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Distinguishing Characteristics:

    Construction-related industries share a commonality that is unique to their business models:  the importance of estimating, tracking, and reviewing both Time and Materials.

    The following are examples of some of the businesses we have worked with where tracking Time and Materials is critical:

  • Concrete Contractors
  • Custom Cabinetry Contractors
  • Drywall Contractors
  • Electrical Contractors
  • Excavation Contractors
  • General Construction Contractors
  • Home Theater Installation
  • Paving Contractors
  • Professional Landscaping
  • Roofing Contractors
Alton Consulting Group, LLC - Jobsite Process Diagram

    Each of these businesses must not only accurately track the costs of time (labor costs) and materials, but also estimate those costs up front for projects.  A poor estimating process will result in over- or under-quoting for a project, leading to either not winning the bid or performing work below cost.

    With a client in a T&M environment, one of my first tasks is to look at the estimating processes.  Is it accurate?  Is it complete?  Is there a feedback mechanism during and after each project to improve the estimating process?  Our goal is to ensure that you know your actual costs (direct costs and overhead costs) and profits for each and every job you bid on, and that those costs remain accurate throughout each project, so that at the end of the year, your company is within budget and profitable as planned.

Actual Client Results:

General Construction Contractor:  Annual revenues of $6.1 million and $110,000 saved annually in labor by reducing excess staffing costs.

Commercial Drywall Contractor:  Annual revenues of $1.3 million and $110,000 saved annually in labor by optimizing the usage of subcontractors.

Electrical Contractor:  Annual revenues of $14.9 million and $93,000 saved annually from improved materials management procedures plus another $516,000 saved annually in labor through performance incentives and productivity measures.

Roofing Contractor:  Annual revenues of $1.2 million and $23,000 saved annually from improved materials management.

Woodworking Shop:  Annual revenues of $2 million and $45,000 saved annually through increased shop floor utilization, plus $15,000 saved annually from improved inventory management procedures, plus $86,000 saved annually from a redesigned performance-based compensation system for field employees.  While overall payroll was reduced, some employees could make considerably more under the new incentive-pay system.

General Construction Contractor (Commercial Buildings):  Annual revenues of $1.6  million and $175,000 saved annually through improved bidding and managing labor costs, plus $115,000 saved annually from more prudent use of subcontractors.  While equipment and materials costs were within 6% of budget for each project, labor costs averaged 65% over-budget throughout a two-year period and were steadily rising.  Conversations with both Management and employees suggested that the time estimates used for bidding labor were in fact accurate; instead, employees were not working all of the hours they had entered on their time cards.  Unfortunately, this was not the first of such timecard abuses we have seen, and it will probably not be the last, either. 

Concrete Contractor:  Annual revenues of $950,000 and nearly $285,000 in net income added annually.  While we don't normally advocate raising prices, this particular contractor was severely underbidding all of its projects:  payroll costs were not accurately tracked, and the company was using an overhead factor of 20% of direct costs, when in reality their overhead costs were 35% of direct costs.  The company was also turning down a number of projects, suggesting that slightly higher bids would still have resulted in winning all the work they could handle.

Excavation Contractor:  Annual revenues of $1.3 million and $130,000 in additional net income from adding an evening road crew during the summer, plus another $150,000 in additional net income from brush cutting along highways.  This client is in a northern climate with a limited work season, so any additional sources of revenue during the summer months would help carry the business through the winter.  A significant portion of the project involved training the client in cash flow forecasting and budgeting (specifically, the need to budget for almost $200,000 in depreciation each year).



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