first trend: Business is now the name of the game.

Decades ago, construction was a partnership between a craftsperson and their customer. Quality service was provided and the craftsperson was paid their fee. And may I add, more projects probably stood the test of time back then too. Why? Because the learned and honed craft was the most important aspect of the exchange, and payment came second – if you did a good job. 

Today, we are ‘contractors’ – creators governed by contracts. This isn’t a bad thing, but the business aspect of the building has – in many cases – overtaken the craft. We now have “on the tools” contractors entangled with construction managers who have earned their “trades” in a university or TAFE setting – with varying degrees of field knowledge under their belts. Navigating these relationships is a skill all its own.

In addition to this, we are now engaged with more educated and involved owners and customers who come to the table from a myriad of backgrounds – and sometimes with an even broader myriad of expectations. This adds a layer of construction management that the craftspeople of 50 years ago rarely had to deal with. We are now managing interactions with owners that can have a drastic effect on the progress of a project.

The game has changed and it’s trickier than ever for the average contractor to navigate these added elements of contracting. We need to not only be vigilant with our construction cycles, but also recognise where to step in, diagnose problems, and get things moving again – all while ensuring we are keeping the appropriate records to show we’re doing our due diligence in terms of the contractual agreement.

The Business of Construction

Get with the Program

Every contractor needs a ‘construction program’ which guides the contractor along the path of identifying, flagging, and tracking issues that come up throughout the project. Programs can vary between types of contractors or the types of projects you manage. Most importantly, your preferred program is essentially a system that allows you to minimise disruptions to the project by identifying and acting on issues immediately.

Remember, we’re now managing people outside of our own business – we’re managing more-involved owners and other construction managers with varying ‘field’ experience. This means there’s a lot of back and forth between different parties. Naturally, one of the issues that can arise then, is a lack of action or critical information from any number of other parties. This has the potential to slow down or even halt a project – which is something we want to avoid at all costs. 

Some aspects of the project where this might happen include: receiving and making monthly progress claims on time, submissions and approved variations in writing, signed and executed contracts, delays on responses to requests for information, specifications on owner’s materials, sign-off’s on colours or finishes selections.

Using a well-structured and practical construction program, these issues are flagged for your attention, so you can then take action and get things moving again. It’s not that easy, but it’s certainly manageable if you keep your keeping your finger on the pulse.

A day in the life of a contractor and all the modern-day tricky bits that go with it has many moving parts to keep in order. With a bit of planning, some solid systems, and a construction program that works for your business, you can make a start to creating quality work and building your reputation. 

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