When your primary concern is simply surviving, it’s tempting to pay less attention to the routine fundamentals, such as preparing a realistic budget and following through on it. In fact, difficult times make attention to the basics more important than ever – which means now is a good time for contractors and sub-contractors to take a fresh look at their budgeting practices.
An up-to-date, credible budget is a valuable management tool that allows you to respond properly whenever conditions change. And it is essential for preparing competitive yet realistic bids, which in turns affects your margins and, ultimately, your ability to get work.
Here are six basic steps a contracting or subcontracting business should follow:
- Assemble Your Budget Team
- Be Sure Your Accounting Systems Are Up to the Task
- Get an Updated Picture of Costs
- Develop a Revenue-Driven Budget
- Develop a Profit-Driven Budget
- Monitor and Respond
For more information on each step, click here to download my whitepaper, “Budgeting for Success in the Construction Business: A Six-Step Plan for More Effective Budgeting.”
The budget exercise described in the whitepaper will strengthen your management team by making them more sensitive to your cost structure and more familiar with what drives profitability. But the budget’s real value is its use as a management tool. Having a practical, effective budget – and then managing your business to meet that budget – will help you navigate more effectively through the challenges that construction-related businesses will continue to face in the coming years.