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Maximize Vs. Optimize Which Is Better For Your Construction Company?

Posted by Randal DeHart on Tue, Nov 15, 2011

This Is Max's Story - *Max had a construction company in the previous century in the early 2000's and this is a brief recap of some of what he discovered including how the 80/20 Rule applies to his general contracting business.

The 80-20 Rule For Construction SuccessHow The 80/20 Rule Applies To Your Construction Company

Max Felt - Everyone on his staff from the lowest paid laborer to the highest paid Project Manager needed to hustle every day, run not walk, and give 110% to their job. Max was happy to let everyone know that everybody was replaceable. His employees did not like him, they were somewhat afraid of him; and Max liked it that way.

Max Treated - His tax preparer, banker, construction accountant, suppliers, construction attorney, financial planner (what should have been his Board of Advisors) vendors, bookkeeper and everyone he came in contact with like an enemy looking to take away the last morsel of food of his dinner table.

One Day - It occurred to Max that his profits were actually losses of roughly -5% and this was during a boom time in construction when his competitors were earning in the area of +10% net profit.

He Happened - To ask a friendly competitor, one that he had not made angry at him yet, what he was doing differently.

He Told Max - That her Construction Accountant / Business Mentor has hundreds of fast, easy and safe ways to make money owning and operating a construction business. Because it is all about having a Strategy That Works!

He Shared The - Difference between Optimizing and Maximizing that made a world of difference in his business.

Maximize

Stock Your Truck - By packing your truck with every tool you think you may need and loading it to the sky with all the parts and inventory you think you may need and drive hard and fast you are maximizing that resource

Benefit - Hopefully fewer trips to the supply house, Lowes, Home depot or other places which will save you time and money.

Costs - You will spend more per mile than I do because you will use more fuel, wear out brakes faster stopping with more weight, tire wear increases, suspension parts wear out faster. You will have money tied up in assets and inventory and if you have any credit card debt or loans that is money you could have used to pay them down.

Risks - If you are in a traffic collision and the investigation shows you exceeded the Gross Vehicle Weight Rating (GVWR) of your vehicle with all the tools, equipment and parts then you may have trouble getting your insurance to cover the damages as well as some possible negligence charges; however, you would need to speak with your insurance agent and your attorney to know for certain.

Optimize

Stock Your Truck - Wisely by having a strategy that serves a niche market and uses the 80/20 Rule Then you will need a lot fewer tools, parts and equipment and only keep the items on that are used every week and that will further reduce your load and GVWR.

Benefit - Hopefully since your truck is organized and you serve a niche market you will have fewer trips to the supply house, Lowes, Home depot or other places which will save you time and money. Save time not hunting for things because when you know What Ten Minutes Cost Your Company you will really wake up!

Save More Money - You will spend less per more per mile because you will use less fuel, brakes and tires will last longer.

The 80/20 Rule - In construction is about working smarter and not harder by paying attention to where the most profits come. In most cases it is from 20% of your best clients and the odd thing is that just so happens to be where the least headaches come from too. This concept is so powerful I had to show it again!

The 80-20 Rule For Construction SuccessHow The 80/20 Rule Applies To Your Construction Company*Max - Not his real name.

Click Here To Develop Your Own Personalized Business Success Strategy

 

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About The Author:

Randal DeHart, PMP, QPA The Construction Accountant Randal DeHart, PMP, QPA is the co-founder of Business Consulting And Accounting in Lynnwood Washington. He is the leading expert in outsourced construction bookkeeping and accounting services for small construction companies across the USA. He is experienced as a Contractor, Project Management Professional, Construction Accountant, Intuit ProAdvisor, QuickBooks For Contractors Expert and Xero Accounting Specialist. This combination of experience and skill sets provides a unique perspective which allows him to see the world through the eyes of a contractor, Project Manager, Accountant and construction accountant. This quadruple understanding is what sets him apart from other Intuit ProAdvisors and Xero accountants to the benefit of all of the construction contractors he serves across the USA. Visit http://www.fasteasyaccounting.com/randal-dehart/ to learn more.

Our Co-Founder Randal DeHart - Is a Certified PMP (Project Management Professional) with several years of construction project management experience. His expertise is construction accounting systems engineering and process development. His exhaustive study of several leading experts including the work of Dr. W. Edward Deming, Michael Gerber, Walter A. Shewhart, James Lewis and dozens of others was the foundation upon which our Construction Bookkeeping System is based and continues to evolve and improve. Check out our Contractor Success Map Podcast on iTunes and Follow Randal on Google+

Topics: Strategic Planning, Business Process Management For Contractors, 80 20 Rule, Optimize Vs. Maximize

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