flexiblefullpage
billboard
interstitial1
catfish1
Currently Reading

How seasoned construction pros handle the cost of scaling up

Contractors

How seasoned construction pros handle the cost of scaling up

Here’s how seasoned operators meet the new demand for homes, offices and new locations without drowning in new expenses.


By Amex | October 24, 2018

An upturn in home-buying and commercial development is a boon for the construction industry, but the pressure to grow can squeeze construction companies grappling with cash flow, expenses and expansion.

 

— In April, privately-owned housing starts jumped 12.4%, to an annualized rate of 1.319 million units, according to the U.S. Census Bureau and U.S. Dept. of Housing and Urban Development.1

— Cost and availability of labor and developed lots, as well as building material prices, are the top problems builders expect to face this year, according to a recent survey of builders from the NAHB/Wells Fargo Housing Market Index.2

— Construction companies anticipate 5% growth in 2018, up from a strong 4% in 2017, according to a consensus forecast from Oldcastle Business Intelligence.3

 

You might think it takes a truckload of cash on hand to take advantage of growth in the sector, but here’s how seasoned operators meet the new demand for homes, offices and new locations without drowning in new expenses.

 

Lining Up New Suppliers in New Areas of Operations

 

Lining Up New Suppliers in New Areas of Operations

Many construction firms are taking on out-of-state jobs as opportunities arise in regional rebuilding areas like Houston and California. But starting up in new markets is hard.

“When you go to a different area, you need to be able to establish a new set of vendors and that's very time-consuming,” said Ray, a vice president of operations for a large concrete company.

Financial partners can help firms quickly gain the trust of new vendors, no matter the market.

To quickly scale, out-of-towners have to establish credibility. A trusted third-party can help, say construction decision-makers. In particular, financial partners can help firms quickly gain the trust of new vendors, no matter the market.

When Ray needed a new concrete materials supplier in Texas, for example, he took advantage of the existing relationship he had with his business Credit Card financial representative to negotiate with the supplier he wanted to work with, which allowed him to get the materials he needed quickly and at the best price possible.

 

Managing the Cash Crunch

 

Managing the Cash Crunch

As builders take on more projects to meet growing demand, it’s taking longer to complete construction jobs. There’s simply not enough construction workers or sub-contractors to get the job done on normal schedules.

“We'd love to build a home in 90 days but in reality, it's taking 130,” said William, a small home builder that does about $40 million a year in revenue. “We accept that and budget for it. As much as we want to build a home in 90 days, it's just not happening.”

Longer timelines mean builders get paid later. Managing cash flow for extended timelines delays your payments to builders. It can turn into a juggling act, particularly when you’re looking to start a new job while previous projects are winding down.

Using a business Credit Card for purchases or materials generates rewards savings that can help defray additional expenses.

To help manage the cash flow crunch, general contractors say they are increasingly working with financial partners that can build custom solutions for their firms. These partners play a helpful role by fully understanding the company’s business needs and helping to ensure their lines of credit are sufficient to allow them to make needed purchases, as well as providing the flexibility they need to jump on demand for new projects.

“Usually it's getting materials for a new job that’s starting up,” said Hal, a vice president of a mid-size building construction contractor. “We may need to purchase specially-ordered materials that are expensive and end up in a catch-22 because we can’t bill for them, but we need them to prepare for the job.”

Having a dedicated financial partner can help contractors and builders avoid the juggling act by developing custom financial programs and solutions. Also, using a business Credit Card for purchases of materials or other items generates rewards savings that can help defray additional expenses due to project delays.

 

Cards Instead of Cash on the Job Site

 

Cards Instead of Cash on the Job Site

Keeping track of expenditures on the jobsite is key to managing cash flow. That challenge becomes even more acute as builders and developers take on projects outside of their normal territories.

Keeping track of expenditures on the jobsite is key to managing cash flow.

Jake, director of operations at a general contractor for commercial construction projects, said his firm has a good idea of what his sub-contractors are going to buy because they get approval from his firm first. But there are always workers on site who need to make purchases.

“Having clear visibility into what are our superintendents’ unexpected expenditures are is really important for our business,” Jake said.

 

1U.S. Census: Monthly New Residentail Construction, April 2018

2Eye on Housing: Building Materials Prices and Labor Access Top Challenges for 2018

3Oldcastle 2018 North American Construction Forecast Report

Related Stories

| Mar 6, 2013

Dual towers designed by SHoP create new affordable housing in NYC

With the construction of Hunters Point South, New York City will get its first large new housing development for middle-class families in more than 30 years. Related Companies is partnering with the nonprofit Phipps Houses in the project, designed by SHoP Architects with Ismael Leyva Architects.

| Feb 28, 2013

Videos reveal City 2.0 ideas from 2012 TED Prize winners

Thought leader TED has released eight new videos from winners of its 2012 TED Prize: the City 2.0. The prize went to 10 winners involved in urban issues, including education, safety, health, food, and public space.

| Feb 28, 2013

Novel multifamily solutions to be presented at New York Modular Construction Summit

The New York Modular Construction Summit will be co-hosted by the Modular Building Institute and Pratt Institute School of Architecture on May 16, 2013, in Brooklyn, N.Y.

| Feb 28, 2013

Greeening Silicon Valley: Samsung's new 1.1 million-sf HQ

Samsung Electronics' new 1.1 million sf San Jose campus will support at least 2,500 sales and R&D staff in the company's semiconductor and display businesses.

| Feb 28, 2013

Lend Lease builds world's tallest timber apartment building

Construction giant Lend Lease recently put the finishing touches on Forté, a 10-story apartment complex in Melbourne, Australia's Victoria Harbour that was built entirely with cross laminated timber (CTL) technology.

| Feb 28, 2013

BIA opens entries for 2013 Brick in Architecture Awards

The Brick Industry Association (BIA) has opened entry submissions for its 2013 Brick In Architecture Awards—with a new Renovation/Restoration category and new category divisions this year. BIA’s annual awards honor architectural excellence and sustainable design nationwide that incorporates clay brick products as the predominant exterior building or paving material.

| Feb 27, 2013

Bronx residents get LEED Platinum public housing complex, rooftop farm

The New York City Housing Authority has opened Arbor House, a 124-unit LEED Platinum complex in the Morrisania neighborhood of the Bronx.

| Feb 25, 2013

First look: Google's new HQ is engineered for creative collisions

The new California "Googleplex" will be engineered to make sure no Google employee will be more than a 2.5 minute walk away from any other.

| Feb 25, 2013

AISC seeks proposals for development of BIM best practices guide

The American Institute of Steel Construction seeks assistance from BIM users in identifying and documenting best practices to facilitate the long-term standardization of BIM in structural steel construction.

boombox1
boombox2
native1

More In Category

Construction Costs

Data center construction costs for 2024

Gordian’s data features more than 100 building models, including computer data centers. These localized models allow architects, engineers, and other preconstruction professionals to quickly and accurately create conceptual estimates for future builds. This table shows a five-year view of costs per square foot for one-story computer data centers. 


Sustainability

Grimshaw launches free online tool to help accelerate decarbonization of buildings

Minoro, an online platform to help accelerate the decarbonization of buildings, was recently launched by architecture firm Grimshaw, in collaboration with more than 20 supporting organizations including World Business Council for Sustainable Development (WBCSD), RIBA, Architecture 2030, the World Green Building Council (WorldGBC) and several national Green Building Councils from across the globe.



Healthcare Facilities

Watch on-demand: Key Trends in the Healthcare Facilities Market for 2024-2025

Join the Building Design+Construction editorial team for this on-demand webinar on key trends, innovations, and opportunities in the $65 billion U.S. healthcare buildings market. A panel of healthcare design and construction experts present their latest projects, trends, innovations, opportunities, and data/research on key healthcare facilities sub-sectors. A 2024-2025 U.S. healthcare facilities market outlook is also presented.

halfpage1

Most Popular Content

  1. 2021 Giants 400 Report
  2. Top 150 Architecture Firms for 2019
  3. 13 projects that represent the future of affordable housing
  4. Sagrada Familia completion date pushed back due to coronavirus
  5. Top 160 Architecture Firms 2021