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Construction Business Management: What Every Construction Contractor, Builder and Subcontractor Needs to Know

ISBN: 978-0-87629-825-1
201 pages
October 2006
Construction Business Management: What Every Construction Contractor, Builder and Subcontractor Needs to Know (0876298250) cover image
Less than half of construction firms are still in business after four years. Make sure your company thrives with essential – and very readable – guidance from a pro with 25 years’ success. Find out what it takes to build all aspects of a business that’s profitable, enjoyable, and enduring.

Here are just a few of the things you’ll learn from this book:

  • The duties of the owner of a successful construction business
  • Essential terms and conditions to include and exclude in contracts
  • Commandments to follow to ensure you’re paid what you're owed, including step-by-step change-order procedures to avoid disputes and non-payment
  • Strict dos and don'ts of mechanics’ liens – including when an owner goes bankrupt
  • What must be done administratively before breaking ground on every project
  • How to select, hire, and keep “golden” employees
  • Effective marketing even the smallest contractor can afford
  • How to identify the accountants, lawyers, and insurance agents that are right for you
  • The what, when, where, and why of licensing and registration
  • The advantages of specializing, including the opportunities in chain store construction

Whether you’re a contractor, a key employee, a subcontractor, a student, or a facility executive, you’ll find many ideas you can immediately add to your management and leadership toolbox. Adopting even a single one of them will pay dividends now and throughout your career.

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Preface: What you can learn from this book.

Acknowledgments.

Chapter 1 Do you have what it takes?

1.1 Essential traits.

1.1.1 Initiative.

1.1.2 Passion.

1.1.3 Stress tolerance.

1.1.4 Reliability (follow-through).

1.1.5 Willingness to work while others play.

1.1.6 Unyielding positive attitude.

1.1.7 Mental toughness.

1.1.8 Attention to detail.

1.1.9 Sense of urgency.

1.1.10 Self-control.

1.1.11 Thirst for knowledge.

1.1.12 Ability to get along with others.

Chapter 2 Your role as owner of your construction firm.

2.1 Leadership (Setting the course).

2.1.1 Vision to reality: The required path.

2.1.2 Leaders and managers are different from each other.

2.1.3 Tame the ego.

2.2 Leadership in times of uncertainty.

2.3 Manager vs owner/shareholder.

2.4 The entrepreneur mindset.

2.5 Managing risk.

2.6 Establishing your corporate culture.

2.7 Striving for excellence.

2.8 Hiring the right people.

2.9 Knowing your industry.

2.10 Coordinating resources.

2.11 Keeping in touch.

2.12 Being there.

2.13 Identifying objectives.

2.14 Measuring results.

2.15 Marketing.

2.16 Little habits with big payoffs.

2.17 Getting involved.

Chapter 3 Sales, marketing and business development.

3.1 Marketing materials.

3.2 Publicity.

3.3 Proposals and presentations.

3.4 Staying ahead of the pack.

3.5 Impressions.

3.6 New customers vs old.

3.7 Reaching out.

3.8 Data mining.

Chapter 4 Creating customer loyalty.

4.1 Budget.

4.2 Quality.

4.3 Relationships.

4.4 Schedule.

Chapter 5 Business considerations.

5.1 The corporation.

5.2 Capital equipment.

5.3 Purchasing.

5.4 Collection.

5.5 Dealing with the IRS.

5.6 Contractor failure.

Chapter 6 Controlling your finances.

6.1 Working capital.

6.2 Projecting cash needs.

6.3 Understanding financial statements.

6.4 Dishonest employees.

6.5 Where is the money?

Chapter 7 Bidding.

7.1 Qualifying to bid.

7.2 Approach to bidding.

7.3 Pricing.

7.4 Cost databank.

7.5 Pre-bid site inspection.

7.6 Warranty considerations.

7.7 Compiling your bid proposal.

7.8 Reverse bidding/auction.

Chapter 8 Building it.

8.1 Registration and licensing.

8.2 Environmental studies.

8.3 Subcontracting the work.

8.4 Photographs.

8.5 Pre-construction meetings.

8.6 Before you start a project.

8.7 Project overhead/general conditions expense.

8.7.1 Managing project overhead/general conditions cost.

8.8 Warranties.

8.9 Mechanic's liens.

8.10 Lien waivers.

8.11 Closing out the project.

Chapter 9 Accounting and record keeping.

9.1 Certified public accountant.

9.2 Audited financial statements.

9.3 Bookkeeper.

9.4 Cash vs accrual accounting procedures.

9.5 Percentage of completion vs completed contract reporting.

9.5.1 Percentage of completion method.

9.5.2 Completed contract method.

9.6 General and administrative expense.

9.7 Fixed vs controllable G&A expense.

9.8 Cost accounting.

9.9 Financial statements.

9.9.1 The income statement.

9.9.2 The balance sheet.

9.10 Reports.

9.11 Billings.

9.12 State sales tax.

Chapter 10 Contract terms and conditions.

10.1 Types of agreement.

10.2 Requirements for a binding agreement.

10.3 A few generalizations about contracts.

10.4 Know the project owner.

10.5 Getting paid.

10.6 Commencement/completion dates.

10.7 Owner delay.

10.8 Contractor delay.

10.9 Changes in the work.

10.10 Constructive change.

10.11 Differing conditions (Changed conditions).

10.11.1 What to do upon discovering differing conditions.

10.12 Insurance.

10.13 Indemnification.

10.14 Warranty obligations.

10.15 Limitation of liability.

10.16 Governing law.

10.17 Dispute resolution.

10.18 Contract termination by the owner.

Chapter 11 You and your employees.

11.1 Who are the "right" people?

11.2 Hiring the "right" people.

11.3 Good hiring practices.

11.4 The interview.

11.5 New employee orientation.

11.6 Non-compete non-disclose agreement.

11.7 Managing employees for the long term.

11.7.1 Relationships.

11.7.2 Autonomy.

11.7.3 Recognition.

11.7.4 Employee's return on investment.

11.7.5 Employee incentive plans.

11.7.6 Benefits packages.

11.7.7 Trust.

11.7.8 Work/life balance.

11.7.9 Work fulfillment.

11.7.10 Training.

11.7.11 Job security.

11.7.12 Internal conflict.

11.7.13 Openness and communication.

11.8 Responsibility vs job description.

11.9 Evaluating employee performance.

11.10 Employee termination.

11.10.1 Conducting the termination meeting.

11.11 Employee handbook.

11.12 Professional employer organizations.

Chapter 12 You and your subcontractors.

12.1 Independent contractor or employee?

12.2 Subcontractor qualification checklist.

12.3 The contractor–subcontractor agreement: Special considerations.

12.3.1 Pass-through or flow-down clause.

12.3.2 Scope of work.

12.3.3 Work as directed.

12.3.4 Changes to the subcontract.

12.3.5 Conditions for payment to subcontractor.

12.3.6 Pay-if-paid.

12.3.7 Delay damages.

12.3.8 Retainage.

12.3.9 Calculation of payment amount.

12.3.10 Terms for final payment.

12.3.11 Indemnity.

12.3.12 Termination for convenience.

12.3.13 Subcontractor default.

12.3.14 Notice of default.

12.3.15 Cure.

12.3.16 Contractor alternatives.

12.3.17 Continuation of performance.

12.3.18 Dispute resolution.

12.3.19 Termination of subcontract.

12.3.20 Merger.

Chapter 13 Banking and finance.

13.1 Your business plan.

13.2 Sources of financing.

13.3 Borrowing criteria.

13.4 Managing credit.

Chapter 14 Insurance and bonds.

14.1 Insurance.

14.1.1 Worker's compensation insurance.

14.1.2 Employer’s liability insurance.

14.1.3 All-risk builder's risk insurance.

14.1.4 Commercial general liability insurance.

14.1.5 When a loss occurs.

14.1.6 Insurance administration.

14.1.7 Certificates of insurance.

14.1.8 Waiver of subrogation.

14.2 Construction surety bonds.

Chapter 15 Specializing in chain store construction.

15.1 Improved prof it potential.

15.2 Continuing relationships.

15.3 Chain operators favor niche contractors.

15.4 Fewer parties in the mix.

15.5 Reliable cost database.

15.6 Reduced risk.

15.7 So why are so many contractors missing out on the chain store niche?

15.8 A note about the construction industry as a whole.

Appendix 1 If you’re just getting started.

Appendix 2 Useful Web site links.

Appendix 3 Regional cross reference of construction-related organizations.

Appendix 4 Potential questions for interviewing job applicants.

Glossary.

References.

Index.

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Nick B. Ganaway started and then operated his own construction business for 25 years. Prior experience includes several years as a construction manager for Shell Oil Company. He has a degree in industrial engineering from the University of Texas at Arlington. Nick lives in Atlanta, Georgia, where he currently consults with contractors and other small business owners. You may visit his Web site at:

www.constructionbusinessmanagement.com

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