Like any business, contractors need to have processes in place in order to run the business effectively. Without these processes, things get out of control quickly which can lead to the failure of the business. With nearly 50% of all businesses failing within the first five years, it goes without saying that we require a solid process to build our business on.
As the co-owner of a construction company for over 18 years, one of my primary roles is developing solid processes which allow us to grow year over year even during the great recession and the pandemic.
In this blog, we’ll review the top 15 processes that have been key to our success and would apply to any contractor in the trades.
What is a “business process” and why does it matter?
A business process is “a collection of related, structured activities or tasks by people or equipment in which a specific sequence produces a service or product (serves a particular business goal) for a particular customer or user”. This Wikipedia definition is okay but let’s talk about how it applies to construction.
When you complete a job, you want to get paid, right? That is the business goal in this example and the user is the company. The business process includes the creation of an invoice which then gets sent to the customer and is paid. This Accounts Receivable process is a very important part of being in business. Without it in place, you will not have the funds to keep operating.
This example is one of fifteen important processes that we outline below.
15 processes that every contractor needs
Pre-Construction Processes
1. Tracking new projects
When new opportunities and projects come along, you need a process for tracking them. For example, sometimes you get a phone call or an email or even a text message about a new project. You need to have a master list of all projects including ones that you are bidding on and ones that you have a contractor for. We use BuildCenter to keep track of our projects. Another way is to have a Google Sheet (online spreadsheet) that you simply enter the name, address and contact info for the project. Regardless of the tool you use, it must be available from anywhere on your phone or tablet. Once you have your list, you can track the status of each project and no longer rely on your brain power to remember.
2. Bidding process
When a request for proposal (RFP) is received, how do you bid on that project? Do you attend the job walk? Do you use electronic take off tools? Do you print out the drawings before going to the job walk? Do you have a checklist of items to look at when you bid? This process is different for every trade but it needs to be defined for your business. Even if you are the only one that does the bidding….how else will you be sure your didn’t miss something?
I’ll never forget a bid I worked on where I was in a rush and I didn’t use our checklist. It resulted in leaving out any money for supervision……which was a huge mistake. From that point on, I never bypassed our process.
3. Submittals
Once you get awarded a project, most trades and GC’s are required to create submittals for approval. This process is commonly overlooked and sometimes skipped altogether. I can’t understate the importance of an approved submittal. It covers your butt from ordering the wrong items and it also increases the odds significantly that the customer will be happy with what is installed. Finding out that you installed the wrong thing can be devastating and tank the profit on the job. Do yourself a favor and embrace the submittal process.
Submittals are typically for finish items (flooring, paint), special order items (windows, doors) and custom made items (glass, cabinets). Other examples can be concrete mix or samples for approval.
4. Material ordering
Once the submittals are approved, ordering of those items should be closely monitored. Getting the materials to the job when it is needed can be harder than ever. We are seeing long lead times these days and ordering has become an important part of most construction businesses. Be sure to get lead times from the vendor and relay to the customer or GC if it doesn’t work with the schedule. They may decide to switch to another more available product to meet the schedule.
5. ICP
The Ideal Construction Project (ICP) definition is an important way of scoring projects and deciding which are the most desirable and which ones should be passed by. The ICP concept is simple. Define what you are great at doing and what you want to do and then give each project opportunity a desirability score. Once you score it, you can decide if you want to go after the project or pass or simply give a big number. This business process will help you create laser focus on building the business by doing the right projects and not running all around to anything that comes along.
Read our blog post to dive deeper into this concept.
Construction Processes
6. The Daily Hot List
The daily hot list process is something that typically happens in the field by the foreman or superintendent. It is a super charged todo list that will help your projects go smoother and faster because it forces the team to focus on today and tomorrow and next week and be proactive instead of being reactive.
Check out our detailed blog post to learn more….it is a game changer for any company that is struggling to get projects done faster.
7. Time tracking
Tracking time spent on projects is common practice in construction. Since labor is typically the largest expense, it’s critical to track the hours spent on each project and ideally on each task or cost code.
We use BuildCenter’s construction time tracking app. It was designed for construction and allows workers to easily clock in and out from their phone. Check it out and get a free trial.
8. Crew scheduling
If you have more than 10 workers, then managing the crew schedules can become a challenge. Texting and calling workers each night can take hours and it’s easy for miscommunication to happen. This is why having a great scheduling process in place is important. Getting the crews to the right jobs at the right time with the right information makes for a more efficient use of time and it will lead to happier employees.
We use BuildCenter’s crew scheduling app. It’s a simple drag and drop interface that allows us to plan out our projects from anywhere. The crews can see their schedule on their phones so they have all the information they need to go to the right location.
9. Change Orders
When scope of work is changed, a change order is the typical way to handle it. The problem is, how do you make sure you billing for those changes? You need a process to account for scope changes and then decide if it’s too small to do a Change Order or is this one just a “favor”. Either way, it should be tracked well. Some companies have paper work order forms they fill out and have the GC or client sign off on the work. Others have the PM get involved and it’s all done from the office. The key is to have a solid Change Order process and to make sure you are consistent. Without it, you may not get compensated for work that is billed long after the job is completed.
Check out our blog post for when it’s better to do favors and why they can pay off. We also have a post that talks about Change Orders and how to present them.
10. Communication with field
Having a process for communicating with the field is vital to the success of projects and the company as a whole. Great communication is not easy to accomplish but it is achievable. Setting up weekly meetings, safety talks, job site meetings, progress update, etc are all part of the mix. Getting the field information they need, when they need it keeps things moving.
Check out our blog on how you can get progress reports from the work crews to the office.
Accounting Processes
11. Job Costing
Job Costing in construction is common but not always easy. Having a solid process for tracking all job related costs like time spent, delivery time, PM time, materials and labor is the only way you will know how much money was made or lost on a given project.
Without knowing that, it’s impossible to know if you should adjust for future projects. Construction job costing is made easier with time tracking tools like BuildCenter which capture all time spent on projects and can even separate time by cost codes.
Check out our blog post about Job Costing to learn more.
12. Accounts payable
If you don’t pay your bills, things won’t last very long. Having an accounting system like Quickbooks or some other accounting software is critical for tracking bills from vendors and subcontractors. This work can be done by a full time or part time book keeper or office manager. Getting this process right is important but once you get it setup, it should run smoothly.
If you do have someone else handle all the AP work, then you may want to at least still sign the checks to keep an eye on the money that is flowing out.
13. Accounts receivable
Getting paid is something that should be a top priority and have a solid process. In many cases, trade contractors are at the mercy of when the general contractor get’s paid. This could take a few months in some cases. Having good terms with your material vendors and suppliers will prove to be important from a cash flow standpoint.
Ensuring that proper invoicing is happening in a timely manner to keep cash flow moving into your business is something that should be managed by an office manager or accounting person. It’s too much for the owner to handle once you get to over 10-15 employees.
Having accounting software that tracks the invoices and even sends reminders to customers is also important.
Human Resources
14. Onboarding (handbook)
Having a process of bringing new employees into the company (onboarding) helps in many ways. It allows employees to get up to speed quicker so they can be more productive. It also help establish expectations with regards to their employment. Using an employee handbook to outline those expectations is important because it becomes the item you will refer back to when things are not going well.
We have shared our employee handbook that you can customize for your own use. It’s a great starting point if you don’t already have something. Make sure to keep it up to date as laws change.
15. Crew Retention
Keeping your hard working crew has become tougher and tougher. Other companies are looking to poach your best workers and you have to keep them happy in order to not lose top performers.
Simple things like buying them lunch can go a long way to keeping the workforce happy but it may take more. Read our blog post where we discuss strategies to retain workers and build a great culture.
Summary
In construction, you need processes in place to keep things running smoothly. Without it, things are chaotic and quickly get out of hand. Spending time setting up these processes will pay off in the long run and make your life easier.
