Building Industry Magazine - April 2011 - (Page 54)

BestPractices Keep What You Earn: It feels like a dirty trick — you increased your company’s sales volume for the year, but made less profit. Your crews worked harder than ever, but your bottom line actually shrunk. Sound familiar? If so, you’re not alone. If you’d like to keep more of what you earn, consider using the following simple yet profound precepts: I. Plan your Profit: It sounds basic, but it’s not. Many of us fixate on gross income to the exclusion of the bottom line. It is only at year end that we “discover” what our profits were. Try turning this model upside down. Shift your focus to the net income by establishing a specific dollar amount as your annual planned profit. By clearly defining this to your management, you can collectively track your progress toward the final goal. How “Cost Triggers” Protect Profit BY GARRETT SULLIVAN II. Use Adaptive Budgeting: In times past, a single budget was sufficient. In today’s tough economy, with contractors moving in and out of geographical areas, the more savvy contractors are preparing numerous budgets. Why? So your budget can accommodate sudden, real-life situations such as a bad or cancelled job, a labor strike, material shortages or unanticipated material cost escalations. When you face something like this — and we all have — you’ll be too busy dealing with the situation to take notice of your budget. That’s where the bleeding usually begins. In contrast, if you pre-determine appropriate costcutting measures, or cost triggers to implement during these situations, your likelihood of achieving your annual planned profit goes up exponentially. HYDRO • ut performs single-ply O membranes STOP tested roof system “Premium Coat” • liminates roofing accessories E (drain rings, metal flashing and sealants) • actory Mutual Class I-4470 F (direct to insulation or concrete) • Serving Hawaii since 1995 • STM D 7281 (Resistance to A moisture migration through membrane) • ind uplift FM I-735 W • aterproofs roofs and walls W (the building envelope) • ustainable 10-20 Year Leak S Free Warranties Not just a coating It’s a III. establish Cost Triggers: This is the crux of adaptive budgeting. A cost trigger is a preset cost reduction from your annual budget that is implemented when the actual profit to date is not on target. There are two types: senior management cost triggers, which may or may not have employee buy-in; and employee cost triggers, which are democratic and have employee buy-in. Senior management cost triggers can be immediately deployed without approval. They can include wage or hiring freezes, reduced vacation, or reductions to expenses such as advertising, company vehicles, charitable donations, office supplies, etc. Employee-agreed triggers are established through a series of meetings between senior management and staff. Employees brainstorm a list of cost-saving measures and vote upon the order in which they will be implemented. Some options can include temporary reductions to the 401K match, decreasing employee training and tuition reimbursements or cutting bottled water delivery. When the staff agrees on the triggers beforehand, it lets them make their personal plans in a more orderly and less stressful environment. Additionally, it creates a sense of ownership thinking because they are actually participating in the tough decisions — and are personally vested in the company’s outcome. BI (Is it time for you to use adaptive budgeting? To read the full article on this topic and request a free sample of cost triggers, contact Garrett Sullivan at GSullivan@SullivanHI.com or 478-2564. He is president of Sullivan & Associates, Inc., a past president of the General Contractors Association of Hawaii and the 2010 SBA Small Business Person of the Year for Oahu. Visit www. SullivanHi.com.) (808) 216-4949 markalexander@hydro-stop.com www.hydro-stop.com 54 | buILDINg INDustRY | APRIL 2011 http://www.hydro-stop.com http://www.SullivanHi.com

Table of Contents for the Digital Edition of Building Industry Magazine - April 2011

Building Industry - April 2011
Content
Datebook
City’s ‘Most Ambitious Project’ Breaks Ground
Kauai’s Koloa Landing Opens
BIA Show Generates Record Crowd
Kauai Solar Farm Complete
Zoo Gets New Entry
HIUSA Takes Greener Path
Contracts Awarded
Developers
Spotlight on Success: Keaukaha Military Reservation
Low Bids
Saddle Road Receives FHWA Award
ACECH Celebrates Engineering Excellence
Lumber & Wood
Inside the ABC
Concept to Completion: Kukuiula Plantation Core
Odd Hours, on Schedule
Best Practices: How “Cost Triggers” Protect Profit

Building Industry Magazine - April 2011