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The Successful Contractor of the Future – How to Prosper in a Cyclical Industry

Thursday, July 16, 2015

The recession has shed a painful, but bright light on the challenged business model of the construction industry. Because of the highly cyclical nature of the business, no longer can contractors measure success on how much revenue growth, how much equipment they own, or how big the jobs are.

Coming out of the recession is the perfect time for contractors to rebuild their organizations using new and sustainable business models. Dr. Thomas C. Schleifer will introduce one of these models – the “Flexible Overhead” concept.

Some say the overhead paradox is that you can’t get half a person, half a truck or half a piece of equipment. But the flexible overhead concept means that 15% to 25% of all overhead costs can be turned off (expense ceases) in a week or less and in some cases in a day.

During each down market too often contractors give back in losses some (or all) of what they gained in good years. The contractor of the future must have the ability to reduce overhead when in excess and not needed. The success of a construction business cannot be measured by the difference between total sales and operating profit, but must include the measure of operating profit to overhead.

When you get control of overhead through the “flexible overhead” concept, sales no longer drive the entire organization. Absent a desperate need for sales an organization is able to go after only projects that are of a size, geographic area and type of construction they normally profit from and stop chasing any non-typical (greater risk) work just because they feel they have to maintain sales to cover fixed, permanent overhead expenses.

The contractor of the future will simply reduce overhead practically overnight at will. The concept includes doing only work that is normally profitable for the organization and avoiding work that is out of the ordinary. If there is a job in your past that you wished you hadn’t done.

Dr. Thomas C. Schleifer, Ph.D.

Asst Research Professor and Author, Arizona State University School of Sustainable Engineering and the Built Environment

Dr. Thomas C. Schleifer, nationally renowned “turn around” expert, who has managed the resolution or salvage of hundreds of distressed construction enterprises and is the author of Construction Contractors’ Survival Guide, a book acclaimed by thousands of contractors and used as a text in numerous university graduate and undergraduate courses. Dr. Schleifer is known for his insightful industry analyses and remarkably accurate market projections and has studied the economic dynamics and impacts of prior market rebounds.

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Material posted on this website is for informational purposes only and does not constitute a legal opinion or medical advice. Contact your legal representative or medical professional for information specific to your legal or medical needs.

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