Construction Business Consulting and Advising

How to Empower Your Construction Business from Startup to $50 Million and Beyond In the second episode of Pro-Accel's two-part series on financial and accounting advice for contractors, Jerry Aliberti and guest expert Patrick Shurney dive deep into the financial strategies needed at various stages of company growth. Ranging from the startup phase to becoming a multi-million dollar enterprise, the episode provides invaluable insights for contractors. Here's a comprehensive breakdown of the advice shared during the discussion. From Startup to $10 Million: Laying the Foundation in your growing construction business 1. Prioritize Profitability over Revenue (however this should always be the case!) While it's tempting to focus on the top-line revenue, Patrick Shurney points out the importance of understanding profitability. A company making $10,000,000 in revenue isn't necessarily successful unless its profit margins are healthy. Thus, young businesses need to zero in on maintaining profitable operations instead of solely expanding sales. Businesses should always be more concerned with bottom line profits and not get distracted by top line revenue! 2. Invest in a Bookkeeper Early For contractors just starting out, one key recommendation is to hire a bookkeeper from day one. They can and will most likely be part-time just starting. Often, the owner-operator manages everything, wearing multiple hats. However, bookkeeping is critical for timely and accurate financial data. A good bookkeeper will also make the accountant's job easier and help establish healthy financial habits from the onset. 3. Outsource Lower-Paying Tasks Business owners must understand the value of their time. Jerry emphasizes the need to focus on high-value tasks and delegate lower-paying ones. For example, instead of handling bookkeeping personally, a contractor should outsource it and concentrate on business development and strategy. $10 Million to $20 Million: Introducing Fractional Help in our growing construction business 1. The Value of Fractional Professionals As companies grow, the complexity of their financial needs increases. Patrick suggests introducing fractional help—like a fractional CFO or controller—between the $10 million to $20 million revenue mark. This approach allows businesses to professionalize their accounting functions without the high costs and risks associated with full-time hires. 2. Trial Before Commitment One significant advantage of fractional help is the ability to "try before you buy." If the initial hire doesn't work out, you can easily switch to another professional without substantial disruption or dealing with difficult HR issues. This flexibility can be a game-changer as your business scales. $20 Million to $50 Million Construction Business: Building the Executive Team 1. Hiring Full-Time Accounting Roles When a company hits the $20 million to $50 million mark, the scale and complexity require more robust financial oversight. By now, the firm should have multiple roles within the accounting department—accounts receivable, accounts payable, a controller, and possibly a CFO. This is when fractional roles might transition into full-time positions to oversee a larger team and manage intricate financial tasks. 2. Balance Control and Delegation One common issue at this stage is that business owners might still be heavily involved in day-to-day accounting tasks, leading to inefficient operations and burnout. It’s crucial for them to relinquish control to trusted professionals, thereby focusing on strategic growth rather than minute details. $50 Million and Beyond Construction Business: Professionalizing Further 1. Full-Time CFO (Chief Financial Officer) Leadership At $50 million and beyond, most companies need a full-time CFO. This role is vital for managing banking relationships, strategic planning, and executive-level financial decisions. A seasoned CFO will also help build out the accounting department, reducing the burden on the business owner. 2. Financial Transparency and Job Costing A crucial aspect of high-level financial management is understanding the profitability of individual jobs or services. Advanced accounting departments can provide detailed job costing and financial performance analysis, helping business owners make informed decisions about where to focus their efforts. 3. Owner Involvement in Estimating One essential lesson shared by Patrick is the importance of owner involvement in estimating. Even with a team in place, the owner should review estimates before they go out, ensuring accuracy and feasibility. This oversight can prevent costly mistakes and align the operations closely with the company's financial goals. Entering into the upper echelons of business revenue requires continuous improvement and strategic planning. Contractors should aim to understand their strengths and delegate tasks that are not the best use of their time. Patrick and Jerry's insights reinforce the necessity of building a qualified team while remaining involved in critical business processes. Contractors can achieve sustainable growth and increased profitability by adapting to each stage's requirements. Whether you're a startup or an established contractor scaling new heights, the key is to keep refining your financial strategies, leveraging professional help, and focusing on both revenue and profitability. Email Jerry at jerry@pro-accel.com to learn more about how Pro-Accel can help you achieve high project success. Or you can click the below button and schedule a call directly!  For more tips on achieving optimal cash flow in your construction business, click here . For more tips on the stages of construction business growth, click here .

Navigating the Complex World of Construction Finance: Insights for Growing Contractors - Part 1 of 2 Unlocking the Secrets to Financial Success and Stability in the Construction Industry The construction industry, with its unique business dynamics and financial requirements, poses distinct challenges for contractors looking to grow their businesses. On the latest episode of the Pro-Accel Podcast, hosted by Jerry Aliberti, guest speaker Patrick Shurney, a seasoned business finance coach, dives deep into the common financial hurdles faced by growing contractors and offers actionable advice to overcome them. Understanding Common Financial Pitfalls Patrick opens the conversation by highlighting a frequent issue among contractors: the tendency to self-teach financial management without a formal background. This gap in professional accounting knowledge can lead to significant problems, such as inaccurate financial data and misplaced trust in underqualified bookkeepers. The first step towards resolution, Patrick suggests, is recognizing the need for professionally trained financial personnel who can provide accurate and timely data, vastly improving decision-making processes. Transitioning From QuickBooks to Specialized Software A significant focus of the discussion revolves around the limitations and capabilities of accounting software like QuickBooks. While sufficient for early stages of business, there comes a point, particularly as revenues exceed $20 million, where industry-specific software becomes necessary to handle complexities like union contracts and fringe benefits. Patrick encourages contractors to seek tailored accounting solutions early on to prevent financial mismanagement as the business scales. The Disconnect Between Field Data and Financial Reports A critical pain point discussed is the disconnect between on-site job data and its reflection in financial accounting systems. Contractors often excel in tracking onsite expenses and project costs but fail to integrate this data accurately with their accounting systems, leading to unexpected financial discrepancies. Patrick emphasizes the importance of syncing industry-specific reports, such as Work in Progress (WIP) and backlog reports, with the accounting system to avoid issues like overstated profits or unforeseen tax liabilities. Managing Cash Flow vs. Profit One of the most enlightening parts of the episode deals with the difference between profit and cash flow, a common source of confusion for many growing contractors. Patrick explains that while profit appears on the profit and loss statement and reflects earnings, cash flow is what determines the business’s actual liquidity and ability to sustain operations. Discussing strategies to maintain healthy cash flow, he advises closely monitoring the business’s equity on the balance sheet and considering external funding to cover shortfalls during growth periods. Strategizing Financial Growth Addressing the challenge of financial planning, Patrick advocates for a proactive approach, encouraging contractors to create detailed financial forecasts akin to project estimates. By forecasting, businesses can set realistic financial targets and align their business strategies accordingly, rather than hoping for favorable outcomes. This planning is particularly vital during rapid growth phases when businesses are susceptible to becoming cash-strapped despite appearing profitable on paper. Incorporating Salaries and Distributions Lastly, Shurney tackles the common issue of contractors not paying themselves competitive salaries. He argues against the notion of sacrificing personal compensation to reinvest in the business, suggesting instead a structured salary combined with quarterly distributions. By setting a professional standard for compensation, business owners can ensure personal financial stability while setting a precedent for the business’s financial management. The insights shared by Patrick Shurney highlight the necessity for construction business owners to adopt sophisticated financial strategies and recognize the importance of integrating professional accounting practices into their operations. As they navigate the complex landscape of the construction industry, focusing on robust financial planning and management will pave the way for sustained growth and success. To learn more about how Pro-Accel can help you increase cash flow and maximize production check out our Operations Performance Page. You can also set up a Free Consultation by emailing Jerry Aliberti at jerry@pro-accel.com or clicking the blue link below and setting up a call. You can reach Patrick Shurney at patrick@3pcllc.com or 443.539.6276 or www.3pcllc.com