Operational Strategies To Financially Enable Your Construction Business
Continuous Profitability
The American economy is on a positive forward trend. This trend started around the time of Brexit, and represents very positive tidings for the construction industry over the next several years. Provided no substantial upset undermines the present administration, there is high likelihood this will remain the case for at least the next three years, if not the next eight.
If you run a construction agency that provides contractor services for clients large or small, you’ve got a substantial opportunity in the current market. But getting the most out of that opportunity will require a strategic approach. For example, you need to take into account things like moving and storage. This is something easy to overlook before a given construction business is pursued, but something you can’t ignore once the ball is rolling.
It’s costly to store your equipment, and the cost of storage must be overcome by profit. That profit won’t hit until you’ve paid for materials, labor, various protections, and unforeseen contingencies like equipment repair or injury remuneration. Generally, you want to include in your budget for a given project allowances for such unexpected expenses.
Additionally, you want to invest in equipment that can serve a dual purpose. Unless you’re in a highly specialized area of construction, like, say, something that includes installation of a nuclear reactor, there are a lot of construction tools that can be multi-purpose. Take the logging truck, as an example.
Multi-Purpose Equipment
Sites like this one, https://www.mylittlesalesman.com/find/logging-trucks-i2c73f0m0, offer a variety of cost-effective construction equipment solutions, like lumber trucks—according to the site, these vehicles: “…can be used for off-road or highway transportation of logs that are up to 80 feet long, though 42 feet is the length of an average log. Most logging trucks can transport an average of 80,000 pounds…”
80,000 pounds is 40 tons, by American reckoning—a ton being 2,000 pounds. What this means is you could use such a truck for more than just hauling logs. Most equipment can be transported with such a vehicle as well. Additionally, you might be able to transport units like prefabricated construction offices, and the like.
If you recently spent $40k on a fine Peterbilt logger, you want to maximize that investment. With any construction equipment, the primary aim is to get your spending out of it. Once you’ve hit that number, anything else is profit. If you spend $40k on a truck and you do $40k worth of work with it, it has paid for itself. Ideally, you want to double your investment or more.
Equipment Investment Strategy
But getting that investment means more than just transporting $40k of equipment. Additionally, you need to account for the cost of fuel, wear and tear, and employee payment. Call it $5 a mile. Now if you’re getting $10 worth of value per mile (by saving shipping costs or hauling salable goods, etc.) then you’ve recouped your money by 8,000 miles. By 16,000 miles, you’ve doubled your money, and you could sell the truck at any price for profit.
Now the $5 figure was plucked out of thin air. Depending on your construction (or logging) needs, that number will be higher or lower. If every 500 miles you’ve got a $1,000 repair charge, it’s going to change that figure. If you don’t have to do any work on the truck beyond 2,000-mile intervals, this will also have an effect.
Err on the side of caution. Assume operational expenses will be greater than they are, and make that your “bottom line”. That way you’ll always operate at profit, and when you dip, you’re really just approaching breaking even. Especially in an economy operating at as profitable a level as this one, there is high potential for success—so capitalize on it now!
