Throughout the country, the construction market is booming. The potential for major infrastructure investment at a national level means the boom could continue. Here in Los Angeles, local efforts like Measures R and Measure M along with statewide investments are driving a period of significant growth and new construction.
These are good times in the industry. Ironically, these are also the times when contractors of all sizes make mistakes that cost them money. For small and traditionally-underutilized businesses, those mistakes don’t just hurt the balance sheet. In fact, losses that a large company might simply lament can lead a small business to shut its doors.
Thankfully, these smaller contractors do not need to navigate the market on their own. Skanska, itself, has several programs to help small businesses learn how to win work with larger contractors while also shoring up the fundamentals that will help their businesses stay solvent in a busy market. Hopefully, these efforts mean we’re helping to create lasting businesses for the community. Who knows? Maybe we are training our next big competitors.
Both the work we have done in the training room and on the construction site has shown us some of the top risks small businesses need to address to ensure their long-term health. ARE
THE RIGHT PEOPLE IN PLACE?
Everything we do in construction comes down to people, from leadership in the office and the job site to craft hands that do the work itself. For small businesses, it is vital to make sure staffing is in place and that the right people are in the right roles.
That starts with proper estimating. Different projects bring different challenges and that will affect everything from the rate of work to necessary crew sizes. Understanding the scope of work should affect the types of projects that a firm pursues. If a business knows its labor force can execute certain types of work better than others, the firm should focus on opportunities that let it do its best work. That does not mean forgoing new types of work forever; it means knowing what makes your firm successful and building new capabilities over time, rather than taking too big a risk.
Project leadership is also important, especially making sure that project managers and foremen are not only on staff but available on time to serve potential new work.
Beyond that, it takes knowing your staff and their professional passions. With as much opportunity as there is, and a national construction labor shortage, crews that do not see what’s in it for them will find new opportunities. Focusing on the strengths of your staff while also understanding the limiting factors will ensure you are positioning your business for success.
IS IT THE RIGHT NEW OPPORTUNITY?
A good way to apply that sort of thinking is with a SWOT analysis prior to pursuing a job. Looking at the strengths, weaknesses, opportunities and threats facing your business is more than a business school exercise; it has practical real-world applications.
While people are the primary focus here, a SWOT analysis is a great place to look at where you are already committed. Lessons from past work can provide insight to new work, too. Should issues from a current job arise again on a new one, what will it mean for the bottom line? Balance “ideal world” solutions with worst-case scenarios and see how palatable a new opportunity looks from both ends.
As you consider, look at who the client will be. In training, we always emphasize the need to choose not simply a client, but a partner. Seek out work with the firms where you have relationships in place and know what to expect.
HOW MUCH IS TOO MUCH WORK?
In the current boom, it can seem like there are more and more opportunities. It is tempting to go after as much as possible, but do not let your eyes be bigger than your stomach, or, more specifically, than your bank accounts.
For example, can your firm accommodate the prevailing wage and payroll. It is very important to step back and ask if you can you handle a 60- to 90-day delay in payment as invoice payments are processed starting at the owner level.
This is particularly true with change order contracts. Often, subcontractors want to jump into a change order immediately. Before doing so, it is vital to look at how the change order affects your schedule. You might need more hours or a larger workforce and, beyond that, the approval process on payments can be pushed out even more than normal.
There are other factors like bonding capacity and more to consider, as well.
MOVING AHEAD CONFIDENTLY, AND PROFITABLY
These are just a few of the important factors that will affect subcontractor success. Fees, supply chains and more need to figure in, as well. The good news is that larger prime contractors want to help smaller firms build their businesses and be successful.
By working together, everyone can win in the long run, including the Los Angeles community. If we all do our work the right way, we should cultivate a healthy small business community that can thrive for the next generation.
Mel Jones is the National Director of Diversity & Inclusion for Skanska USA Building Inc. He is responsible for Skanska’s D&I efforts, which focus on recruiting and developing a large and diverse pool of talent, and creating an inclusive workplace culture – both internally for the company and externally through company partnerships
