In our assessments of hundreds of companies over the past years, we have only seen a handful of small companies who have successfully structured themselves in this area. Not that you need to go out and hire a full time finance professional, but your CFO should be able to work with your accounting or investment firm to plan out your needs. Take your War Chest and work on developing a fully diversified portfolio structured with a combination of common stocks, bonds and mutual funds, as shown in Figure 9. As we saw in Figure 7, you’ll want to keep a portion of your instruments with short term maturities, so you can readily access your cash when you need to.
By putting these steps into motion you are creating a situational awareness for your company both internally and externally based on the current state of operations, and at the same time you are creating future goals and plans necessary to get there. Externally you are now actively monitoring your markets, and understanding what are the primary drivers of your market. Internally, based on your historical performance, you are establishing the baselines of your revenue streams by identifying the strengths and weaknesses of your project managers or departments in their current state. Beginning to look forward with the company, you are developing budgets and creating operational metrics to ensure the company is performing within established guidelines for the next year. Next, by identifying the gaps in the composite rate both overall and between the different categories of work, will allow you to increase your hit rate to ensure you are operating at full capacity. Now that you know what your composite rate needs to be to get the work you are going to use prefabrication to reduce and keep your composite rate in alignment with the open market. Looking forward to the future, focus on what the financial needs will be for the next year, and how much is it going to cost to finance your upcoming operations. Lastly, you want to begin planning on building your assets both in the form of equipment and the war chest in the form of financial instruments. Welcome to the future of contracting and what it takes to survive and be successful in today’s market.
Dr. Heather Moore is vice president of Operations for MCA Inc. She holds a Ph.D. in Construction Management from Michigan State University. Additionally, she holds an MBA from University of Michigan (Flint) and a B.S.E. in Industrial and Operations Engineering from the University of Michigan (Ann Arbor). She was a contributor for the ASTM Standard E2691, “Job Productivity Measurement,” and was co-author of the newly published ASTM book, “Application of ASTM E2691 Standard Practice for Job Productivity Measurement in Agile Construction®.”
Dr. Perry Daneshgari is the president/CEO of MCA Inc. MCA Inc. is a research and implementation company that focuses on implementing process and product development; waste reduction; and productivity improvement of labor, project management, estimation, accounting, and customer care. He has published four books and an ASTM Standard for Job Productivity Measurement.
Jim Ford currently is MCA’s Lead Data Analyst. Jim’s educational experience includes a Masters in Accounting from Oakland University, and a BBA from the University of Michigan with concentrations in Accounting, Finance, & Marketing. Jim leads the financial analysis and project audits for the field; raising awareness of how to reduce unknowns and uncertainties in the early stages of a project before it is too late. His prior work experience includes 3 years as a low voltage subcontractor.