Branching Out in Construction
Minimum Bottom Line Profit Should Average 9.4%!
For Trades & Subcontractors, at Least 11%
After Income Taxes Are Paid!
When you own a small construction company many people depend on you. There are your family, employees and subcontractors. A typical $2,000,000 per year operation will have upwards of 20 people dependent on the contractor for their livelihood. This can get stressful and overwhelming for the contractor especially if they are only involved in one or two lines of construction.
To reduce risk and provide greater security to all parties the small construction company should consider branching out. What I mean is adding an additional class or line of construction work to the company’s portfolio so that in hard times there are more opportunities for work. It makes sense, because if you think about it, it is easy to get involved in other forms of similar types of work. For example a new home contractor can explore additions or remodeling as additional sources of income. Often it is the other way around as most new home contractors got their start in additions or remodeling.
Well there is a proper way of addressing this and going about analyzing the experiment to see if you can and should explore other forms of work. I’ll use my real life example and explain the basic concept of horizontal integration in construction. Then I want to explain how to document the entire process and finally review the results and analyze the outcome. I’ll use my story to explain each one of these areas of branching out.
© 2015 – 2022, David J Hoare MSA. All rights reserved.