Tag Archives: construction finances

Know the intricacies of the construction business

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The construction business is one of the most popular and profitable businesses in the current scenario. People choose the real estate business for investments and also everyone desires to have a property of his or her own. Hence, if you too are looking for a business that will fetch you great profits within a very short span, the construction business is the right one for you.

But, before you start the construction business, it is a must that you know about the intricacies of the construction business. With proper details, you will be able to establish your business fast and will also be able to enjoy the profits soon.

  • Get the finances:

 

The first thing that you need to start or establish a business is finance. Without finances, you will never be able to start any business. However, the construction business is one of those businesses that require huge amount of start-up capital.

For that you need to chalk out a business plan that will help you to fetch bank loans. The plan must clearly state how many employees you are going to have, your target market and how you plan to achieve the target. The initial cost and the potential profit that you will earn from it must be clearly mentioned in the plan. If you do not know how to right a good business plan, hire a skilled professional, who knows how to write business plans for a construction business.

  • Tools and heavy construction equipment:

 

One of the very important intricate factors associated with construction business is the expense of tools, heavy construction equipment and machineries. If you can afford, you can buy them. You will certainly get the brand new equipment as well as the old equipment. There are many dealers, who deal in the new and old construction equipment and will easily find one for you. You can also rent the equipment, tools and machineries for your projects initially, if you do not want to engage a lump sum amount of money in buying them.

  • Setup the business office:

 

The construction business demands a physical office, where all the employees, the clients and the customers can come in to deal. You must also keep in mind that along with the office building, you need a parking space for the construction equipment, machineries and tools.

  • Licensed and insured:

 

If you want to be fair and gain acknowledgement within a short span of time, having your business licensed and insured is a must. This will give the customers the assurance and guarantee that your company is there to stay. Certainly this will have an impact on the prices of your projects, increasing the profit margin.

  • Safety plans for the employees:

 

Since the construction business works onsite and there are numerous workers, who will be working on the many construction projects, their safety plans and occupational health plans is your responsibility. You must offer them to the employees, so that they are happy working with you and do not bring your business to a standstill under any circumstances.

 

Building finances for your construction company. Does it take time?

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Construction is a multifaceted industry and a risky business. It requires huge financial investments, which get returned as profits much later. Thus, it is an expensive business which offers delayed benefits. The construction project cannot proceed without adequate finances. Hence, the owner of construction facilities must obtain reliable capital resources to finance costs of construction. The owner does not just work on one project but numerous projects which are all financed together. In addition, there are other problems such as budget overruns, unreliable contractors and delays. If the owner is unable to cover costs, the capital investors face financial problems.

However with a pragmatic approach, owner of construction industry can build finances (achieve profits) in less time. Some of the guidelines for the same are as follows:

  1. The owner should be aware of the amount of work to be undertaken. Further obtain knowledge of the technical skills required which will enable to calculate the correct cost of construction project. Thus he should define goals and set expectations. Emphasis have to be on long term planning. Setting expectations enhances confidence of both clients and employee’s in the owner.
  2. Generally it costs less during planning and designing of the project but involves substantial expenses during construction. Instead of giving importance to sales, and getting deals, owner should develop understanding of the financial aspects and costs involved in the construction project. They can also hire appropriate project managers and financial consultants to understand the actual costs incurred by a project.
  3. Estimate the true profit by considering overhead costs, risks and job costs.
  4. Managing the job production to achieve profits: the job should be done in the cost-effective manner to make profits. Changing daily orders of operation and determining the productivity of labour force. When the work to be completed in 2 days, takes 6 days, it incurs additional costs. Thus jobs should get delayed.
  5. Accounting for profit by employing a project manager who keeps track of the budget and purchase orders. He has accurate knowledge of the expenses since he is present on the site. He applies construction specific accounting knowledge.
  6.  Since education always helps, hence training to be given to labourers, employees and management professionals.
  7.  Emphasis on written procedures (SOP) is important. Procedures should change improve. They should be evaluated periodically.
  8.  Effective Good communication with employees is valuable and necessary. They result in strong relationships with all parties and frequently result in future referral business.

Overall building finance in construction industry takes time. Following the above guidelines will enable the owner to develop business skills to reap profits in less time and have sustainable career in construction industry.

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Keep a track on your finances while spearheading for any expansion plan

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When you think of expanding your business, it means that you are having sufficient money to let you think about it. It would be absolutely naïve for someone to even think about expanding his business without having enough money in hand. The other option would be to take loan from financial institution. However that will cost you interest that you will be required to pay for the next many years. Taking loan can’t be termed as a bad option. It is just that one should go for this option only when it is really needed. As long as they can do with the money they have in their account as surplus, they should try to take care of any expansion plan with that.

We will be discussing few very important points that one should take into consideration before they decide to spearhead for any business expansion.

Multiple projects should be avoided without adequate resources:-

When we talk about expanding our business, we have to pay a lot of heed to the fact of having enough resources to take care of the extra project. You can’t sign up with a company and commit them of completing their project if you do not know whether you have adequate resources in hand. One of the major components that come under the word “Resources” is availability of finance to fund the project. You just do not want to start up with something and then get to know that you are unable to carry it along due to scarcity of funds. That will be a nightmare both for you and the one who gave you the business. That will also go against your goodwill and will deteriorate your relation with your client. You definitely do not want that to happen with you.

Knowing your finances helps you to take better decisions:-

You can take better decisions when you know how much money you have that you can utilize for your business. Remember, you also got to meet your financial responsibilities with your existing company like paying salary to your employees, taking care of operating and non-operating expenses and many other expenses that probably your accountant may keep an account of. It is better that you call up a meeting and take detailed report from all the departments. Understand the immediate financial requirement of any department and once you have taken suggestions from every corner, you decide what should be your next step.

Turn up to a financial institution if you really have to expand:-

At times you may get an offer than would be too lucrative and naturally very hard to resist. You will certainly not want someone else to bag it instead of you. In situations like these, you may turn up to a financial institution to avail loan from them. However, before you do so, have a small talk with your business advisors and check what they feel about the project. In case, if they all are positive about it, you may take a shot.