Historically, a construction company owner’s main concern was to find the next job and keep the company’s backlog at an appropriate level. In today’s fast paced, competitive, and complex construction market, owners are challenged with a range of other issues. Some of the key issues facing today’s owners include:
In a good economy, employees have options. For the construction industry, this matter is compounded due to the shortage of skilled labor entering the trades. Companies are faced with a lack of competent employees to properly perform the work. This makes it critical for companies to retain their top performers and rising stars. Reviewing your current employee incentive plan is a good start. A good incentive plan rewards top performers and encourages employees to think like owners. Instead of paying traditional bonuses at year end, consider educating the employees on how the company can sustain profitability and letting them share in the profits when there are improvements on the job. Employees who are engaged and invested in the company are less likely to leave for a small pay increase elsewhere.
Failure to develop a sound succession plan presents a significant risk to owners and their families, as well as to management and employees. It’s never too early for business owners to develop a succession plan. With time, the plan can be evaluated and changed as needed, but the key is to start planning early. Early planning is essential for the company to be prepared to seamlessly continue operations in the case of unanticipated life events. Construction company owners have several options to consider when developing a plan, including:
Discuss all of these options with your financial advisor and legal counsel, in order to develop the strategy best aligned with your goals.
For the past decade, the accounting industry has been working on a revenue recognition standard that eliminates industry-specific guidance for revenue recognition, instead developing one standard of recognizing revenue for all industries. The initial year of adoption for privately-held companies will begin with any annual accounting period started after December 15, 2018. Understanding and implementing this standard in the company’s financial statements is important to maintain bonding and borrowing capacity.
In December 2017, the largest tax overhaul seen since the Reagan administration was passed. Under the new legislation, without proper tax planning, companies may see an increase in income tax liability. To maximize deduction decisions on items such as entity structure, method of accounting for tax purposes, and owner payroll, proper planning should be addressed before year end, while there is still time to make the appropriate changes.
Technology and Cybersecurity
It can be difficult to keep pace with rapidly-changing technology within an industry that has historically been resistant to change. Companies must constantly evaluate software and applications to determine the best fit. Implementation of new, top-of-the-line technology can help improve efficiency on the job and provide the competitive edge needed to maintain profitability. Optimal use of technology will also help in addressing labor shortages, by eliminating waste in the office.
Along with increased reliance on technology comes the issue of cybersecurity. A security breach can result in loss of business, confidential data, and can be time consuming and costly. Investing in understanding the cyber risks to your company is imperative. Work with a qualified IT consultant to develop and maintain your cybersecurity and help reduce your risk of a potential cyber-attack.
It’s important for business owners to be surrounded by a professional team who understands construction industry best practices, as well as the specific challenges your company is facing. Trusting your advisors on these and other issues is a key component to any company’s success. Successful construction companies are able to manage these issues, continuing to deliver projects on time, within the budget, and retain profits.