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Managing the Profitable Construction Business: The Contractor's Guide to Success and Survival Strategies

Book Description

Take control of your construction contracting business and manage it through the natural highs and lows of the construction market.

Learn from a team of construction business veterans led by Thomas C. Schleifer, who is commonly referred to as a construction business "turnaround" expert due to the number of construction companies he has rescued from financial distress. His financial acumen, combined with his practical, hands-on experience, has made him a sought-after private consultant. His experience and no-nonsense philosophy have truly given him a unique perspective. Important topics covered include:

  • Understanding the primary areas of construction business failure in the next decade

  • Minimizing business risk with real-world examples

  • Developing a positive and competent management attitude and strategy

  • Discover how to maneuver through this complicated and risky industry by using the authors' research and proven success strategies to sustain and grow your business.

    Table of Contents

    1. Foreword
    2. Preface
    3. Acknowledgments
    4. How to Use This Book
      1. Part 1
      2. Part 2
      3. A Teaching Text
    5. About the Authors
    6. PART 1
      1. 1 Managing with Confidence
        1. 1.1 Lessons Learned
        2. 1.2 Objectives of This Book
        3. 1.3 Managing Areas of Risk
        4. 1.4 Recognizing Signs of Potential Trouble
        5. 1.5 Layers of Management
        6. 1.6 Owner Versus Top Management
        7. 1.7 Disciplining Performance
        8. 1.8 Boards of Directors
        9. 1.9 Accountability
        10. 1.10 Selecting the Members
        11. 1.11 Importance of Credit
        12. 1.12 Volume Versus Profit
        13. 1.13 Employee Benefits and Compensation
        14. 1.14 Borrowing
        15. 1.15 Business Planning
        16. Chapter Review Questions
        17. Critical Thinking and Discussion Questions
      2. 2 Elements of Contractor Failure
        1. 2.1 Capitalizing on Experience
        2. 2.2 Increase in Project Size
        3. 2.3 Unfamiliarity with New Geographic Areas
        4. 2.4 Moving Into New Types of Construction
        5. 2.5 Changes in Key Personnel
        6. 2.6 Lack of Managerial Maturity in Expanding Organizations
        7. Chapter Review Questions
        8. Critical Thinking and Discussion Questions
      3. 3 Increase in Project Size
        1. 3.1 Limits of Growth
        2. 3.2 Increased Risks with Larger Projects
        3. 3.3 Case Study
        4. 3.4 Case Study Review
        5. 3.5 Underestimating the Size
        6. 3.6 Owners and Retainage
        7. 3.7 Allocating Time
        8. 3.8 Alternatives to Taking on Large Projects
        9. 3.9 Conclusion
        10. Chapter Review Questions
        11. Critical Thinking and Discussion Questions
      4. 4 Change in Geographic Location
        1. 4.1 Defining “Normal Area”
        2. 4.2 Reasons for Changing Geographic Area
        3. 4.3 Case Study: Long Distance Project
        4. 4.4 Review of the Long Distance Project Case Study
        5. 4.5 Managing the Risk with Long Distance Projects
        6. 4.6 Case Study: Regional Office
        7. 4.7 Review of the Regional Office Case Study
        8. 4.8 The Need for Personal Attention
        9. 4.9 Opening a Regional Office
        10. 4.10 Regional Office Contingency Plan
        11. 4.11 Conclusion
        12. Chapter Review Questions
        13. Critical Thinking and Discussion Questions
      5. 5 Changing or Adding to Type of Construction Performed
        1. 5.1 Reasons for Changes in Type of Work
        2. 5.2 Challenge: Lack of Experience
        3. 5.3 Challenge: Differences That Appear Subtle
        4. 5.4 Resolution: Know Your Specialty
        5. 5.5 Background to Case Studies
        6. 5.6 Case Study 1
        7. 5.7 Case Study 2
        8. 5.8 Example: Union Versus Open Shop
        9. 5.9 Know the Risks
        10. 5.10 Volume versus Profit Alternative
        11. 5.11 Withdrawal Plan
        12. 5.12 Conclusion
        13. Chapter Review Questions
        14. Critical Thinking and Discussion Questions
      6. 6 Replace Key Personnel
        1. 6.1 Identifying Key People
        2. 6.2 Partners
        3. 6.3 Founders and Succession
        4. 6.4 Inactive Founders
        5. 6.5 Succession Case Study
        6. 6.6 New Management Team
        7. 6.7 Adding Key Personnel
        8. 6.8 Management “Dilution”
        9. 6.9 Summary
        10. Chapter Review Questions
        11. Critical Thinking and Discussion Questions
      7. 7 Managerial Maturity
        1. 7.1 Start-Up Construction Companies
        2. 7.2 Importance of Management Skills
        3. 7.3 Company Growth Phases
        4. 7.4 Limit of Managerial Effectiveness
        5. 7.5 Company Growth and Management Thresholds
        6. 7.6 Telltale Signs of Insufficient Managerial Maturity
        7. 7.7 The Challenge of Management Changes
        8. 7.8 Delegation of Authority
        9. 7.9 Test of Delegation
        10. 7.10 Managerial Maturity Case Study
        11. 7.11 Summary
        12. Chapter Review Questions
        13. Critical Thinking and Discussion Questions
      8. 8 Accounting Systems
        1. 8.1 Accounting and Information Management
        2. 8.2 Types of Systems
        3. 8.3 Who Is Responsible?
        4. 8.4 Accounts Payable
        5. 8.5 Disputed Invoices
        6. 8.6 Case Study
        7. 8.7 Recording Liabilities
        8. 8.8 Accounts Receivable
        9. 8.9 Timely Data Entry
        10. 8.10 Summary
        11. Chapter Review Questions
        12. Critical Thinking and Discussion Questions
      9. 9 Evaluating Contract Profitability
        1. 9.1 Measuring Performance
        2. 9.2 Accounting for Profit
        3. 9.3 Selection of Systems
        4. 9.4 Percentage of Completion
        5. 9.5 Estimated Profit
        6. 9.6 Case Study
        7. 9.7 Percentage of Completion Method of Accounting
        8. 9.8 Construction—Work In Progress Method
        9. 9.9 Over- and Underbilling
        10. 9.10 Impact of Total Revenue
        11. 9.11 Cost Control
        12. 9.12 Timeliness
        13. 9.13 Cost Control Versus General Ledger
        14. 9.14 Tracking Costs
        15. 9.15 Working Without Information
        16. 9.16 Summary
        17. Chapter Review Questions
        18. Critical Thinking and Discussion Questions
      10. 10 Equipment Cost Management
        1. 10.1 Ownership Costs
        2. 10.2 How Much to Own
        3. 10.3 Reasons to Buy
        4. 10.4 Competitive Position
        5. 10.5 Calculating Equipment Costs
        6. 10.6 Time and Usage
        7. 10.7 Replacement Costs
        8. 10.8 Equipment Costs Charged to Projects
        9. 10.9 Idle Equipment
        10. 10.10 Cash Flow
        11. 10.11 Equipment Obsolescence
        12. 10.12 Equipment Obsolescence Case Study
        13. 10.13 Replacement Cost Incurred Daily
        14. 10.14 Summary
        15. Chapter Review Questions
        16. Critical Thinking Questions
      11. 11 Other Industry Concerns
        1. 11.1 Introduction
        2. 11.2 Growth and Risk
        3. 11.3 Market Driven
        4. 11.4 Controlling the Need for Volume
        5. 11.5 Rate of Growth
        6. 11.6 Flexible Overhead
        7. 11.7 Mobility of the Industry
        8. 11.8 Diminished Profits
        9. 11.9 Employee Benefits and Compensation
        10. 11.10 Motivation and Loyalty
        11. 11.11 Internal Company Disputes
        12. 11.12 Debt
        13. 11.13 Business Planning
        14. 11.14 Recommendations
        15. Chapter Review Questions
        16. Critical Thinking and Discussion Questions
    7. PART 2
      1. 12 Financial Management Issues
        1. 12.1 Keys to Success
        2. 12.2 What Financial Statement Are Supposed to Convey
        3. 12.3 Three Major Functions
        4. 12.4 Financial Statement Basics
        5. 12.5 Balance Sheet
        6. 12.6 The Holding Tank Concept
        7. 12.7 Assets
        8. 12.8 Current Assets
        9. 12.9 Property and Equipment
        10. 12.10 Other Assets
        11. 12.11 Liabilities
        12. 12.12 Equity
        13. 12.13 Income Statement
        14. 12.14 Financial Statement Sets
        15. 12.15 Summary
        16. Chapter Review Questions
        17. Critical Thinking and Discussion Questions
      2. 13 Financial Analysis and Indicators
        1. 13.1 Working Capital
        2. 13.2 Calculating Target Backlog
        3. 13.3 Calculating Target Annual Income
        4. 13.4 Maximizing Working Capital
        5. 13.5 Liquidity
        6. 13.6 Current Ratio
        7. 13.7 Quick Ratio
        8. 13.8 Receivables to Payables Ratio
        9. 13.9 Leverage
        10. 13.10 Financial Capacity
        11. 13.11 Additional Indicators
        12. 13.12 Break-Even Point
        13. 13.13 Rscore
        14. 13.14 Change Percentages
        15. 13.15 Summary
        16. Chapter Review Questions
        17. Critical Thinking and Discussion Questions
      3. 14 Projection and Budgets
        1. 14.1 Terms
        2. 14.2 The Projection Process
        3. 14.3 The Pre-Projection Process
        4. 14.4 Key Operational Factors
        5. 14.5 The Projection Process
        6. 14.6 Putting the Projection to Use
        7. 14.7 Short-Term Cash Flow Projections
        8. 14.8 Summary
        9. Chapter Review Questions
        10. Critical Thinking and Discussion Questions
      4. 15 The Effective Use of Credit
        1. 15.1 Introduction
        2. 15.2 The Primary Creditors
        3. 15.3 Banking
        4. 15.4 Bonding
        5. 15.5 Leasing
        6. 15.6 Summary
        7. Chapter Review Questions
        8. Critical Thinking and Discussion Questions
      5. 16 Making Decisions in Volatile Conditions
        1. 16.1 The Effects of Market Cycles
        2. 16.2 G & A Stair-Steps
        3. 16.3 Using Cycles Positively
        4. 16.4 Consecutive Cycles and Fighting Tendencies
        5. 16.5 Summary
        6. Chapter Review Questions
        7. Critical Thinking and Discussion Questions
      6. 17 Success Factors for a Changing Industry
        1. 17.1 What a Client Wants
        2. 17.2 A Client Perspective of the Contract
        3. 17.3 How Contracts Are Awarded
        4. 17.4 How Contracts Are Won
        5. 17.5 Relationships and Contract Divergence
        6. 17.6 The Client's Vexing Problem
        7. 17.7 Goals of Alternative Delivery Methods
        8. 17.8 Successful RFP Response Strategies
        9. 17.9 Effectively Using Risk Analysis in a Proposal
        10. 17.10 How to Develop a Winning Proposal
        11. 17.11 Successful Interviewing Strategies
        12. 17.12 Summary
        13. Chapter Review Questions
        14. Critical Thinking and Discussion Questions
      7. 18 Performance Measurement
        1. 18.1 What to Measure
        2. 18.2 Setting the Client's Expectations
        3. 18.3 Risk-Based Preplanning
        4. 18.4 Measuring Project Performance
        5. 18.5 Measuring Past Performance
        6. 18.6 Performance-Based Client Relationships
        7. 18.7 Measurement and Leadership
        8. 18.8 Summary
        9. Chapter Review Questions
        10. Critical Thinking and Discussion Questions
    8. Appendix: Answer Key for Chapter Review Questions
    9. Index