Control Equals Profit in the Construction Industry (Introduction)
Minimum Bottom Line Profit Should Average 9.4%!
For Trades & Subcontractors, at Least 11%
After Income Taxes Are Paid!
With manufacturing, production of high quality, properly priced widgets is done under an exacting process. The product is highly engineered and tested; even the production systems are tested too. The final outcome is the perfect product built to a high standard and within cost. How do they do this? Manufacturing uses cost accounting to accurately define the final price to produce the best widget. Cost accounting is about control, control the inputs to get an output that is exactly as defined.
Just like manufacturing, construction uses control to earn a profit. However, unlike manufacturing, the contractor is not going to produce thousands of the exact same model (widget). The end product was a vision beforehand and it is unlikely a second will be built. Every building is unique; each project faces its own set of restrictions, variables and inputs. Manufacturing uses the law of large numbers, i.e. they are going to produce millions of the exact same product, thus making the science of control cost-effective. How can a contractor do the same thing when each product is unique?
The answer is ‘Control’. Control the outcome and the contractor will earn a profit from the project.
This article will cover the general areas of control with construction. This is an introduction to a series
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