632: Navigating Job Site Challenges For Small Construction Businesses

This Podcast Is Episode 632, And It's About Navigating Job Site Challenges For Small Construction Businesses

As a small construction business owner, you're not just a builder; you're a problem-solver, a negotiator, a project manager, and often, the first one on-site and the last one to leave. While the vision for a completed project is always clear, the path to getting there is often paved with unforeseen challenges, daily inconveniences, and persistent problems.

 

I've seen it time and again from my vantage point, both as a previous construction business owner and now a construction bookkeeping specialist: these job site issues, if left unchecked, don't just delay projects – they eat into profits, strain client relationships, and can even jeopardize the future of your business. But here's the good news: recognizing common pitfalls is the first step to conquering them.

 

1. The Relentless March of Labor Shortages

The U.S. construction industry is grappling with a significant shortage of skilled labor. Finding qualified carpenters, electricians, plumbers, and other tradespeople can be a constant headache, leading to project delays, increased labor costs, and a struggle to take on new work.

How to Handle It:

• Invest in Training & Apprenticeships: Partner with local trade schools, community colleges, or established apprenticeship programs. Grow your talent by investing in on-the-job training for less experienced workers.
• Competitive Compensation & Benefits: Review your wage scales and benefits package. Offering competitive pay, health insurance, and retirement plans can significantly improve attraction and retention in a tight labor market.
• Employee Referrals: Encourage your current, trusted employees to refer candidates by offering a bonus for successful hires.
• Cross-Training: Train your existing crew members on multiple tasks to increase their versatility and cover gaps when a specific skill is in short supply.
• Utilize Technology for Efficiency: Leverage project management software to optimize scheduling and minimize wasted labor hours, maximizing the productivity of your existing workforce.

2. Escalating Material Costs & Supply Chain Disruptions

From lumber and steel to concrete and specialized components, material prices can fluctuate significantly, and supply chain issues can lead to frustrating delays. This unpredictability makes accurate bidding and project profitability a constant challenge.

How to Handle It:

• Early & Bulk Ordering: When feasible, order materials well in advance, especially for items with long lead times or volatile prices. Consider bulk purchasing when storage and cash flow allow.
• Multiple Supplier Relationships: Cultivate strong relationships with several suppliers. Having backup options is crucial for urgent needs or when your primary supplier faces delays.
• Price Escalation Clauses: Include clauses in your contracts that allow for price adjustments if material costs exceed a certain percentage, protecting your profit margins from sudden spikes.
• Explore Alternatives: Be open to using alternative materials or construction methods that offer cost savings or improved availability without compromising quality or code compliance.
• Real-time Cost Tracking: Utilize robust accounting and project management software to track material costs in real-time against your budget, enabling quick adjustments.

3. Navigating the Regulatory Maze: OSHA, Permitting, & Local Codes

The U.S. construction industry is heavily regulated, with strict rules from federal agencies such as the Occupational Safety and Health Administration (OSHA), as well as complex state and local permitting and building codes. Non-compliance can result in substantial fines, project delays, and legal liabilities.

How to Handle It:

• Prioritize Safety (OSHA Compliance): Implement a comprehensive safety program to ensure compliance with OSHA regulations and maintain a safe work environment. Conduct regular safety meetings (toolbox talks), provide proper Personal Protective Equipment (PPE), and ensure all workers are trained on OSHA regulations relevant to their tasks. Regular site inspections are key.
• Dedicated Compliance Officer: For larger businesses, consider designating a team member to be responsible for staying up-to-date on all relevant regulations and ensuring compliance.
• Permit Proactiveness: Start the permitting process early. Understand the specific requirements of each municipality you work in, as these can vary significantly.
• Consult Experts: Don't hesitate to consult with legal counsel, an experienced construction bookkeeper, or a safety consultant to ensure full compliance.
• Documentation is Key: Maintain meticulous records of all safety training, inspections, permits, and communications with regulatory bodies.

4. Poor Communication & Coordination Among Stakeholders

Construction projects involve numerous moving parts: your crew, subcontractors, suppliers, architects, engineers, inspectors, and, of course, the client. Miscommunication or a lack of coordination can lead to costly errors, delays, and friction.

How to Handle It:

• Implement Project Management Software: Utilize software designed explicitly for construction that enables centralized communication, scheduling, document sharing, and progress tracking, accessible to all relevant parties.
• Daily Huddles & Weekly Meetings: Conduct brief daily huddles with your on-site team to review tasks, address immediate concerns, and assign responsibilities. Hold weekly meetings with key subcontractors and the client for larger updates.
• Transparent Chains of Command: Define who is responsible for what and establish clear reporting lines to ensure accountability.
• Documentation of Decisions: Follow up verbal discussions with written summaries (emails or notes in your project management system) to avoid "he said, she said" disputes.
• Manage Client Expectations: Set realistic expectations from the outset regarding timelines, budget, and potential challenges. Implement a formal change order process for any scope adjustments.

5. Cash Flow Challenges & Budget Overruns

Delayed payments from clients, unexpected expenses, and inaccurate cost tracking can quickly lead to cash flow issues and projects spiraling over budget, jeopardizing your business's financial stability.

How to Handle It:

• Accurate Job Costing: This is my wheelhouse! Implement a robust job costing system that tracks every expense (labor, materials, equipment, subs) against specific projects. This helps you identify where money is being spent and where you might be losing profitability.
• Detailed & Realistic Bidding: Don't underbid to win a project. Include a reasonable contingency fund (typically 10-15%) for unforeseen issues.
• Progress Billing: Structure your contracts to allow for progress payments based on milestones achieved. This ensures a steady inflow of cash as work progresses.
• Aggressive Invoice Follow-Up: Don't let invoices sit unpaid. Have a straightforward process for following up with clients on outstanding payments.
• Leverage Technology: Utilize accounting software integrated with your project management tools to automate invoicing, track receivables, and monitor cash flow in real time.

Building Success, One Solution at a Time

Being a small construction business owner in the U.S. is not for the faint of heart. The challenges are significant, but they are not insurmountable. By proactively addressing these common job site problems with thoughtful planning, clear communication, strategic technology adoption, and a strong financial management system, you'll not only overcome obstacles but also build a more resilient, reputable, and profitable construction company that stands strong for years to come. Your foundation for success is built not just on steel and concrete but on sound operational and financial practices.

P.S.
We wish our construction community fathers a "Happy Father's Day" this coming weekend for being actual builders, both at work and at home! Your dedication to your craft inspires those around you, and the strength you show on the job site mirrors the strength you provide to your family. Thanks for laying a solid foundation of love, support, and hard work in our lives. Enjoy your special day—you've earned it!

About The Author:

Sharie DeHart, QPA, is the co-founder of Business Consulting And Accounting in Lynnwood, Washington. She is the leading expert in managing outsourced construction bookkeeping and accounting services companies and cash management accounting for small construction companies across the USA. She encourages Contractors and Construction Company Owners to stay current on their tax obligations and offers insights on managing the remaining cash flow to operate and grow their construction company sales and profits so they can put more money in the bank. Call 1-800-361-1770 or [email protected]