Articles Written by Charles Vander Kooi

Managing in a tight economy - part 2

This is the 2nd in a series of articles taken from a new Charles Vander Kooi seminar entitled "Managing your company in a tight economy."

By Charles Vander Kooi

I want to share with you some of the things my contractor clients are doing to tighten up their numbers so that they can be more successful in getting jobs. The first has to do with materials.

Do your shopping first

In the good times, contractors typically use the going rate in pricing materials for bids. And if you get the job, especially if it's a bigger job, you then go out and do some shopping for materials to see if you can cut our cost. And if you are able to do that, the savings flows to the bottom line.

However, in this difficult economy, you need to do your homework upfront. Instead of using catalog prices, you need to be calling suppliers and getting exact prices. Work with your supplier, who is one of your partners, to find ways to shave a little off material pricing either based on quantity or delivery or delivery time.

Then if you are able to find some savings, you will want to put that in the bid in order to tighten down your prices. If you don't go in with your best material prices to begin with, you risk not getting the job in a market with scarce other opportunities.

Get better production from people

The scarcity of jobs is not lost on your employees. They know it is hard for you to get work, and that if you can't get work you're going to have to lay some people off.

I have a contractor client who wasn't getting work because he was getting beat by 3% to 5% on every bid. They do steel work, putting rebar in bridges, parking garages and structural concrete buildings. He knows their production rates and how many tons of steel they install per hour for different circumstances.

To land more jobs, the contractor factored higher production rates into their bids. He increased their rates 5% and even 10% depending on the job. Since labor was about 60% of the contract, speeding up production 5% or 10% lowered their bids anywhere from 3% to 5%.

Then, when the contractor won a job he told his field people, "We have a new job, but to get it, we had to raise our production rate estimate from 10 tons per man/day to 11 tons. To do that, we need 10% more production from you. If we can't do that and have to go back to our old production numbers for bids, we're going to get less work and we're going to have to lay some people off."

This approach worked. They're winning more of their bids, and their field people are meeting the faster production rates. It's working because they got the field people on board as part of the team and made sure they knew what was expected. Lastly, you have to monitor that very closely to make sure that those production rates are met.

Back in the good days we could use what we felt were safe production rates and still get work. These are no longer the good old days. Today we have to look at increasing our production rates and managing our labor better to achieve those rates. But, you can't be overly aggressive because your production rates have to be doable for your people.

Since 1980, Vander Kooi & Associates has been helping business owners add more to their company's bottom line. We would be proud to help you with budgeting, estimating, high-performance management, marketing, sales, productivity and field training. Visit vanderkooi.com or call (303) 697-6467.