One of my clients broke some exciting news to me the other day. She had discovered Excel’s pivot table feature. She was just amazed how quickly she could pull together answers to questions her yard man had regarding the number of days their equipment was in the field. Her mind was exploding with the different job costing, pricing, and financial analyses she would be able to perform. I assured her that her company’s bottom line would benefit greatly from her new hobby.

If you don’t know and use Excel, learn it. There is no more valuable tool for running a business than Excel. It is essential for job cost analysis, pricing analysis, production trending, and financial analysis. It is great for budgeting. It works pretty well for scheduling.

If you rely on your accounting system’s reports for these tasks you are making a mistake. Accounting systems simply can’t manage and slice and dice data like Excel.

The two most useful features of Excel are graphs and pivot tables. Until you see what pivot tables can do you don’t know what you’re missing. Take a few minutes, hop onto www.YouTube.com and search for Excel Pivot Tables.  Watch a handful of video samples. You’ll be amazed at the things it can do for you.

Do yourself a BIG favor. Learn how to use Excel.  You can thank me later.

You probably have noticed that economic forecasts are about as reliable as weather forecasts. Maybe even less so. With that said, I thought you might appreciate hearing the thoughts of a couple of sources I have.

The other day, an email arrived in my Inbox from the Associated Builders and Contractors. ABC’s chief economist Anirban Basu is predicting the construction economy’s recovery may be two years away. Non-residential construction recovery (e.g. commercial) may be even further out. He listed healthcare as one of the segments that should be growing in the next twelve months. He listed hospitals, health centers, and clinics as specific building types that should see action.

The ABC commercial building forecast is a little more pessimistic than what my real estate resources are forecasting. The commercial real estate world follows a predictable cycle which is basically circular. Occupancy rates bottom out when lease rates bottom out. Then the lease rates start to recover followed by occupancy rates. That eventually leads to construction of new buildings for office and retail use.
The good news? Lease rates are starting to recover.

Keep an eye on the employment numbers. They are the leading indicator of a recovery in commercial construction (and also have a significant impact on residential construction and the remodeling industry).

There is a direct connection between employment levels and commercial real estate occupancy. The commercial construction industry has suffered more from high unemployment than it has from tightened lending.

The United States Commercial Trade Contractors Association’s doors are officially open!

The site can be seen at www.USCTA.com. Let us know what you think.

With it’s unveiling, we are laying our cards on the table. We have always been aligned with commercial trade (sub) contractors. We’ve always written that developers, building owners, and general contractors stack the deck against them.

The association has one simpler mission: Teach trade contractors how to take control of their future by building strong businesses.

Only through the creation of strong businesses can trade contractors free themselves from being at the mercy of general contractors and building owners. Only by creating cost advantage via efficiently run field crews, by conservative financial management, and by superior sales and marketing systems can a trade contractor position himself to work exclusively for good, fair clients.

We’ve already been accused by more than one general contractor of drawing the line in the sand. We didn’t draw the line. The hundreds of general contractors who hold money, refuse to pay fair prices for change orders, and fail to run their job sites efficiently drew the line the sand. We’re just the messengers.

We know not all general contractors are a problem. I can name several that are professionally run and treat their subcontractors fairly. These are not the ones who spoil the pond.  It’s the others who are the problem.

Unfortunately, their impact is far reaching. An association was needed to help offset that impact.

Check it out at www.USCTCA.com

Good luck,

Ron

One of the most pleasurable parts of being an adviser to contractors is visiting with the field workers.  Not only do they tell it like it is, they are ground zero for the industry. They’re in it for both a living and a lifestyle.

I had an interesting conversation with a field guy the other day. My gym decided it was time for a  “freshen up”. New paint, TVs, ceiling tiles, lights, etc. The gym would be closed for 9 days while the work took place starting at 10:00 PM on a Friday night. Naturally, the contractors were allowed to start prepping Friday morning.

As I walked into the locker room, I ran right into the scaffold a drywaller was working on. He looked familiar and sure enough we had met a couple of years earlier on a large prison project. I asked him how things were going for his company – an outstanding union drywall sub that is well run.

He proceeded to tell me that when we last saw each other the company was keeping 225 field guys busy. Last fall (2009) they were down to the 18 senior foremen. Those 18 guys were the only field workers at the company. He felt fortunate to have remained fully employed the entire way. The company had since crept back up to about 25 field guys. Remember this is a very well run company, that enjoys a great reputation among GCs, that can perform both new construction and tenant renovation. Their work load had slipped 90%!

This is not a doom and gloom blog. Things are turning around. Just thought you might appreciate reading about the depth of destruction this recession has had on our industry. Even the best run companies took a huge hit and the impact was felt nowhere harder than on the front line.

Hope your world is considerably brighter than this company’s.

Ron & Guy

We’re pleased to announce that the discussion board on our membership site is now active.

Members can introduce themselves, ask questions, seek opinions, and compare notes. We have created sections for each major business function to keep conversations focused and organized.  The board contains all the usual discussion board features with one notable exception: in this case only contractors committed to growing their business will be posting. That’s quite a change from most discussion boards.

If you’ve ever ventured over to a free discussion board, you’ve probably noticed the discussions often devolve into petty little cat fights. We will not allow that to happen on the club’s board.

Guy and I will be monitoring everything and clarifying suggestions that we believe violate sound business practice. That feature is missing from most forum dialogues.

Hope to see you participating on the forum.

Your friends and champions,

Ron & Guy

As our series on Construction Bonds draws closer to the end, we’re going to take a look at two big ones — payment and performance bonds.

These are very significant and similar bonds. And are also among the most common construction bonds in existence. In fact, contractors will often see these bonds issued together as one “Performance and Payment Bond.” Their individual and collective function isn’t much of a mystery.

What They Provide

A performance bond ensure that a contract will be followed to the letter and that work will be completed — or that appropriate financial compensation will follow if the wheels fall off. A payment bond guarantee that workers, suppliers and other key stakeholders get paid.

These bonds are crucial for most construction projects, especially those that involve public tax dollars. For example, mechanics liens can’t be placed against public property, so payment bonds are basically the only protection available. These key bonds are actually required by law for most public works projects, including all federal projects that cost more than $100,000.

Filing Bond Claims

If a subcontractor or other party hasn’t been paid, they can file a claim on the bond. If it’s deemed valid, the surety company issuing the bond ensures the claimant is properly compensated, either by the contractor or, at last resort, the surety itself. Then the surety company will seek to recoup the damages from the contractor.

Purchasing These Bonds

Performance and Payment Bonds are typically purchased during the period of contract negotiation for the project. Surety companies and surety bond issuers scrutinize an applicant’s financial history, company and work history, management team and other key factors before deciding whether to issue a bond.

Rates for these bonds shift depending on an applicant’s unique financial and credit status. The market has leveled off a bit in recent years, but contractors should expect a stringent, straightforward underwriting approach.

Contractors without solid credit or significant experience may wind up needing high-risk bonding. There are companies that specialize in these types of bonds, although the rates are definitely higher because of the added risk.

This guest post was written by Kevin Kaiser of SuretyBonds.com.

Thought we’d pass on a few stories that have come our way recently. They really demonstrate the magnitude of the melt down.

The first comes second hand from a local saw mill owner. He opened his mill in the mid-60s. He recently told a mutual friend that he has NEVER seen the economy this dead. That’s saying something considering the number of recessions he has personally survived including the horrible 1982/1983 recession when no one was building anything.

The second story comes from a paving maintenance contractor. He went out to price a simple pot hole repair and was stunned to discover that an asphalt plant offered to fix the pot hole for about half the price. To put that into perspective, asphalt plants usually chase road work and only drop down to installing NEW parking lots when times get tough. Them doing a patch is unheard of. Their overhead alone would be more than the price of the job.

Our third story comes from an electrician I know. He went after a new project very aggressively. The project was prevailing wage so nobody had a wage rate advantage. He assumed his production would be quite a bit higher than normal, and his crews are already incredibly fast. He slashed his margin…and he was more than 10% above the low bid! The winner has NO CHANCE of getting out of the job with his direct costs being below his price.

Our fourth story comes from a large, regional multi-family remodeler. He has built an amazing business over the last two decades but, as he just discovered, no great strategy goes unpunished. He had focused his business on a highly specialized niche and at a size that served large, publically traded property owners. He owned his niche. Unfortunately for him, his clients have cut their spending by 80%. 80%! They have no money so this contractor, who has done everything right for over 20 years, is forced to slash staff and overhead costs just to survive.

Our final story comes from a mechanical service contractor. Here is another contractor who excels at keeping clients happy and loyal. One of his previously SUPER LOYAL clients was planning on expanding part of his mechanical system and had always just handed the job to this contractor because they did his work on a time and material to a GMP basis. This time the work will be bid by eight (8!) other contractors – all at the advice of the design team. Stupid design team.

These stories came from coast to coast, North to South. It’s not just in your area. It’s happening everywhere. Dig in and get everybody inside your company giving their all. Their future depends on it.

After three years of content generation and six months of site set-up, the www.FilthyRichContractor.com Private Club’s doors have official been thrown wide open. New members are joining daily to access our set of integrated business systems for organizing and growing a construction business.

Click here to check out the club.

All of the systems and solutions are field proven. They work in the chaotic and challenging world that is our beloved construction industry.

The club is for the Do-It-Yourself business owner who is looking for a solution to a pressing problem, validation that he or she is on the right path, or simply is ready to build a business that will produce the riches and freedom ultimately desired.

To see the vast amount of content we’ve stored in within the club, click here.

To watch a quick tour of the club, click here.

Join now, it’s incredibly affordable and could save you 10 to 20 times the annual club price in just the first solution you embrace.

Just finished my three week preparation for the LEED AP test. Pretty much had to put everything aside, including launching our new private club, to take my shot at the last opportunity to become a full LEED AP “easily.” I got lucky and passed. Not sure how.

Never have I heard of or experienced such a difficult test that so many people have passed with no intention of putting their certification to use.
Hundreds, probably thousands, of contractors have passed down the edict that their staff shall earn their LEED AP. For the most part, they are using them as a marketing tool as most of the certification processes will probably be led by design consultants.

I plan on putting my certification into action at first chance just to stay ahead of the game.

LEED is going to bring tremendous new opportunities and challenges to your business.

Don’t get left behind.

The last few weeks I’ve been cramming for the LEED Commercial Interiors AP exam. It’s a bear of material to memorize. It’s also turning out to be information well worth knowing.

Rest assured, over the next few years green building construction as defined by the LEED certification process is going to be a Tsunami of change crashing upon the construction industry.

A huge chunk of public work is going to require LEED construction techniques. I’ve been hearing rumors about pressure being applied to Fortune 500 companies who receive government contracts. Don’t be surprised if several of the techniques work their way into building codes.

No trade is going to be left untouched. My former trade is one that is suffering some of the most dramatic impact.

Prior to jumping sides, I was a consulting mechanical engineer who designed, commmissioned, and retro-commissioned many a mechanical system. I often went into the field to take performance data on existing sytems, designed retro-fits, verified system start-up, tested control systems, and tuned control loops. Many of the services our select manufacturing clients valued – and no commercial clients ever were willing to pay for – are now being required by LEED.

To say that I am shocked and delighted would be a grand understatement. The positive impact on mechanical engineers, mechanical contractors, test and balance contractors, and operations and maintenance staffs is almost mind-boggling. Finally, buildings and their occupants will receive mechanical systems that operate as they should to maintain comfort and health with minimal energy consumption.

Your trade will be touched. Bank on it.

Your costs will rise as productivity drops, materials cost more. material handing consumes more time and the volume of paperwork sky rockets.

My recommendation is:

1. Learn the LEED requirements that apply to you.

2. Take on a couple of small LEED projects to get a feel for the change in job costs.

3. Build your strategy to take advantage of competitors who fail to respond to the rapidly changing landscape.

Good luck.

Ron