The construction industry is a lot like an American muscle car.
I want you to picture a classic American muscle car. In fact, let’s all take a minute and appreciate this 1968 Ford Fastback Mustang GT.
Gorgeous.
The GT was built with purpose. Every mechanical component, every aesthetic choice, every button, knob and light all work together to communicate and fulfill that purpose: POWER.
That car was built to dominate the road, to kick ass and take names.
When you sit behind the wheel of an expertly-designed, expertly-engineered, and expertly-manufactured vehicle — be it a classic American muscle car or a king-of-luxury Bentley, you know this vehicle was built with PURPOSE.
The construction industry used to feel like that. The industry had a PURPOSE and was built to fulfill that purpose. Every second- or third-generation contractor will tell you that their parents used to take pride in being part of the industry that was building America.
Now imagine that same 1968 Mustang sitting in a front yard somewhere. The paint is faded, the upholstery is cracked, and a family of squirrels is living in the engine. This amazing machine, capable of such power and greatness, left to gather rust.
That’s how the construction industry felt for a long time. Dismissed by society as a “lesser” track. Pushed aside in favor of expensive college degrees. Taken over by bad actors.
You know what, though? That Mustang can be a powerful machine again. It just needs to be rebuilt.
Construction IS an engine of PRIDE and PERFORMANCE.
It just needs to be rebuilt.
Who is going to rebuild it?
WE ARE.
We’ve spent a year defining our Purposes, establishing our Core Values, and building our Work Cultures. (If you’re new here, click any of those links to catch up.)
Now it’s time to take all of that purpose and energy and use it to impact the industry that we love.
Roll up your sleeves. Break out your toolbox. It’s time to get to work.
Subscribe to our newsletter to learn exactly how we are going to do it and how you can help!
Cash flow in construction is complex, but managing your company’s cash flow shouldn’t feel impossible. What you need are a few simple, actionable strategies that will take your cash flow management from chaotic to clear and productive.
Cash flow experts Scott Peper (Mobilization Funding), Suzanne Cox, CPA, CIT, (Saltmarsh, Cleaveland & Gund) and Lori Drake, CBA, (Levelset) will share their best practices for managing, tracking, and forecasting cash flow in your construction company. See how effective cash flow management can increase your team’s performance and your company’s ability to grow!
Autumn Sullivan
Okay. Thank you, everyone for joining us today. My name is Autumn Sullivan. I’m the Marketing Director at Mobilization Funding and I’m so excited to bring you these three cash flow experts. We’re going to talk about cash flow management and construction. I have Scott Peper, the CEO of Mobilization Funding. I have Lori Drake, who is the community manager of payment professionals from Levelset. And Suzanne Cox, who is a partner at Saltmarsh, Cleveland and Gund. And Scott will be leading the conversation, they have a list of topics. But if you have a specific question you want to ask, please drop it in the q&a. And I will make sure they get that. And without further ado, I’m going to go behind the curtain, hide my screen and monitor our LinkedIn conversations in our chats. You guys have a great conversation.
Scott Peper
Thank you very much Autumn and welcome, everybody, Lori, and Suzanne, I really appreciate you guys joining me and going through this topic, I know the three of us are very impassioned by cash flow specifically for construction, how people get paid, when they get paid, how we can make it better how we can fix it.
And I think each of us have a shared perspective, but also comes from different ends of that cash flow waterfall spectrum. So I find it really interesting and exciting to be able to go through that with you guys. And kind of, I think the genesis of how we all landed on this spot together from where we came from with these clients, I think is gonna be really impactful and beneficial to the collective audience. So jumping right into it, first and foremost, thank you for joining me. I’m glad to be here. Thank you.
All right, jumping into it, I want to talk about basically the flow of cash in and out of a construction business, and how it’s a little bit different than many other industries, cash flows. And what I mean by that is, every business has I like to call a revenue cycle you get in order to do work today. And ultimately, you either perform that work, you make a product or a service, and then you invoice it and you get paid. To me that’s the revenue cycle. And then there’s cash needs all along the way just for that specific opportunity revenue. And then that may has to marry up to the cash flow needs of your overall business. But specific to construction, there’s some unique things about that, that are very different for than other industries. And so, Suzanne, can you just can you share what experience has been like working with contractors in your role as a CPA, and what you do to help manage contractors cash flow? And I might have a follow up question or two after that.
Suzanne Cox
Sure. So I’m I’m making a wild assumption that we have some contractors on the phone here. So you guys probably already know why cash flow is a challenge. So I won’t back up and talk about why. But obviously, there’s this time period between you know, when you may have mobilization costs, and you’ve got labor costs and supply costs, and all of these costs, and they’re rolling in the door, and you may not get paid for 60 to 90 days, you know, depending on who your customers are. So you’ve got this very long wait time in between when the services are performed. And when you get paid, unlike, say, a restaurant who also has the same thing, supplies, people, etc, etc. But the minute you give that service, you’re getting paid, you know, there’s no 90 day wait time to pay for your meal that you just had, you know, so there’s obviously a huge challenge of that.
I would say that I have some contractors that have desperate cashflow needs, and then I’ve got contractors that are sitting pretty nice. And it depends, like on a few things, what kind of construction they do, who they work for who their customers are. If they’re working for the government, perhaps they’re getting paid really timely, and they’re submitting on you know, line and they get paid in EFT and a couple of days. But that’s not going to be your most of your, you know, contractors out there. So it does depend on what type of construction you’re in, you know who your clients are, how well you manage your you know, your business, and I’m not sure if you asked me part of that. But you know, my my contractors that are paying close attention to cashflow, they’ve got a dashboard. They’re constantly monitoring what their AR turnover is. And what that means is how quickly they get paid. So they send a bill. And that time in between when they send that Bill and when they collect the cash is is essentially a turnover rate.
And so the people that are monitoring their collections and their turnover very closely, and they’re monitoring their payables, you know how soon they’re paying people and can they negotiate better terms, both on the front side and the back side, the contractors that are focused on those are obviously usually in a better, you know, cash position, the ones that are just winging it. And I say that because a lot of people do when times are good, and there’s a lot of work. Some of these, like accounting, boring, you know, boring accounting details, they tend to get pushed to the backburner. And so the contractor is, you know, not really focused on that they’re about going out and making money getting new work and Getting it done. And they’re very focused on the production side of their business and maybe not so much on the, on the boring accounting side of their business. So that’s when I, you know, come in and help from, you know, let’s do a cash flow forecast, let’s talk about a budget, you know, let’s get things in order in your house, so that you can go out and have the infrastructure to take on more work. And, and that sort of thing. Did that cover what you’re looking for?
Scott Peper
I think so. Yeah. Lori, you know, you have an interesting perspective, you know, prior to the role that you serve now level set, you are a credit manager for a supplier working directly with construction subcontractors, general contractors, and their their purchasing. Can you give us some insight into what you saw in that aspect of your life? And how you manage that from a supplier perspective?
Lori Drake
Absolutely. So it’s always been a big issue, like you say, I was a credit manager for over 20 years in construction. And obviously, we work on the past two accounts. That’s our big focus. And typically, those are the ones that have the cash flow issues, we found that when it one of two things was always the case, they either had strong cash flow, but they didn’t have any profit, or they had a bad cash flow with a lot of profit. And unfortunately, that usually means that they are making so much a third excuse me, it means that they are not covering their liabilities. Because their profit margins and earnings are not coming in high enough, it could happen because they’re not budgeting for retainage. They may have a high DSO, they’re not collecting on their accounts and kind of closing that past due GAAP, they might not be projecting their cost estimates and progress payment Billings. And there’s a lot of different ways they can do that. But we definitely find the ones that we were typically working with, they had the bad cash flow, because they were just trying to get the profit in there, they may be trying to pay their bills to get that 10% discount or 1% Discount within 10 days with that some other suppliers. They’re just not managing the money like they’re supposed to be managing, we had a lot that were trying to pay us in terms. Well, they weren’t paid yet. So not paid paid pay when paid paid not paid, that it has a big effect on contractors, especially, you know, the ones that are working on the back of this truck, you know, they may not have the big office and other resources that they could use. So managing that cash flow was definitely something that we tried to help them out with.
Scott Peper
So, so question to both of you guys, do you think the average contractor that you work with? I guess in any phase, regardless of the size of business, do you think they understand cash flow? And the management of it and how to use it as an effective tool? We I know they all understand cash flow in my in my opinion, I don’t know if they understand. And I’m curious what your thoughts is to what the power of it is, when you when you when you actually can control it and understand it, what you can do with it, I guess, same question to you. What is your opinion on that? In my opinion,
Lori Drake
In my opinion I don’t think that they do. I mean, a lot of people start construction businesses, they’re the labor side, you know, they don’t really know how to do the business side. And then they hope to hire somebody that does have that experience or knowledge, but not understanding the cash flow side of it. I mean, they may get a bunch of jobs, and they don’t have payroll to pay somebody to work on those jobs. So those jobs just sit out there. They can’t grow, if they don’t have the cash flow coming in to pay the labor to buy the materials. I mean, it’s kind of a vicious cycle. And fortunately, if they keep getting these jobs and not getting the labor and materials to get out there, they’re kind of going to go in more debt. It’s kind of that same old sale where it’s not a sale until it’s paid. I honestly, I just don’t think that a lot of them know how to manage that. I know, we’ll talk later on different policies, but there are ways you know, that even their credit manager to supplier can help them. You just got to ask for that help. And they can kind of walk through what’s going on in their company currently, and try to make some changes on where they see that it could improve.
Suzanne Cox
Yeah, sure. So that we, of course, are issuing tax returns and financial statements. And the first question I get when anybody gets a financial statement is on the cash flow page. And, of course, there’s a difference between accounting cash flow, and perhaps what we’re discussing here, you know, cash flow forecasting and things like that. But that’s always the first question. They’re like, I have more cash than that. I definitely made more than that. And they they’re not sure what’s you know, the inflows are and the outflows are so it of course, is a top top concern for contractors to to understand what that page and all those numbers mean. And, and so it’s really nice to work with them to be able to simplify it and say, Okay, here’s, you know, cash inflows from receipts of AR and from that, you know, if you’re getting inflows of cash, and then here’s your outflows and you know, breaking it down and showing them where their cash is coming in and out. I would say our contractors that are maybe a little bit bigger and have an in house person that has an accounting background or doing a little better in this area, are smaller contracts. that aren’t you know, spending money on the accounting again, the backroom, you know, processing infrastructure type things. If that’s not a focus or priority, then you you do see that suffer in their numbers you see that suffer in their profitability, you see the suffrage in their cash flow. It’s pretty obvious which contractors have spent money to pay attention to these things and which ones haven’t.
Scott Peper
So it’s interesting I one of the things I love about doing these webinars is I’ve watched lots of webinars, and I think that a lot of webinars can point out all the problems, but they never offer any solutions. And one of the focuses that we always have, and what I appreciate about both of you, and what you do individually, but also whenever we’re working collectively is you always have a solution. I’ve talked to many CPAs, accounting firms, or even just CFOs that are either employed by a business or they’re an owner of a business or sometimes even like your largest fractional CFO organization where you make their a CFO for hire. There’s one thing that always resonated with me that unanimously they all say is like the first or immediate second thing that they do when they enter in a business is a 13 week cash flow forecast. And anytime I bring that up, you guys are nodding your head, anything I bring that up in a close relationship with our one of our clients. Probably 80% of the time they say, Scott, what is a 13? Week cash flow? whisper to me aside. And can can you guys one? Tell me if that’s your also my opinion? Or my perspective is do you share that? And two? Can Can you explain what a 13 week cash flow is? And the why that is the first thing you would do before you do anything else when you jump if you were to jump into a business to try to help?
Suzanne Cox
Sure. I Lori were you about? So we do fractional CFO work? We have a team for that. So I’m not always the one the one diving into that specific need. But the reason is, again, back to like, how is this business going to stay afloat? You know, how are they going to stay in business? That’s one of the first things we analyze from a risk perspective. As CPA, we analyze risk. So we’re coming in there going, Okay, well, is this business gonna be able to make it you know, three months or six months, you know, what’s their long term sustainability? And you know, of course, we do a lot of valuation work. And that’s one of the ways you value a company is based on their cash flow. So it’s one of the most important things for our company to know, even if it’s just a basic, just basic knowledge of what’s coming in and what’s coming out. And, you know, what, what is my forecast for the for the next, you know, like you said, 13 weeks, so it’s just important to understand how the business runs, you know, how do you make money? And what’s the viability of you existing past 13 weeks? Yeah.
Lori Drake
Yeah, and I think we’re on different sides of it. When I used to work in the credit side, Suzanne, when I worked with the companies, the first thing we did was look at the financial statements, like you said, cash flow page, which usually didn’t really exist. But the biggest issue that we always found was that they didn’t have a credit policy in place, or they weren’t enforcing them when they had and like you said, the credit policy is what assesses the risk and lets them know what risks they can take and what risks they can’t take. So we would work with them not on the 13 plan thing, but we would work on setting up the credit policy, just to you know, know when they should invoice timely you know, when they should deal with waivers, contracts in writing, there’s just a lot of different specific things that once they’re focused on it, it would help that cash flow side a lot better.
Scott Peper
Yeah you know, and to add what I look at as a cash a cash flow third job what it really does for for contracting business, is when you’re when you know you have receivables of $100,000 $200,000 or 150 year you’re going to invoice X amount each month, which the funniest part about the construction world is the the business owners extraction world know an amazing amount of detail about their business, they can tell you who all their customers are, how much is getting invoiced to them, what they’re estimated to be invoiced them. There’s a tremendous amount of detail broken down into three, four or five, six major categories on a job. It’s it’s just never has all the infrastructure been put together to marry up to it, but when it is, those contractors with all the knowledge they have are able to make such good a good decision.
So to explain to the audience, in my viewpoint, what a cash flow a 13 week cash flow does for you is it tells you basically where your sources of cash are coming from when those sources are expected to come, which is it which are inputs that you would provide, and then more importantly, what the cash flows. The cash flow sheet is going to do is then tell you how you can use that cash and when you can use it, you might not be able to use that $100,000 exactly the way you want. But when When you look at it over a 13 week period, it gives you a chance to forecast at least four or five, six weeks in advance and also look back four or five, six weeks, so you can see exactly what you have going on. So you know, when you get this specific $100,000, check and exactly how you can use that, and exactly how much cash you need to leave out of that. So you’re not in you might be in panic mode one week, but you’re not going to be in panic mode every week on every Monday trying to figure it out, it’ll eventually will become a problem that you’re solving, you might have panic today. But as that money comes in, if it’s used appropriately, and it’s managed in this way, you will not have a panic Monday or a panic month, it’ll eventually smooth itself out. That’s what it will do for you.
Suzanne Cox
Well, and I think part of that to add is, you know, management of your cash flow, which a lot of people underestimate how much control they may have over the management of the cash flow. So if you’re doing a 13 week projection, and you can see, hey, I’m going to get paid in this week, but the expenses are due in this week, you know, is there a possibility, you could call that vendor and say, hey, you know, I needed two week, you know, grace period, you know, this this month, because I’m running a little bit behind, you know, ask, talk to your, you know, suppliers and your vendors and have open conversations with them, or, you know, Scott, what do you do for a living, you know, look into some, you know, quit, you know, financing alternatives to maybe traditional debt, or, you know, there’s a lot of options, and that, again, goes back to managing your cash flow. So I think it’s really important that you not just do the projection, but then you do something with it.
Scott Peper
No, right. And when we decide to make loans, we it’s exactly what we do, we build out a cash flow forecast for that specific project, or groups or projects, so we can see where the sources of cash are, but when it’s needed, and then how we’re going to use those sources of cash all the way along, and we use the exact same information that you would put in to a 13 week cash flow for the overall business.
Lori Drake
So I was just gonna say, I think that’s a big deal to you, we’re saying that you do the cash flow for the job, a lot of issues that contractors are having as well is they may not have enough money for one job. So they take it from another job and put it into that job. So I mean, it just messes it up across the board. And that’s a really bad cycle to get into.
Scott Peper
It can be very dangerous, you know, and that’s a great segue to my next question for you guys. You guys are so we didn’t plan that at all. How you came up with that. But my question is, we all obviously you hit the nail on the head, we know that cash flow can impact the performance on a job pretty significantly. What are some of the ways that each of you have seen with your experience and clients on exactly what has happened when cash flow isn’t manage what shows up what other problems or issues show up?
Lori Drake
Well, like I was saying, on the jobs, if you can’t afford the labor to put out on the job, then you’re obviously not gonna be able to meet your deadlines. If you can’t pay your bills, you may not be able to get the material out there in time for when you need it especially you know, right now when it’s so far delayed even getting material out there. You see a lot of notices get sent out see liens possibly file, that’s kind of your reputation, if you don’t have good cash flow, you’re gonna unfortunately wind up with a reputation of they can’t pay their bills or they can’t manage their money. So unfortunately, like I said, I always saw the bad side of it. I never saw the positive side of it. But I mean, knowing that jobs have different parts of them, they can change orders, they have progress billings, if you can’t manage any of that stuff, it’s gonna throw everything up in the air.
Suzanne Cox
I was gonna say the same is that I think it’s more long term than short term effects of the long term effect is you have vendors that will no longer you know, be your vendor because they’re not going to get paid you have you know, customers that don’t want to work with you because you clearly can’t run you know, manage your business so that it’s just long term reputation is the biggest effect that I see is that if you are especially a new contractor and you want to establish that you know what you’re doing and establish yourself in the market as a true player and you need to have your ducks in a row before you go out because you will get a bad reputation and people will not want to work with you
Scott Peper
specific to a companies that are trying to grow or are growing how have you seen cash flow become an obstacle in front of them to grow? So obviously you pointed out some things related to vendors if you can’t keep maintain vendor relationships with a lot of companies sometimes they might have hovered at a good level they have a good amount of cash and they get they get a good feeling and justifiably so. So they step up and start taking on a different project or a bigger project and they the same offense from a cash flow perspective and management of that cash flow that’s always worked for them. What shows up now and how does that lack of cash flow infrastructure so to speak, where does that show up as a business is trying to grow?
Suzanne Cox
So I think we haven’t you know, touched on it yet but construction in Most areas of construction, you’re going to require bonds. And so there’s also this is a topic we, you know, need to address here is the ability to acquire bonds. So if you do not have a plan, you know, if you don’t have financing in place, if you don’t have an open credit line, if you don’t have six months of backlog to cover your expenses, you know, all of these things is going to affect your ability to get bonded, so it’s gonna affect your ability to get work. So like you, you know, you mentioned, you know, hey, they’re on this job, and they’re borrowing from this job to do this other job, at some point in time, the bonding company is gonna hold their hand up and be like, yeah, we’re not bonding you for any more jobs, because you, you know, you’re clearly not managing your cash flow, and we don’t want to get hit at the end of this train, you know, train wreck. So I think that’s a big thing that we haven’t really discussed yet, you know, is your ability to be to be bondable.
Lori Drake
Yeah, I would think the bonds is a huge deal as well. But even you know, some states don’t require it, but even getting your licensing or getting your insurance, you know, workers comp, any of that stuff, you know, if they don’t see what they want to see, when they you submit your application and turn in all your financials on that, you’re going to have issues getting all of that stuff. And I think it’s on the same line of things. But like, if you don’t want your contracts, I mean, if you do the pay when paid or the pay, if paid. And you’re not managing that because you know, you’re kind of shooting yourself in the foot saying that, hey, you don’t, you don’t have to pay me until you get around to it, you’re not going to have any of that cash coming in to mess around with so it’s gonna affect you a lot.
Scott Peper
Lori, when you were in the credit markets, for our Ma, she’s MTU as well is, have you ever seen the reverse of this, where you have a client who has very aggressive, very organized cash flow manager, they’re very detailed reports. And with that also came a comfort level to for them to know them, and they use them. And then they use those as tools to either get credit they otherwise might not have or get jobs or other ways, some ways they’ve used those tools to get more work or grow or get credit they might not have gotten before, do you have any stories or proactive things that customers did do that
Lori Drake
I kind of look at that as our no notice list, we have certain customers, you know, they’re big customers, or they have great reputations, you know, we just do a lot of work with them. So you just extend and you extend all this credit, and you don’t notice them, because you made that agreement with them. And then as a supplier, you run out of all the funds from any of those, and you don’t have any right to get them back. So I think that they can put yourself out there too far, maybe and not have any repercussions for it. Because you gave up your lien rights. So they there’s no like pressure to make them pay on time. To me, it would just kind of throw them off track there.
Suzanne Cox
I do probably have a specific example of a client back in the first downturn of the economy in recent years, back in the old 910, you know, area area seemed like contractors got hit a little bit later. So it might have been in the 1112 timeframe that I’m speaking of, but I had a contractor that was very, very tight on on cashflow, and they were to the point of like, hey, we may need to like close our doors because we can’t make it happen. So we advise them to go look for alternative financing. So we’re like, look, just, you know, even if the interest rates are crazy at this point, like you’ve got to get something you’ve got to get anything to, you know, get back on your feet, you know, get get something interim, not long term, but you know, do something interim to keep them afloat. And they did they were able to find some short term financing that was you know, like a year, it was highly aggressive interest rate. And I don’t always suggest that, but it just happened to be, you know, at a pinch point, and it made sense. And it was a good decision. And they made it through, they got the short term financing, they were able to finish the jobs, they were able to pay their suppliers, and they were able to, you know, keep going. So I think to answer your question is yes, I probably have more than one example of a contractor without availability to get cash has been able to, you know, continue his business where if he didn’t even have the ability to get that, you know, extra, you know, cash, he wouldn’t have been able to take on any more work. So the contractors that are positioning themselves in the market, to have some excess cash, or the ability to get excess cash, are the ones that are able to capitalize on having that available capital to take on jobs. You know, that’s part of when you’re assessing the risk of should I take on this work, you have to assess Well, you know, what’s my cash flow? Can I take on this additional work? Can I hire these extra people and pay the suppliers to get on site and start doing this work? If you don’t have cash available? You may doubt you know, you may turn down that work. And so cash up front and handy handy cash, you know, available cash is going to let contractors capitalize and maybe take work that other contractors can’t because they don’t have financing available or line of credit or something like that.
Lori Drake
No, I’ll add it when I was doing the credit and all that I had never even heard of like your company’s Sunday. options that are out there. Now, I think contractors now have a lot more opportunities to get that cash flow flowing, or at least to get the help for it and to be taught how to deal with it, to where they can take on more jobs, they can pay their bills, I think it’s a nice thing to have not to, you know, sell you here. But you know, what your company does puts a lot of help out there.
Scott Peper
You get to see that one. Thank you very much. I appreciate appreciate you saying that. But have you guys also, have you seen companies use those financial reports to gain new customers or maybe win a job that they might not have won before or in your case, or when credit that you wouldn’t have given to them that they didn’t come in and say, hey, look, this is why I needed I’m running my business like this.
Lori Drake
Kind of sorta, maybe a lot of our credit was extended based on whatever the job was not really the customer. I mean, even if the customer has bad cash flow, or they don’t pay their bills, we always have those lien rights to go on to the GC or then go on to the owner. So not really, it’s just whatever the job is, if we determined that it was a good job, you know, then we would find that
Scott Peper
what about uses and you have clients that come to you, maybe they ask for capabilities letter or financial stamp of approval that they can use sort of in their, their brag book to kind of win an award or to show up a customer of theirs and owner, developer general contractor? Hey, you give me the contract, you know, here’s my sort of stamp of approval,
Suzanne Cox
So we get asked a lot, we get asked for financial viability, I think was your term that you just used, we’re actually precluded from from issuing that that’s an opinion that we can’t make, without doing a formal, you know, valuation of the company and a formal engagement. So we don’t actually issue financial viability letters. Although I do get asked a lot. What has to stand alone is really your your financials, whether they’re, you know, compiled, reviewed or audited? Or, you know, again, a formal, you know, projection or cash flow analysis or something like that. We can’t just send a letter without doing any subsequent work to support that opinion, for our own risk reasons,
Scott Peper
obviously, yeah, no, that makes sense. Well, you know, what we’ve done immobilization funding early on, I got some advice to always audit our financials. So we do a full financial audit of our financials. And at first, it felt like an extra expense. And I couldn’t really understand why we’re doing I mean, I knew why but it didn’t, it didn’t feel like it, me or the typical clients.
I tell all of our clients all the time, like I am exactly the same as you, they’re, I’ve been dragged into them all the things I’ve done. So I’m just now part of helping people drag along, so I can at least say what it feels like on the other side. And you know, what happened? What I realized is when I did as the business grew, and I did need to go get more capital for which we use to make loans, it was a lot easier when I sat down with an individual with Financials, and certainly when we went to the bank, who basically thought we were in saying,
Suzanne Cox
Thank you like here, because like, you know, there’s no chance Why would we ever make loans to you, Scott, so that you can make loans to people we would never make loans to, and, you know, having an audit financials that they could trust, verify, that basically just eliminates their questions off. I mean, they’re gonna have questions, but they don’t, it doesn’t, they’re not trying to figure out if you’re lying or not, or if you’re, you know, that’s an extreme word, they don’t think you’re lying, per se, but they don’t know if they can trust it. When you have third party assurance, you know, fully reasonable, their, their risk is, at a certain level. And from our standpoint, you know, bonding companies and banks are some of our obviously biggest referral sources, because they need those things to do their work. So it depends on what level they need. So if you need a large line of credit, or a large term loan or something that may require an audit, if it’s a smaller line of credit or smaller term loan, then you may be able to get away with a review or compilation. And those are three different levels of our assurance that we put on that, but the audit is the gold standard, you know, or platinum, you know, that says, hey, this is that we did the most work for this one. And obviously, our risk is the highest there as well. Because we’re opining saying that yeah, these people, their financial statements are not materially misstated. You know,
Lori Drake
you know, it’s kind of funny, we assume that everybody has financial statements, but when you’re extending credit 90% of people don’t have them. And if you can actually get financial statements from somebody, you actually do award them more credit, you treat them back because they actually, you know, you know that it’s putting orders on they’re
Suzanne Cox
paying attention to their house, you know, back to the House comment, they’re paying attention, they’re managing their house and and they’re getting themselves positioned. And you know, in this market, it’s very hot right now, obviously for transactions and we noticed that a lot in transactions is somebody will get a deal on the table and they haven’t had an audit or any sort of assurance from an outside you know, person And now all of a sudden, they’ve got caught with their pants down, and they’re scrambling and rushing, you know, trying to get due diligence work and financials prepared and all of these things. And so, you know, part of that is getting your house in order, you know, having these financial statements ready and the cash flow projections ready. Because when someone comes knocking in right now, there’s a lot of people knocking, you know, you’re going to be like, bam, here’s my folder, you know, and I’m ready. So it’s just good business.
Scott Peper
I mean, one of the things we’ve talked about that, just just to your point, Lori, and Suzanne, is when we get those financials, we care what they said. But what we really want to see, first and foremost is, does the Does, does the company owner care enough to get that monthly scorecard? Like, do you really do care if you really care, you want to know how you’re doing how you’re doing as a business is your financials. That’s how you that’s your scorecard in a business world, at least in my opinion, a lack of that certainly can demonstrate to someone regardless of the size of your business, it demonstrates that it doesn’t mean you don’t care. But it does mean that you only care to a certain degree. And if you’re trying to lend money to someone, or you’re looking for someone to lend you money and trust you and care about what your business is, and partner with you. It’s a really key important thing. And when you’re working with your suppliers, they’re lending you money, extending credit is no different than giving you cash, they want you to be paid back, sure they have lien rights, and sure they have other things. But at the end of the day, they’re trying to run a business too. And they’re trying to find the right people to partner with. So it is important, and I’m sort of letting people know a little bit of the secrets behind what we do and why we look at Scott Warren to look at that. But I’m so important. One other thing is cashflow management, one of the key things as getting paid on time. And Lori, do you guys have tips at level set that you recommend for every contractor to do to basically ensure their timely payments
Lori Drake
Absolutely. So you definitely want to make sure you invoice timely, I mean, that’s going to be your biggest thing with a lot of GCS, they also have specific pay applications that you have to submit. So you want to make sure you understand how and what you’re billing for. Otherwise, it’s just not even going to matter, you’re not going to get paid. You want to protect your lien rights, even on your GC, a lot of people get scared, they will think that they won’t get any more jobs if they like send a notice on their GC or something. It is so common in construction, it people just you know, goes in one ear out the other. So protect your rights, you never know what’s going to happen. We say to definitely send reminders, you know, if they’re not paying in time, like Susan said, you can call your supplier ask for a little more leeway on that, like I mentioned the contracts, definitely make sure you do not sign any pay when paid or pay if paid contracts. You mean you don’t want that risk put on yourself. And we also just Sorry, I lost my place there. But now,
Suzanne Cox
I’ll pick up this, you know, maybe they don’t touch on there is no contract negotiation is really big. A lot of contractors feel like their hands are tied, and they have no, you know, ability to negotiate their contract. But when you start a relationship with someone new, you need to be very transparent about, hey, this is you know, these are the deals that I think would be mutually beneficial. Don’t just take it, you know, if a GC is saying, hey, you know, this is how we do business, ask, you know, ask and maybe maybe ultimately they say no, that’s fine. But, you know, be very transparent about what your needs are as a subcontractor as well, I think communication is really key. And I know some of those conversations can be very difficult to have, but they’re so worth it in the long run.
Lori Drake
So a lot of those contracts will even throw the indemnification clauses in there. I mean, you definitely want to make sure you’re looking through it and make edits, you know, have some initial it off and just have them change, right align it. Yes, most people don’t say anything. So that you know,
Suzanne Cox
they don’t, they’re just like, Oh, I better do whatever they tell me. And yeah, that’s not always true. I think that’s a miss a myth. Yeah.
Scott Peper
We actually did a webinar on that topic. We have an attorney that we worked pretty closely with and they went through basically, there are five or six things that you can negotiate in a construction contract as a subcontractor to a general contractor, that are just key three, four things that are usually pretty negotiable. Most general contracts will accept but they can make a huge difference when it comes to indemnification agreement. And the key real important things to help you within the in the event of a disaster or a bad situation prevent you from being the only person that gets hurt. And you can go to that webinar right on our YouTube channel and find that is posted but it’s great. They lay out the five six main areas and tell you exactly what you can negotiate you know, for a couple 100 bucks. You can have those sections, read them. run by an attorney, and in the front end, and it will save you 10s of 1000s of dollars or more on the back end, and give you a little one more thing to that last.
Suzanne Cox
Maybe question is Lori brought it up is, you know, friendly reminders to get paid? You know, one of the things we do, which is why I’ll tell you no one likes audits, because we come in and ask a bunch of hard questions that they don’t have answers to. And when you know, you’re asking things like, Hey, who’s your collections person? Do you have a person that’s assigned with collections? You have someone calling? And they literally? Don’t think so?
Lori Drake
No, yeah, no, it’s amazing how many contractors do not have anybody calling for their payments?
Suzanne Cox
Not gonna pay for it? Oh, yeah, they feel like that would be inappropriate, or they’re too pushy, or they’re very scared, you know, they’re scared of it. And, and don’t let fear drive your business, you know, that that’s since it should not be driving your business. And so when we ask this question almost 98% of the time, it’s, it’s no, we don’t have anyone doing flexions. Or they’ll say, Oh, the project managers in charge of that. So then we call the project manager, and they’re like, oh, yeah, I don’t do that. You know, and so there’s nothing wrong with asking for payment, especially if someone is past due, you know, so that’s just good. Again, good business structure is to have someone that’s in charge of paying attention to your collection rate, and, you know, calling people and saying, Hey, friendly reminder, your past your 25 days,
Lori Drake
well, that’s where you find out too, if your invoice wasn’t accepted, you know, maybe
Suzanne Cox
it may have been declined, and you didn’t even know it. And that’s, you know, part of the you you mentioned also Lori was, you know, some people have very specific payoffs that they require to be filled out to the near the decimal imperfection. And if there’s one thing wrong with it, or they just don’t really like the font it’s in, they’ll decline it. And so if you don’t have somebody following up on those paths, you your invoice could just be sitting there, and you think, Oh, they’re not paying us because they think our work was crappy, but really, they’re not paying you because they thought your font was bad, you know, so you need to make those calls and understand why you’re not getting paid.
Lori Drake
And two other things on that contract side of things with the invoicing is you have to watch the billing dates as well, a lot of contractors will have like the 15th cut off or the 20th cut off, if you don’t get your invoice in before that time, they’re going to push it off to the next month. And then also retain that you really got to watch your contracts of when retainage it’s easy to hold it out of your drawers, that’s fine. But to find out when you’re going to get paid retainage is that when you’re done with the job is that when the job is totally complete, is it when somebody buys the property, I mean, you definitely want to make sure because otherwise that money is just sitting out there and you can’t count on it for
Suzanne Cox
anything. Absolutely Good point.
Scott Peper
And you know, you know what your know, in reality, what how many days it actually takes for your business to get paid. Because if you think it’s 30 days, or that’s the terms in your contract, but you’re really not, you’re 35 or you’re 45 planning your impact that has a dramatic impact on your cash flow, and showing that maybe you can’t pull your cash flow for maybe your customer is going to pay your 45 Even though you are contracted for 30. But you can make those adjustments and modifications to planning and helping yourself so you’re not in that weekly or daily or monthly stress of cash and managing it. So you the other thing is just be really honest with yourself do the work, don’t just look at the terms that you have, but look at what is in reality you are is actually happening and you are getting paid. A lot of times it’s net 30 After inspection, and maybe the inspection takes an extra six days. So it’s really 36 days from when you submitted the invoice. I mean, there’s a lot of things but just be really, really, really hone in on that and lock in that real number that when you’re doing your planning,
Lori Drake
I can tell you on that same note is there’s a lot of contractors out there that won’t pay until you call and ask for it because they get interest on that money as long as they have it their money there. You know, I watch that. Yeah.
Scott Peper
Well, guys, is there any questions that I should have asked you that I did not?
Suzanne Cox
Maybe not questions, but just maybe additional comment on? You know, it was maybe a few questions ago, if you have bank covenants, or you know, financial ratios that you need to meet for whatever financing you have, or, you know, for bonding or anything like that. So you paying attention to those before you fail them is always a good policy. Yeah. So if you do have cash flow metrics that you need to be aware of, I cannot stress how many times I have met with a client and said hey, what are your you know, does your loan have any covenants? And they’re like, no, no, I don’t have any. And then I open up their loan document and it’s like seven, you know, and I’m like, Well, I think you missed this page. So let’s go over them and usually they’re cash based, you know, they and it’s that’s, you know, service coverage and debt to equity. All these other fun, you know, covenants and so if you’re on this call right now and you haven’t looked at your debt covenants, you may want to take a peek at those because they may relate to cash flow or when you’re closing new financing, you know make sure that you’re asking what are my covenants? What are my responsibilities to not be in default for this you know, financing whatever it is line of credit loan, whatever good questions to ask. So write them write them down a lot of people are just completely unaware of, of some of their covenants and, and cashflow directly ties into them. So another good reason to track it.
Lori Drake
Yeah, I was going to say just as far as your suppliers, ask for help if you need it. I mean, I don’t know any credit manager out there that wouldn’t help somebody that asks for it. We’re used to people just not wanting to pay their bills, or they’re ignoring this. Yeah. But if you actually want help, say you have a new GC that has a path, they will help you, you know, learn how to fill it out. And they’ll help you close the gaps on your aging. And actually,
Suzanne Cox
if you do good work, yes.
Scott Peper
You don’t want to be thrown in a bucket, or have someone make an assumption about you because of previous experiences that aren’t justified. So it’s always good to be honest and upfront with why there is a cash flow concern if there is they don’t think you’re just not trying to paint. So and you know, to the point you made about covenants, actually, Suzanne, I think it’s those should become part of the scorecard that you managed yourself to every month. So when you get those financials, get a list of where are you in those debt coverage ratios, those loan covenants, those other items, and know what they are, so you can know ahead of time. So you can make you have a month or two to manage to that versus all of a sudden, it’s a problem. And it’s getting exacerbated over the next two months, you can start to fix it and adjust it. Which is also the reason why accountants don’t just do your taxes.
Suzanne Cox
So we’re not once a year people. If you have a once a years VBA start calling, you know, on around. Right, I noticed the question in Chad, based on our contracts about getting paid when paid. So we’re not saying that you can always have that leverage, and you may not always be able to negotiate it. So it sounds like it’s not worked for you in the past. And, you know, perhaps Perhaps that’s true, perhaps the GCS you were working with, or the people you were working with. And no, that’s just not something we negotiate on. That may very well be the case. But that’s not the case with everyone. And also this goes back to the more valuable you make your work and your service, the more apt they are to negotiate with you. So that’s just something to consider also, as if someone new that you’re working with, they may say, hey, we don’t know these people we’re not really comfortable with the more work that you do with them. And the more comfortable you are with relationship, you get to the point where you can negotiate those things. So just think of it as a, you know, maybe it didn’t work today, but it might work next year.
Lori Drake
And as you go through, you’ll learn what she sees, we’ll negotiate on that which won’t, and you just decide if you want to take that job, right,
Suzanne Cox
you decide who you want to work with on the flip side as well.
Scott Peper
And working with an attorney to let you know what the risks are of accepting that clause. So you can at least make a good business decision whether you want to accept those risks or not.
Autumn Sullivan
Awesome. Thanks, guys. I just wanted to jump in real quick and let our participants know that I will be sending a replay of this webinar and an email later today or possibly tomorrow morning really depends on how long it takes YouTube to process the video.
A financial capability letter shows your GC that you have the capital to do the project right. Financial capability letters are an important X-factor when bidding on government contracts, but they should be part of every bid you submit as a component of your capability statement. After all, one of the largest concerns a General Contractor has when hiring a subcontractor is whether they have the ability to finance the work that needs to be done before the first payment. A financial capability letter in your capability statement delivers the right message to the GC.
What is a capability statement?
A capability statement is a document included in your bid package to show the General Contractor why they should consider you for the project. The capability statement is much like a personal resume. It shows who your company is, your relevant experience, and differentiators that set you apart from the competition.
When should you send a capability statement?
Many government agencies will require capability statements from contractors as part of the bidding process. Consider the extensive bidding process for government jobs as the gold standard of bidding. Why not go for gold with every bid?
Making a capability statement part of your regular bidding process will give your company a competitive advantage, showcasing the skills and experience of your team and also your commitment to the performance of your team.
What to include in your capability statement?
Remember that your capability statement is much like a professional resume for your business. It needs to SHOW the General Contractor who you are, not just list previous jobs. At a minimum, your capability statement should include:
- An introduction and basic overview of your company
- Share what your company is all about and what you are most proud of
- If they hire you tell them what they can expect from you and your Company every day on that job site / project
- Contact information
- Core competencies
- Your business’s differentiators – Why you?
- Specific experience that relates to the project
- References from General Contractors or clients
Remember, the capability statement is telling a story. Your company is the hero. You are showing the GC that choosing your team is the right decision for this project. Keep it relevant, engaging, and concise.
Include a financial capability letter
Construction has a lot of upfront expenses at the beginning of a project. Those costs — payroll, material orders, equipment, etc. — are almost always handled by the subcontractors on the job. Having sufficient cash flow in place is critical.
Your GC knows this. They’ve seen projects suddenly experience delays because subcontractors can’t afford labor or materials. These delays impact everyone on the job.
Put your GC at ease by showing your numbers in your bid — how much it is really going to take do the job and how you plan to cover those costs. The financial capability letter verifies the “how.” Often in the form of a loan pre-approval letter, a financial capability letter shows that your company’s financial standing has been verified.
If you are not using third-party financing, your bank or CPA should be able to provide a financial capability statement. If you are using third-party financing, your lender will provide one.
Nervous about revealing that you are using financing? We get it. Consider this: The owner or developer has a financing partner. The General Contractor probably does, too. Business, especially construction, requires a lot of upfront cash and long cash flow cycles. It’s normal to need financing. It’s SMART to use financing.
Very few people think the job is being financed with cash in the bank; make your customer comfortable by telling them how you do it. Own the fact that you have a finance partner and that having a good one is how you are able to perform.
Capability statements and financial capability letters may sound like a lot of extra work, but they can be the differentiator that makes all the difference. Invest in creating a capability statement that makes your bid stand apart from the competition, that showcases your ability to perform, and that ensures you have a plan to cover the costs of getting the job done.
Like what you just read? Subscribe to our newsletter.
Read Next
Autumn Sullivan
We have a lot A lot to cover. So we’re gonna go ahead and get started. Hi, everyone. Thank you so much for joining us today. My name is Autumn Sullivan. I’m the Marketing Director at mobilization funding. And today’s webinar is about solving the constructure construction labor challenge. I have amazing guests with me today I’m going to let them introduce themselves and their organizations. Um, Natasha, can we go ahead and start with you?
Natasha Sherwood
Absolutely. My name is Natasha Sherwood. I’m the Executive Director of the independent Electrical Contractors Association ever here on the Florida West Coast and chapter we actually run from Tallahassee in the panhandle, and down to Sarasota ish area, electrical contractors, merit based shops that are constantly looking for labor at all times. So I’m interested to find out if Steve has a solution for me. All right, well, hello, everyone.
Steve Cona
My name is Steve Cona. I’m the president and CEO of Associated Builders and Contractors. We are one of the largest trade associations in the state of Florida. And we also run one of the largest apprenticeship training programs in the state as well. So it’s great to be here. And I was hoping Natasha had all the answers. So that’s why I was here today.
Benjamin Holmgren
Well, that’s three people without the answers. But I’m Benjamin Holmgren, I’m with BuildWit. And we we have to two companies, we have one which is a construction marketing. So we work with heavy civil contractors, dirt companies, earthwork companies, drilling mining, and and we help people tell their stories, we help these companies tell their stories, we help them find great people, we help them with all their marketing, certificate marketing services. And ultimately it comes down to telling stories. Our second business that I’m kind of heading up now is a new project that we just launched called billet leaders, I might talk a little bit about it later. But Bill what leaders is, is really training and development for employees, for teams for leaders. And it’s really about growing leadership in construction. And so I’m sure today, I’ll share a little more about kind of our philosophy behind that and why we started that, because it really has a lot to do with solving the challenges in construction and the the labor shortage. So looking forward to this.
Autumn Sullivan
Awesome, thank you guys so much for your time today. Let’s go ahead and get started. I do want to make a quick note, if you have a question for the panel, please drop it in the q&a section or in the chat. I will be checking that in between questions. And if we don’t get to your question during the webinar, fear not, I will get back with our our guests. And we’ll create a YouTube video specifically answering your question and then we’ll load it up on mobilization fundings YouTube channel. So I promise we’ll try to answer everyone’s questions. Um, so this webinar actually started when I was researching a blog topic on construction labor, and I read a CNN article that said, the construction industry is losing workers faster than it can attract new ones. And I’m going to open this question up to Steve first, Steve, what are some of the factors that are causing this great resignation in the construction industry?
Steve Cona
Well, I don’t I don’t think it’s necessarily a resignation. I think it’s a it’s retirements. I think there are a lot of folks who are aging out of our workforce. And, you know, unfortunately, for our industry, we haven’t done a good enough job to actually replace those folks that that are coming in. So I think a lot of things had to do with it. I mean, obviously, we had a few recessions that hurt our industry. And we just, you know, we just didn’t get the skilled labor backlog. As far as getting our folks trained up now. It is kind of a crisis for us. And we are looking at all avenues to ensure that we are training the next generation of skilled workers.
Autumn Sullivan
Okay. Did anyone want to jump in on that? Or do we want to keep moving?
Natasha Sherwood
I would echo the same thing as electricians are retiring. And it’s mostly retiring faster than we can keep up with it also, I think, and Steve and I live in the same area, it’s kind of seeing the same college for everyone and a big push for college, which, and, you know, my daughter’s at college. It’s it’s great option. But it was in for many years that there was a gap in skilled labor being shown the attention that it should be and the fact that it’s I don’t think it’s an alternative to I think it’s an equal option to college. And that hasn’t been what’s been pushed and so now not only are you overcoming the stigmas with guidance counselors, but teachers And parents and, and there’s a whole new learning cycle that we have to go through. And so we’re seeing that gap between the generation that’s retiring. And this generation that I think we are starting to reach, but it leaves a big gap in the middle. And so I think coming out of these apprentice programs like ABC and IEC offers, is helping to close that. But I think that’s probably one of the most difficult ones is because everyone has been told that college is the first option and if you can’t do college, then we might have these other things for you. And I’m a former K through 12 principal, you know, so I push College on for it but but it’s not for everyone and not just because isn’t the best option. So I think that’s probably what’s driving a lot of our gap.
Autumn Sullivan
Yeah, and we’re gonna we’re gonna get into that, that that narrative precisely in just a little bit. Let’s talk about, um, recruiting and retaining millennials. Then you had the amazing opportunity to speak with Jocko willing on your podcast about millennials and construction specifically. Do you want to talk a little bit about that conversation and what? What is it? What will attract millennials and what will attract millennials to the construction industry?
Benjamin Holmgren
Yeah, so there’s there’s two quick qualifiers before I start one, my boss Aaron, he’s kind of this celebrity Aaron wit. And so I worked for him. He was the one that talked with Jocko. I’ve met Jocko, he’s a great guy. And I saw their conversation. But it wasn’t me. So I just want to clarify that. The second the second is there, there is the millennials conversation. But what’s funny is like, as more time goes on, it’s less and less about millennials, because we’re seeing millennials, like that’s my generation, right? Millennials are all of a sudden in charge. And now we have like Gen Z and these others, these other youngsters that are coming up, and I know I look like I’m 16 years old, but but those kids need to know, you know, and so it’s not just millennials, it’s it’s the next generation as well. So I’ll tell you what we’re seeing and and the conversation with Jocko. This is gonna be maybe the most inflammatory thing I’ll say all day. But I really, really don’t believe that it’s so much a labor shortage, as it is a shortage of leaders who know how to lead the next generation. And that maybe makes a cute soundbite. But ultimately, that’s what the world has changed. And it seems to me that, you know, from traveling around seeing these job sites, talking with people who either are struggling with this, or people companies who have have solved this that, you know, at their level, it’s leadership. Everything’s a leadership issue. And my generation, the younger generation, kids coming out of high school, are less interested in how business was run 40 years ago, kids my age want to get want to have a mission to get behind. They want to have a vision, they want to understand their career path. They want to be led and trained and developed. And, and as Natasha was talking about, the college thing is like, that’s been the you know, we’ll talk more about that. That’s been the big push. But it doesn’t mean that if if I come into the industry or the trades, that I don’t want to be developed that I don’t want to learn, and I don’t want to have education. Absolutely, I do and my generation does. And so that’s one of the big things that we took away from our conversation with Jocko. And it’s, it’s really just backed up everything we’ve been seeing for a couple of years now traveling around the companies who have solved this on the individual level. They understand that it really it’s not about millennials, and the longer that we blame millennials, the longer we blame Gen Z, the worse this is going to get baking ownership of solving this for your company is is the elixir that’s that’s the solution. It’s not millennials.
Autumn Sullivan
It’s not millennials and avocado toast the My Favorite makhado. Toast the well. And I love that you said that because because another data point that I was reading during my research was that culture work culture was actually a major factor in a lot of skilled trade veterans, you know, people who have been in the industry for a long time, it was the reason that they decided to leave. It’s either the reason they decided to leave their current place of employment for another or it’s why they leave the industry entirely. So while we often frame the idea of work culture as a new thing that young people are pushing for, it really seems like everybody wants to talk about work culture in construction. And so my question is open to the panel. Whoever wants to go first. How are you seeing the industry respond to this new call for an awareness of your of your workplace culture. Don’t all jump other ones
Natasha Sherwood
I don’t mind at all I definitely see and you say about, you know, we have a vast, diverse group of contractors, you know, from small to large. And you can tell that no matter the age of the employee, and so we work with our apprentices who are just coming in, you know, just starting in the electrical industry, still into long term. And employees, as we’re looking for the manpower trying to find labor, and they are all looking for a culture that it’s not the perks that we always hear associated with millennial, but it is the benefits, it’s not always a financial benefit, I will see people take a job at a, maybe even a few dollars, even, you know, $1 less an hour type job, but for a good culture for a good company that has benefits and not just like a health insurance benefit, but a family atmosphere, a group that works together flexible time. And, you know, they they are interested in that I just helped a fourth year apprentice with graduate who had opportunity to go anywhere, he took a job at a company that paid I think $2 less an hour, because it was a good fit. And and then we’re also seeing and I’m sure you know, the other thing, we’re seeing people move in from all over the country moving into Florida. So they’re they’re coming in droves. I mean, I think like 900 a day to the state, but many of them are looking for that culture, that they have a feeling of being welcomed, or being included, of having an opportunity to grow and learn whether they’re an 18 year old, or they’re, you know, we just had an apprentice graduate who’s 60 years old, you know, who who wants that opportunity to develop and I think that goes into that culture is that they’re appreciated and that and, and maybe that’s something we did learn from that millennial or, or Xenial. Age Group or whatever, that there’s that level of appreciation that is sometimes more important than the dollar bottom line. And I think that’s sometimes a difference you see between them, but the culture definitely changes where I see them stay, because I see them move the lead here, and they go there, and you kind of track where they go. And I can almost pinpoint clearly where they will end up.
Autumn Sullivan
We had a question from the audience, which I think is an interesting one. And it was about oops, sorry, it was about the correctional industry. So you’re looking at correctional institutions, and working with them as viable solutions for pipeline verge for talent pipeline. Do any of you have any experience working with and I know, there are some groups? I know there’s one out in Seattle, but Do any of you have any experience working with groups that specifically work with, with correctional institutions to train for for construction?
Steve Cona
Think jump in here for a second? Yeah, I think, you know, we’re our our pipeline is we’re looking for all sorts of avenues to fill the pipeline. And one of those avenues obviously, is folks coming out of corrections. And coming back into the industry. What we are saying is that we are getting asked by state leaders, state politicians, to actually, you know, work with them to actually help develop skills while folks are still incarcerated. So we can build some skills when they’re in, in prison or in jail and and work to whenever they get out, help get them back plugged in to society, because I think everyone realizes that if you can give folks opportunities and jobs, when they get out of being incarcerated, I think the chances of them are going back are very, very slim. So we need to make sure that we are doing that investing and I think our industry and Atocha can tell you is very open to partnering with, you know, state lawmakers, state correctional facilities to help us, you know, engage those folks and get them into the workforce.
Natasha Sherwood
We we just started a pre apprenticeship program with the DOJ out of Tallahassee. So I know it sounds weird, but it falls into our area. So it’s our Tallahassee Community College. And the idea is that they will learn a portion of it while they’re in and then they’ll be able to move into a higher level. So whether they test into our second year or third, our programs, a four year program. And so the idea is to start that program, it’s not it’s just in development, and you know, it’s using our curriculum wise but the idea is to provide those workers and both in so you know, it’s a win win is providing some more for them. It means that they have the knowledge something to do while incarcerated. So they have a reason to continue to move towards release. And then from there, they have a skill when they get out a highly employable skill. And then for our contractors who have invested in that in the idea of this program, they have skilled labor coming to them And yeah, I would hope it would expand it is something we’ve just started in. But I see it as, obviously a great place not only for our contractors, but for our state.
Autumn Sullivan
Thank you. Um, so we talked a little bit about, we talked about Gen Z. So let’s talk about shop class, since we’re talking about, since we’re talking about Gen Z and the younger kids, because Gen Z is all the way from 1995 to 2012. Right. So some of them are very little while some of them are already in college. So shop class was almost completely extinct. It’s slowly coming back now. But there’s still a big trade education gap, particularly in high school, but also in middle school. It used to exist and now is almost completely gone. So I’m Natasha, can you talk a little bit about the role of apprenticeships and mentorships, and how they help fill that gap and how companies can get involved? Right, definitely
Natasha Sherwood
Definitely a couple of different ways. And that we work. And I’m going to flip it over to Steve at the end, because he does a lot just not with ABC, but in his own personal life. But so there’s different ones, we work with specific schools that have programs already. And it’s not so much the shot class, what I would love to see is that new to it, it is available at all the high school. So it’s not just you’re going to one school just for that same as the school that we’re working with our pre apprentice type programs, we’re again, they’re kind of taking the first year of our program over four years. And by the time they graduate from high school, they’re able to come into a second year of our program. There’s some programs and with AI built out of Orlando or ACE program, which we are looking to actually copy and look at it, which is providing that mentoring what you’re talking about. So it’s sending workers from our contractors, and to partner with those schools that are right now more considered technical schools, and their speakers or their job shadowing, when they’re allowed off the campus, we get out of COVID, you know, they can go on field trips, and so forth. But that is and what we’re seeing is those contractors that are more involved in the mentoring are having a much better hiring because they already know, you know, that the students know those names of companies and so forth. But I think beyond that, I think it is a it is a figuring out from a community based and I build is one of the ones we’re working with in Orlando and Tampa areas trying to bring the contractor the school together, to better the community. But there still are some of those bridges that aren’t, they’re not burned or anything, just like you said, they’ve been left alone for years. You know, they haven’t, you know, they’re a little wobbly on the bridge. And I think there’s that aspect, but the one we’re not talking about is really trying to bring that into every high school, you know, so that every kid gets that exposure to it. Because if I don’t make that decision in middle school, like you talked about, so if I didn’t make a decision to go to Tampa Bay tech or whatever, technical school, I probably don’t have the chance to change my mind. By the time I’m in ninth or 10th grade. Like I can’t change schools, especially in our districts. It’s not super easy to change High School. And then do you Where are you in the program. So it really does transfer down into that middle school. And we’ve been working with junior achievement on they do and they did a huge program here out of Pinellas a virtual career fair. We used to do real real I went but trying to hit the middle schooler. So the idea was middle schoolers doing some hands on and just seeing the opportunities. And it was everything from, you know, cosmetology, to electricians, to building constructions to graphics, and so forth. And I think that’s where we have to look at is is introducing it and middle schools and making it more available through more high schools, which is where Steve was doing a great job in my area with and trying to really expand it through Hillsborough?
Steve Cona
Well, I will say, the greatest benefit to our industry would be a solid pipeline out of high school into the trades. That is what we are focused on as an association and as an industry, we have to do a better job of attracting students right out of high school into into our industry. I mean, that’s that has to be the main focus and how that works. Obviously, you know, we have to do a better job from a state perspective, from a educational perspective in making sure that our students are aware of all of the opportunities that are available them after high school, you know, not just a particular welding program at a high school or an electrical program at a high school, it has to be a statewide effort to in our educational system to promote opportunities in in all occupations that don’t necessarily require a four year degree and I think that is what we need to see what needs to happen. Because that’s our greatest pipeline right now in our apprenticeship training program. The average age of our apprentice is 2627 years old. That has to be we have to get that lower we have to get that to be 20 to 21 years old, because, you know, we are getting these folks coming into our program, as you know, it’s an afterthought to them, right? They didn’t go to college, they don’t want to work fast food, they don’t want to work in these, you know, hourly jobs, they want to build skills and careers. They shouldn’t have to wait till 26 We should start promoting that in middle schools and and throughout their, you know, K through 12 career.
Natasha Sherwood
Or they went to college and it wasn’t for them. And now they have a lot of debt and they need a real job.
Autumn Sullivan
Yeah, let’s not have student loan debt, I’ll cry.
Benjamin Holmgren
I agree with what Steve said wholeheartedly. And I would chime in on this from our perspective. So admittedly, we’re a marketing firm. So take it with a grain of salt. But yet again, like I bring us back to Gen Z, millennials of where are the eyeballs? I think that we need to do a better job at telling the story of the trades of working in excavation in utilities in electric, electrical and plumbing. And and understand where the eyeballs are. It’s one thing to put on a show at a trade show or a jobs fair, which I admire that I applaud that. I think that’s awesome for local, all of us kind of that’s, that’s good. That’s a great solution. But what about Instagram? Tick tock, I know you’re everybody’s rolling their eyes, whatever. But But you wanted me on the panel.
Autumn Sullivan
This is what this is why I want to do on the panel. But there’s a there’s whatever. 100 Something eyeballs watching this clip right now. And one thing that they could start doing today, if you’re not doing is using social media, to start telling this story of your business of what you’re up to show people what it’s actually like to work in your industry. Talk about it. Like that’s what we see works time and time again, it’s not that you have to try to make it look cool. The trades is already cool. Like it’s amazing. Like get in here and get get into an apprenticeship program. We’re getting to work with a a journeyman for a while, get some years under your belt come like Come join us. That’s what we need to be telling people.
Autumn Sullivan
Yeah, and the comments rolling in really back that up or people are talking about, you know, do you know how many kids leave the foster care. Without a career path? Why aren’t we tapping into them? What about people who leave the military without, you know, having only served two or three years they’re still young they have a lot of they have they already have a good skills background, they obviously have the dedication, so why aren’t we reaching out to them. And what you’re talking about then really makes me think about how the military does a great job of recruiting kids with ROTC officers and billboard campaigns and all of that. So really wrapping wrapping construction into a cool message that that people can that young people can identify with to make it a more generic really to illuminate that it is a viable option. It’s not it’s not a substitution. It’s not lesser than college, it’s just a different path. And, and telling that whole story of not just it’s cool, and it’s fun. But also you can feed your family, you can travel around the country, like there’s a lot of opportunity here, depending on what where you want to go with it.
Benjamin Holmgren
Exactly right. And to to polish off the point. It’s, we need to the narrative, there is the college thing, but the narrative of it’s not just cool. It’s not just fun. But this is absolutely critical. But we can do with fewer underwater basket weaving degree majors week, we need people to put in pipelines? How are you going to turn on your electricity? How are you going to turn on your shower in the morning, if like, where’s your sewage gonna go? This needs to happen. And this is a critical infrastructure. And so that that’s like, there’s more fulfillment in it than people give it credit for. And this is this, this is it’s critical needs to happen.
Autumn Sullivan
And to Steve’s point and to what you just said, it’s more than just, it is more than just construction, we need to give options that we just need all of those skilled trades options that don’t require a four year degree and you and you can still get one if you want. And we’ll talk about the options for continuing education. And maybe that’s where we where we talk about that is is right now. You can still get a college degree and work in construction, but you can be making a good paycheck in the meantime. So Natasha, Steve, whichever whoever wants to take this, let’s talk about the role of offering continuing education as an incentive to retain workers.
Natasha Sherwood
Well, I think there’s two things you talked on. One is continuing education for our industry there are required to use as well so there’s that part where they have to continue learning but then there’s the optional part. So similar to like what Benjamin said about leadership. So where do those next superintendence? Come where those next forming come? And when? Where do you identify them. And Steve and I both also have apprentice programs. So our apprentice programs, we actually were on a call last week with one of our community college partners. So our kids are not only in an apprentice program where they’re on the job training, they’re actually at a community college where they’re you’re earning college credits that they’re not paying for, you know, that they are, and they’re being paid. So there’s that option. But in In addition, and one of the things I’m working with Florida, Prince of association is articulation agreements. And that’s something as a state that we can do. As well as if we provide those articulation agreements that are across the board for the state college system, then it becomes ongoing learning. So not only is what they’re learning to become an apprentice, giving them college credit, they’re then connected with that State College and able to maybe take business classes, and maybe they do want to become, do want to own their own, become a contractor on their own, they want to become estimators, they want to move up. And those options are available through our partners. But then as well, we’re able to do as an association. And I know Steve does similar trainings that make our contractors better, whether it is technical knowledge, business knowledge, or just contributing community knowledge. And I think that does keep them engaged. And it goes back to that Ben was talking about in the culture is it’s an engaged employee, someone who stays with you. Right? So they like where they’re working. You you do business with people you like, it’s not, you know, so you if you have them continuing to become engaged in investing in them. That’s another part of that culture. So yeah, we do everything from fire alarm, burglar alarm, and OSHA and journeyman prep. And similar to what you know, I’m sure and Steve’s doing down there, but the leadership training, and that really is identified, again, getting those kids when they’re 18, to 24, rather than 24 to 26. They get in that pipeline, they’re running jobs by the time they’re 26.
Steve Cona
Yeah, and just to kind of piggyback I think, you know, what we’re saying is, in this day and age in this economy, you have to invest in educating your workforce, there are no unemployed, electricians, and plumbers sitting on the sidelines, they’re already employed. So if you’re gonna build your pipeline, you have to build your pipeline by investing in people who might not necessarily have the skills that you need at that time. But if you’re going to create your own pipeline, investing in your employees, training them, putting them in apprenticeship programs, and you know, what, and actually maintaining it through their lifecycle as an employee, I can tell you right now, one of the things that we’re we’re doing is, you know, training superintendents on how to lead apprentices. Right. Yeah, we talked about Ben, you brought up a good point earlier, like, this is how, you know, you lead to engage, you know, the younger folks coming into the workforce. So, you know, where as, as an association, we’re offering as many courses as we possibly can to focus on how employers upskill their employees and, and, you know, that’s going to be a continuing effort. And we’re gonna see more and more of that, as we as we grow as an industry.
Benjamin Holmgren
Absolutely, this this is sound like a completely shameless plug. But just to back up what both you just said, I mentioned build with leaders during my intro, that’s exactly what we’re doing for the heavy civil dirt, interest industry, like how our vision is, we’re going to create this training platform, it’s live, you can go look it up, you can sign up today. But we create this training platform that teaches Yes, the skills. And we want to be able to take someone from total total newbie out of high school, teach them how to be a great grade checker, or great laborer, and then teach that guy or gal, how to be a great operator, and then how to be a great foreman, to a great superintendent to a great project manager and estimator, and eventually a business leader, like and we can teach all that those are tangible skills. And I think the important thing that that to note is that we need to give youngsters a path. Like we need to show people a path, and that they’re making progress toward a goal that they value. So many people the narrative is that construction is this dead end job. And if you bump into somebody two years later, and they’re like, Yeah, I’m still working in construction. It’s like a bad thing. Like, no, that’s not a bad thing. I’m on track. Yeah, I’m almost through my apprenticeship program or I’m all I just became a foreman. Now I’m learning how to lead my my crews how to deal with superintendents. So that’s what we built build leaders about and for and that’s what that’s the philosophy is like, give people a path, develop your people invest in people as Steve, Steve said, that’s, that’s exactly what we’re seeing. And that’s the huge part of the solution.
Autumn Sullivan
That’s awesome. We have Question from an audience member. Christina asked, What are we doing to address workforce development in disadvantaged and underserved populations. And it dovetails very nicely with one of my questions, which was about diversity as part of the labor challenge. The last research I did had 6% of the workforce of the construction work workforce was African American, and 10% of the workforce was made up by women. So obviously, a lack of diversity is part of the problem. So, Steve, let’s start with you. What strategies would you recommend for a construction company to address their diversity challenge as part of their talent? And pipeline challenge?
Natasha Sherwood
Yeah, no, you’re? That’s a great question. And you’re absolutely correct. But I will tell you from a construction standpoint, and from our apprenticeship program standpoint, we run a very diverse program, I would say, you know, we are we’re probably hovering around, you know, 35%, Hispanic, 18%, African American, where we do struggle, and it’s something that we have to be better at is getting women attracted to coming into our industry. Now, that has changed quite a bit, when you talk about the, from a general contractor’s perspective from project managers to, you know, Assistant Project Managers, you’re seeing a huge influx of females coming in to those positions. We need to be better from a trade perspective training, giving females the options to come in and be electricians. I think right now, in our program, we probably have, we’re training about 350 apprentices and I would say, you know, 12 to 15 of them are female, which is great. I, you know, I’d like it to be I’d like it to be more, but I’m encouraged by what we’re seeing. And to get to the question on, you know, low income, disadvantaged folks, this is the greatest career path for any individual, the quickest way to become a owner. A CEO, is, in my opinion, through the construction industry, once you learn a trade, and then figure out a way to monetize it, you know, it, you can quickly become, you know, from a from a apprentice to a CEO, in a very short period of time, we’ve seen folks that we brought into our programs from disadvantaged communities, I’ll we have an example of a black female apprentice who started two years ago. Now she’s in our, she’s in our program right out of high school, she bought herself a new car, she’s doing very well, providing for her family. So I tell people all the time, this industry doesn’t really see color, it sees skills. And when, you know, if you have those skills, those skills can can take you pretty much anywhere in our industry.
Natasha Sherwood
And I would get our numbers, I just pulled them up to make sure. So we have about 403 across the state, we only have eight women, it’s super sad in an organization run by a woman here and I you know, I still struggle. We diversity wise, it we do better, you know, so we’re pretty similar numbers, we’re probably about 25%, African American, 25%, Hispanic, and then the percent white and other and so forth. And that area seems to work. But I think part of that the diversity is just getting there is again, back up the very first question that gap. So we’re talking a long time ago, when electricians were first being it then we didn’t educate them. So now we’re catching up and, and diversity, we do have a, I think a good handle on but some of that’s reaching out. So like we work with a migrant workers, and we’re heavily involved with the migrant workers around the area and Ami, which is a group with works with kids who have maybe gotten a little trouble and so forth. And then some just disadvantaged groups, and you mentioned foster children as a super big heart of mine. And we have looked at how do you reach out into those groups, as well. And we do have some work with Eckerd. And those are, really is to get to, I mean, believe me, I drove my daughter all the way up to college two weeks ago, being like, you could be an electrician, if you want to do my apprentice. You’d own it for years, like I wouldn’t be dying for this college to drive you to and then I got I got 90 employers where you and you you can pick which one and they will they will hire you. If I get resumes in and if I get a minority woman it is a bidding warfare on my resume first. No, give me the resume first. And then but we do we do have a lack of availability in to connect with them. And I don’t know exactly what it is Steve and I weren’t like I said we were working on a community college today. How do you how do you reach that at that point? population and part of it is a stigma is is again, breaking down those stereotypes that what is involved in it, I think, you know, there’s positives coming out of COVID. And we got to find some right there’s got to be something is that we’ve I want to send workers are none among I’ve stopped working, most of them are working overtime from March 13 2020. They haven’t stopped yet. And so there is there’s that aspect, but also for us to learn how to reach out and some of it comes to the military, someone was asking about the military reach out and some of it is women coming out in military and and where do we direct our resources? And I think it may be one of those things where we have to start working more to all the skilled labor together, you know, kind of working as how to where and how do we reach out and then working with our educational partners? Let’s use some of the funding they get from the state to go target those people who will best build our tomorrow’s literally and figuratively.
Autumn Sullivan
Yeah, there’s there was a great comment in the in the chat that said, it’s not that the space is disadvantaged, but that it lacks opportunity reach outs, and I think that that really speaks to like, you know, each individual organization, each of you are doing great work reaching out to these different to these different populations, these different groups. But it’s really hard to get, you know, to your point, where are we going to put our resources, and it’s it to me, it speaks to a need of a strategic cooperation among many different organizations or many different skilled trades to address this issue. But it’s it’s very, it’s, it’s to me, it’s a positive to see how much work is being done in that area. And then, you know, someone else was talking about, oh, Natasha, real quick, we had a question in the chat. What does that
Natasha Sherwood
mean? I’m actually looking at the actual what it means is AMI kids in in Tampa. And so it’s a group that it’s across the whole state. So I’m looking at real quick what it actually stands for, because I should probably know that but I just always call them I started out as I’m really working with Marine Institute to take students who may have had problems in schools or problems at home, and it took a man they taught them they did High School, and really probably a what you would call apprenticeship but worked on Marine, and that’s what it was, was Marine Institute. But now it has gone out they have pre apprenticeship, construction, pre apprenticeship trainings, and so forth for the students that’ll, so instead of going through their juvenile detention, or to some other diversion, this is a process they can use. And I’m looking it up right now it’s ami kids.org. But let me find out what it actually means. So, um, but it works across the state and they have chapters across the state. And it may be like FFA, FFA, where they’ve gone away from Future Farmers of America. Now they’re just FFA that doesn’t. Yeah, and I’ll tell you if I find it. My kids, it’s all about hey, my kids, but that’s what it is. And if it Yeah, they say my kids.org. So if anybody is interested in how that does work out, I don’t get any kickbacks or anything. They’re just a great group.
Autumn Sullivan
I love it. We have a bunch of questions in the q&a. I have one last question for the panel, which is about that narrative, the narrative that construction is a last resort, the narrative that construction is a dead end job. We know that that is a systemic problem in the industry. We also know that we can’t change the whole industry, because we’re only for people. And so my question for you guys is what can an individual company do to start changing that narrative? What is some of you know, what would you recommend a business owner turn around and start doing today? To to help change that narrative?
Steve Cona
I can I can start. Look, I come from a family of carpenters. Right. You know, my grandfather owned a general contracting business, he built a huge amount of homes in the Tampa Bay area. And when I would work with for my grandfather’s company in the summer, my grandfather would tell me like, you need to go to college, so you don’t have to work like this. So it’s self inflicted, right? So as you know, as we, you know, my grandfather had and you know, an eighth grade education. But he also learned to be a carpenter learned a skill, and, you know, and he ended up having beach houses and a really nice house and, and really nice cars. And I can remember saying, Well, why don’t I want to do this. So I think as an industry, we need to the folks who work in this industry, we need to be are the biggest promoters of that. We need to talk to parents, look, there are parents of, you know, electricians that still want their kids to go to college. And when they say they want to be an electrician, you know, the parents are like, well, but you know, so we have to change the culture. We have to change the narrative, because, you know, this country was built because people learned skills and built it. And, you know, no one can say this country was built because people went to college and I know that sounds bad, but this country was because people learn skills and created things and build things, and I think that’s what we need to continue to push. And you know, and as a parent, I want my kids to learn skills that that can self sustain them, whether it’s college, or whether it’s learning to trade. So as parents, as an industry, we need to be better avenues for pushing, you know, the narrative that this is a viable option.
Natasha Sherwood
I think part of it is also showing what we’re doing that narrative, and we’re making sure that we are living that narrative, but we’re also whether it’s the videos if the TIC TOCs, it’s it’s the espousing the virtues of it, the fact that you can go home, you know, your workday and start early, but you can be home with your kids, you can buy, you know, you’re getting your home, because you’re earning instead of collecting debt, and it’s, um, there is that aspect of reaching to the kids, the TIC TOCs to the kids, but there’s also that part of getting into the guidance counselor’s in the high schools, or the middle schools and, and creating that set, you know, one of the things we’re looking at is what we do field trips, for the guidance counselors, we see what it takes to run a, you know, come see an electrical contract or day an electrical contractor, come see how many aspects you know, come meet my vice president of XYZ company that has a nice boat, and a nice car, and a nice house and no college degree. And, and I think that part of it is it’s discussions like this, it’s discussions that we have as a community is it’s working with our chambers and, and working with our legislators working with our Councilman our representatives. And we’re lucky with the papeles career and we have a governor who is gung ho about funding apprenticeships, and you know, that kind of workforce investment, and I think it’s championing that is talking about it. And it’s not saying just, that’s my worst thing, when I hear I just know, you didn’t just do anything, and yeah, I don’t, I don’t like that I’m just a stay at home mom, or I’m just an electrician, or I’m just an apprentice. And, you know, it is changing that narrative on that part that this is cash, and let’s be honest, financially can be awesome. I mean, let’s speak their language, you know, you can buy a car, you don’t have debt, you can buy a nice house, you make good money, and you have good hours. In there’s also lots of overtime, if you want it and you can go be an instructor, you can be a lifelong learner. And I think those aspects that apart, you know, I didn’t do a good job with my first kid, I got three more, maybe one of them, I’ll get to be an electrician, and that’ll be awesome. But and I think that’s what it is. And it I said I was a K through 12 principal and knew nothing about these opportunities. And any, and I’m like, wow, and I worked with all so low economic kids, you know, the 34,000 for a family for and didn’t know this opportunity existed. And I want to like, you know, hit my forehead like, gosh, I didn’t tell it to these kids. So it’s how, you know, it’s changing that narrative and talking about it.
Benjamin Holmgren
You very well said, Oh, echo some of what you said. But I also want to make a point. Because for, I don’t know, 567 years, owners and leadership in construction, have been saying, We just it’s so hard to find good help. You asked them what what their biggest problem is like, Oh, we just can’t find good help. We have all this work, we can’t find good help. Don’t people get tired of talking about how they can’t find good help. But don’t you just get exhausted saying the same thing for five years, seven years, 10 years. We know you can’t find good help do something. And this is kind of an ironic thing, because we’re on this on this conversation about solving the challenges of labor shortage for the industry. I’m not interested in solving the industry’s labor shortage challenge. But if there’s one person on here, who can take something from this, and it lights a spark and may consult it for them. That was a win, you’re not going to solve the problem for the industry micro isn’t going to fly, bless his heart, he’s not going to fly to your house and help you solve your your, you know the industry’s labor problems. But you can solve it, you can do something for you. And we work with dozens of partners who build it ourselves. We have 40 people, we don’t have a hiring problem. We don’t have a retention problem. Because we tell stories. We see it with our partners all the time, these contractors who are having people moved to new cities to come and work for them. We have dozens of case studies like that, where someone was like, I didn’t even realize that existed. Cool, but I saw you on Instagram 100 times. And now I’m going to move to Tennessee and work for you as a scraper operator, because that’s a bargain. No, by the way dirty little secret is he makes 80 or 100 or $120,000 a year doing so. And so I’ll echo what Steve said well said my friend, we need to be like if you’re if you’re in this and you’re struggling with this, but you’re not talking about it. You’re not being The biggest promoter of it, you’re part of the problem, you need to be telling this story. That’s That’s it and telling a story can look like Instagram and Tiktok. But it can also look like reaching out to your schools and starting these programs and apprenticeships, but it’s on you. That’s the that’s the point, you’re not going to solve it for the industry. Don’t worry about that. Solve it for you.
Autumn Sullivan
Yeah, and that, you know, we talk a lot Mobilization Funding about being a purpose driven business and putting a purpose behind what you do every day. And I really think that that is, is key when it comes to to the talent, the talent challenge as well, if you are, you know, if you are a woman owned business and construction, and you are passionate about spreading that message of opportunity, then you need to be reaching out to those organizations, to see how you can help put your efforts toward, you know, toward that success, reach, reach down, reach out and be helping the next the next generation, you know, whether it’s working with kids, whether it’s working with people coming out of the correctional facilities, whatever it is that you’re that’s part of your purpose, that aligns to your purpose, because when you have that, that authenticity, you will pour into it and it doesn’t feel like extra work, it actually lights you up. And if your team is behind that your whole team becomes advocates for that message, you can really like your whole company becomes part of that machine. And I you know, I could get on my high horse about that for all day. But this is about you guys. So we have a we only have like 10 minutes left. And we have a ton of questions in the q&a. So I’m going to start firing these off. First is from Seth. What about processes for employees seeking to apply? I’ve seen many companies who don’t have a formal process, or make it way too over complicated. And so so that people just don’t apply what what would you guys say to that about processes for hiring?
Natasha Sherwood
I’d say some of ours are super quick, like I got a resume Monday and the guy’s already hired today. And he starts Thursday. But there’s some of my contractors that have a much longer process. And some of it depends on the size of their company and their company. Same thing, their vision and mission. And some of them have a longer process. And some of them, I send them a resume and they’ll hire them. And I think getting past maybe some of those stigmas that it’s difficult, or working with those who don’t, but ours, ours is super simple, but I just don’t think people maybe no, it is, for the most part, not fill out an application. It is send me a resume and it goes out to 90 people. And they probably will have five or six phone calls before I finished sending out the email. Again, like Steve said, there’s no electricians or plumbers sitting waiting for the jobs for the most part anywhere.
Steve Cona
Yeah, and I and I agree with Tasha and and to be perfectly honest in this, in this day and age, not even sometimes a resume is necessary. Sometimes someone who is just willing to get to work and makes the right call or the right call a company, I can tell you that. I would say seven out of 10 of our our companies are hiring right now. So really all you have to do, you can go on the abc.org website, look at our membership list, make calls, just call the company and ask if they’re hiring. If they are, I think it’s a great opportunity for you to take advantage of.
Benjamin Holmgren
It’s important to note that recruiting is sales. So don’t make it hard to sell. You know, don’t make it hard for people to buy from you or come and work for you make that process easy.
Autumn Sullivan
Our next question is from Sharon Do any of you believe a four year degree in construction sciences or construction management adds value and or makes a difference in being promoted?
Steve Cona
I can tell you, as you know, someone who was a college trustee and a school board member, one of the things that I fought for the most is we have all of this amazing curriculum in our industry and Natasha, she has the same. The curriculum is amazing. Why do why does the educational I like to call them the educational authority not say that that curriculum is worth an associate in arts degree or in a bachelor’s degree. You know, it requires the same amount of work and rigor and in fact more because it requires on the job training hours as well. So I think we need to get the educational institutional complex on board with actually saying if you have these credentials, then we will give you you know, a degrees and bachelor’s degrees because there’s no rhyme or reason why someone who is a trained electrician shouldn’t have the same degree as somebody who’s an English major in my opinion, I just don’t see the difference in that and we’ve tried and we’re gonna push and that really needs to change from the educational sector in my opinion.
Natasha Sherwood
Kind of just again, it’s one of the main pushes I have in this apprenticeship Station. association is to make those state colleges to look at our curriculum across the board across the state of Florida. All the state colleges. Here’s if you do this, you take this many courses, this OJT counts for that. So it doesn’t, you know, come back to the questions as a four year, you know, construction degree. My college roommate has a four year construction degree and works in a construction agency and the construction contractor and worked with people who don’t have a degree. And on the same level as he does. He put in his work, I would say four years in college, many of them put him for years and OJT. I don’t know, that necessarily gets them ahead. I think some of what it does is there are some exposure to some other courses that they sometimes are able to see which, which opens your horizon a little bit when she gives you sometimes it This isn’t fair, but I mean, it’s just the honest truth. It gives you the courage to apply for jobs you might not necessarily apply for I don’t necessarily think that you’re any more necessarily qualified. But all of a sudden, there’s that stigma associated and that history that we have, and that I have a college degree I can apply for this job. So many jobs require well requires a high school degree, but preferred is a bachelor’s and I used to be K through 12 teacher I had some great teachers that were a teacher assistants that were much better teachers with no degree than some of my teachers, you know, who went through the master’s degrees? And so does it help? Yes, it helps. But it is more sometimes I think, because of the courage that and sometimes the, the they feel I get from it not because they necessarily know a whole lot more. And I think we’re changing and moving away from that. And I wouldn’t be surprised to see college degrees. And college programs become more mirroring our apprentice programs than vice versa. You know, you already see specialized degrees that are steering away from the undergraduate liberal arts and are steering more towards really getting into their industry, which essentially as an apprentice program.
Benjamin Holmgren
I’ll just ask who’s paying for it? If mom and dad are paying for it, help yourself? Yeah, go for it. If you want to just become a construction superintendent. And you think the degree is gonna help, I would just go to go to work. Again, you don’t settle up yourself with six figures in college debt, and end up in the same spot.
Natasha Sherwood
And many companies will pay for it after you’ve been there. That’s right, you do have a degree to get that degree.
Benjamin Holmgren
Yeah. But if you can go as Natasha said, you can go and, and get exposure to other things and network and all that. And have a good time. Congrats, good for you.
Autumn Sullivan
So our next question is from Amanda, a big thing we’re seeing in outreach efforts is job readiness, or lack of job readiness, which is you know, being on time and preparing ahead. This varies from high school age to other groups. How would you address job preparing people job readiness for a job and construction, the details of like, you have to be here on time and should probably wear close toed shoes.
Natasha Sherwood
It’s so true. We have in front of our new a new worker training on the new worker trainings we do. But we make it available for our contractors, but it’s something that’s being developed but we see it even in the resumes or applications. I say resumes because sometimes they don’t know how to write a resume, right? So they don’t even though they’ve been through high school, not necessarily capitalization is not a big thing anymore, right? It is you text is all in all lowercase. And so some of it’s that and then showing up and some of there is some talking through what’s appropriate to wear. And it doesn’t have to be nice. It can it can be from the goodwill down the street, a nice pair of khakis and go for you know, $2 khakis and a $2 collared shirt and, and then also just answering questions. But showing up not just on time showing up for an interview is something that we’re working through. I was Dakota, I just had a board meeting and one of the members said, Yeah, he got a raise, because he made it to the second interview. And I was like, wow, okay, you know. And so we do have that problem. But I don’t think it is specific to construction. It is specific to where we are in this and the world we live in right now. And we were virtual for a year like we didn’t we didn’t leave our houses like we didn’t leave PJ’s. And, you know, we put on shirts and maybe had on shorts. So there is that aspect. And it is a portion of, we go over dress code, the first night of our apprentice program, and that is, please don’t wear opaque clothing. And please wear things that I don’t see, you know, cover your shoulders. And I don’t want to see portions of you that don’t need to be seen. And that is something we go over the soft skills, per se is what you say, you know, and we talked about proper email. And those things are important for them to do that progression. And that is that constant learning that Ben was talking about is it may not be constantly learning about bending pipe. It may be constantly learning about how to work with people because essentially what we’re all doing right, we’re all working with other people. If we’ll learn along the way, it’s great, but if you can’t work with people, you’re probably not going to do well in any industry, any industry, right?
Steve Cona
That’s exactly and I think one of the things that Sorry, sorry, sorry, Ben, I think one of the things that and I’ll be quick, one of the things that, that we tell our apprentices is look, or people who are wanting to get into the trade, you know, show up, be on time and be eager to learn. That’s all you have to do. That is all you have to do. But that, but but that’s tough for some folks. And I think, you know, that’s kind of the world we live in today. But you know, be present, be on time and be willing to learn. And I think if, if they can, if they do that, they’ll go far in our industry.
Natasha Sherwood
And I would ask, I would add, one thing we’ve told them is to ask for help. There is a unwillingness to help ask for help. So whether it’s you need a ride, because many of the kids is 18 year olds, they don’t have driver’s license, like to me was the biggest thing, that driver’s license, because they never even thought about getting a car, or they would be able to get a car. So if you need help, ask if you don’t understand the math of it, ask. And that has not something that’s always been pushed in there K through 12. world, but ask ask ask.
Autumn Sullivan
Well, and interestingly enough, I’ve read a lot of material about how that’s part of the construction culture that that has been pervasive and now is changing is it’s a culture of you don’t ask what you don’t know. You just, you just figure it out. Or you just pretend that you know and hope that it works. But But now research is showing that that that’s a productivity issue. It’s a performance issue, it’s also a safety issue. So it’s a huge safety issue. So So that’s part of the culture that is changing. And that’s kind of opening up the topics of it’s okay to admit you don’t know something, it’s okay to ask a question. It’s okay to be a little bit, a little bit vulnerable, right. And this, you know, kind of what has been historically a male dominated kind of tough industry, it’s starting to open up and say, Look, you have to be able to talk because if you don’t know how to do something, not only does it mean that we’re gonna have to redo this later, but you might get hurt. So our next question is from John, and it is how can technology play a role in attracting new construction workers gently is a great and great topic to dive into in our last few minutes. I’ll go first.
Benjamin Holmgren
We already talked a little bit about social media, the internet, the interwebs. But I would also say that what we’re seeing there’s there’s more and more technology being developed, to help do the job better. Everything from you know, and you guys see it in your industry as well. But But laser, and, and GPS, and all this stuff, there’s actually like a, there is a tremendous amount of technology in the industry. And I think that’s another dirty little secret. People think that if they go work for a dirt company that say that they’re going to end up with the, you know, the dumb end of a shovel all the time. It’s like, No, you can you can, if whether it’s software or hardware, there’s tons of technology that takes a lot of learning and a lot of training and a lot of skill to be able to use there. Like it is incredible. It’s like someone’s rocket surgery. So I think there’s a lot of, there’s a lot of opportunity there for people who may be more interested in a kind of a technology background, like you can work for a company who work for an electrical contractor, and have a heavy tech bent, and get what you need. From that, get your get your kicks from that.
Natasha Sherwood
I think we’ve also seen I mean, the electrical industry goes, it’s changes, right? So we’re always gonna need electricity. It’s just where’s that electricity coming from? So is it low voltage? Is it solar? Are they coming from, you know, what aspects are that? You know, you’re, we’re gonna need air conditioning for it right? You’re always gonna need air conditioning, it’s just not gonna not be something you need in Florida. So how’s the air conditioning? Getting? Is it solar? Is it ah, you know, are you low voltage? Who’s working on it? Who’s putting it in your cars? Like, are you gonna plug your car in? Well, that’s electricity. So there are those new edge parts of technology. But then kind of going back to almost an old technology, like we’ve started offering more of our apprenticeship programs, apprentice programs online, so our students are working in different parts of the state, and they’re going in, we’re making that available to them. Again, we had a small program online, COVID hit and we’re like, Okay, this can work. So now there’s a larger portion. And we’re able to reach more students and students who might not have been in an area, but it also identified an area where, where we didn’t necessarily know that there was a gap in that technology. So as the technology becomes positive, it’s also opening up those areas where we know that technology is maybe a deficit. So I think it’s both
Steve Cona
just to add and kind of what Natasha and Benjamin both hit on. A lot of these commercial buildings are built online way before they’re actually built in real life. So You know, they are building jobs because of the lack of workforce. A lot of these jobs are very efficient and they’re built and you know, someone who sits in a, in a, you know, in a forklift or you know, those things are air conditioned now, like it used to be before. So technology is radio a lot easier. Yeah, technology is making it a lot easier for, for our for our skilled labor workers. And, you know, we’re we’re proud of all of the technological breakthroughs that we’re having in the construction industry right
Autumn Sullivan
now. Well, it’s 101. I want to respect everyone’s time. Thank you guys so much for doing this. I think each one of you said you didn’t have all the answers. But I think collectively, you provided an awful lot of answers and an awful lot of help for our audience. So thank you so much. I appreciate each and every one of you. And thank you, everyone for for joining us today. It was a huge turnout, I am so honored that you chose to spend an hour with us. The last comment in the q&a is great conversation on preparing for the future. Any suggestions on resources to find construction management type folks, quality control superintendent, safety managers? I’ll let you guys answer that. But one thing I did want to say is, I know for a fact there are some recruiting people who specialize in construction who are in the audience right now. There is a LinkedIn event chat for this for this webinar. You can email me at a dot Sullivan at mobilization funding comm if you need a link for that. But if you go on to LinkedIn and you look up, mobilization funding, you’ll find it, I thoroughly encourage all of you to introduce yourselves in that chat and what you do so connect with each other, there were 200 people on this webinar, let’s start connecting, let’s start building these things. Let’s find the solutions for each other. So I just wanted to put that out there. And then if any of you have a resource for finding those kinds of high level people, then let’s go ahead and share and then we’ll we’ll wrap up for the day. Well, if
Steve Cona
you want to go to ABC, FL golf, Gu lf.org, go to our website, my email addresses on there, you can look at all of our resources, you can look at all of our member companies. And if you are interested in any careers in the construction industry, please feel free to email me and my email addresses on the website.
Natasha Sherwood
And I would say I mean ours is ours is IEC florida.org. And I don’t know where to find them. If you do if you’ll let me know because my people would like to hire them. But in the end, I think the part is is building them to part of him is investing and you may have to create your own pipeline for me who you have. But similar to Steve’s all my informations on there, you can reach out through the IEC florida.org. And we do have resumes on there under resources for people looking for jobs. They’re not they’re very long, they don’t last a whole long time. So feel free to check them out. And I think the other part is there are kinda like answer. There’s some staffing companies that work specifically in that some trade partner and there’s just different ones you can look out. If you look up, you know, construction, and temp jobs and so forth, they sometimes will have people in there or join one of our associations, I’m sure I’m sure it will take a member I definitely remember I’ll tell you we don’t borrow. So that is our solution. When I’m one of my guys, one of my companies needs more workers they borrowed from another company in our association. So that’s how we we solve that. So if you’re an electrician, give us a call and give Steve a call. I definitely can help you with this or we’ll train them for you put on my apprentice program. We got some good ones.
Benjamin Holmgren
Okay, yep, for anyone who’s left on the call here, please reach out to me on LinkedIn, just send me a connection request so you can kind of be in touch I post about this stuff all the time, like nearly every day on LinkedIn. So that’s a great place to reach me. And then we also have a handful of recruiters that work for us in house so if you’re interested in anything in dirt in excavation, heavy civil, we can we can definitely help with that either. If you’re if you’re somebody looking for a job or if you’re looking to recruit people we might be able to help with help you out with that at Build with so reach out to me.
Autumn Sullivan
Thank you everyone. If you had to leave early or you didn’t get to join live just so you know we will be doing a webinar replay it will be available on YouTube and I will be sending out an email with a link to that to everyone who registered so you can watch it again and again. Thank you everyone so much take care be well.
The state of construction cash flow in 2021 is well below the level of comfort for most contractors; the industry is still recovering from the damaging effects of the pandemic. Our good friends at Levelset recently released the 2021 Construction Cash Flow & Payment Report, a detailed report on the state of cash flow and payments in the industry.
We wish we’d been surprised by the takeaways, but we talk to contractors every day about cash flow. We know how hard it is out there right now.
Construction Cash Flow 2021 Takeaways
· Out of the 764 respondents, 9% said that they get paid on time
· 97% experienced stress related to late payments and cash flow
· 71% of companies filed for a lien
According to the report, 33% of contractors finance cash flow gaps. Financing growth is actually a smart business move and financing a short-term project cash flow gap can actually improve outcomes on the project, but regular gaps in your operations cash flow can spell serious trouble. There is a BIG difference between financing cash flow gaps in your project versus organizational cash flow shortages. If there are continual cash flow gaps in the business that could be a sign of much greater problems.
The slow payment cycle and payment delays typical to construction contribute to cash flow issues for many contractors. Stress over cash flow impacts your company’s ability to grow AND your team’s ability to perform on the job. The good news is there are simple steps you can take to improve your company’s cash flow.
Hire an accountant.
An accountant is a partner to your business – they are NOT just someone that does your taxes. With an accountant on your team, you will be able to forecast gaps that could hurt your company and help you solve for them in advance. Knowing how to calculate and control your company’s cash flow will positively influence your businesses’ profit and revenue.
Don’t want to spend money on an accountant? Most companies find that a good CPA will pay for themselves just in the tax savings they uncover. Also, consider how much time you spend each week keeping your accounts in order. Finally, what would you be willing to pay to have peace of mind that your company is cash flow positive and growing on a solid foundation of working capital?
Communicate early and often.
Communication is instrumental in building trust. Good communication is a predecessor for good relationships. If you have questions during the bidding process or after, make sure to ask the general contractor to clarify. Doing this, as well as sending preliminary notices, can lead to punctual payments.
Some contractors are hesitant to send preliminary notices, but part of good communication is setting expectations early and clearly. Sending pre-project notices, documenting everything (even if it is just by email), and insisting on change orders all work to keep your expectations clear and present in the GC’s mind.
If a payment is delayed, reach out and ask why. Don’t assume. Keep communications positive and solution-oriented. Remember, you are on the same team working to get the project finished, preferably with a profit for both of you. Solve problems for your GC or, even better, ask them how you can help them solve the problems they are having with their customer.
Refer to How to Get Paid and What to Do When You Don’t for more information on effective communication with contractors.
Plan cash flow by project.
Estimating and tracking cash flows for each of your projects can increase your businesses fluidity immensely. By managing cash flows, you know exactly how much money you’ll need for payroll, materials, insurance and other expenses. You’ll also know when you’ll get paid (provided you get paid on time). This allows you to see the cash flow gaps on a project before they happen. It also allows a business owner the ability to mitigate risk and organize investments. Project cash flow management doesn’t only impact the specific job, it also affects the business as a whole. Healthy cash flows mean that a company is growing and expanding. Cash management and stability can be determined by tracking your cash flows.
Cash flow in construction is tough, but not impossible and not beyond your ability to control. The pandemic impacted every industry, but construction survived and has recovered swiftly — in no small part due to the mental toughness of its people, people like YOU.
We cannot go back and change the damage done by the pandemic; we must instead focus on the future. Good cash flow management is one of the biggest factors in ensuring your company’s future is bright and filled with opportunity.
This article was written by our Summer Intern, Matthew Smith. Matthew attends Auburn University (Go Tigers!) and is studying finance and marketing. Thank you for all your hard work, Matt and good luck on the new school year!
Like what you just read? Subscribe to our newsletter.
Read Next
The construction labor shortage was bad before the coronavirus pandemic; now it is a full-blown crisis. According to a CNN Business article, the construction industry lost 1 million workers during the initial months of lockdown. Now, the article states, the industry is losing workers faster than it can recruit new ones.
According to the 2020 Construction Outlook Survey, 81% of construction businesses have trouble filling positions, whether they are skilled tradesman roles or salaried office positions.
That labor shortage has a real impact on performance and profitability. According to the same survey, 40% of firms have experienced project delays, and 23% are being forced to extend completion times in bids because of staffing shortages.
There is also an impact on jobsite safety. Fewer workers means longer hours and more chances of workers performing tasks they are not experienced in. Fifty-seven percent of the construction companies surveyed listed inexperienced skilled labor or labor shortages in general as the biggest challenge to crew safety.
So, why are construction workers leaving the industry? And what can business owners do to recruit and retain quality workers?
Money isn’t the silver-bullet you think it is
According to the 2020 Construction Outlook Survey, 52% of construction businesses are looking to grow their business by 1-10 people, and almost 25% are looking to grow their team by more than 10 people. That’s a lot of open positions.
So, what makes your job offer stand out?
If your answer is Wages, think again. Fifty-four percent of companies have already increased salary rates. In fact, the national average wage for a construction worker is $32.86, much higher than the average wage in other industries like hospitality or retail.
Money matters, no doubt about it, but it is not the end-all be-all that many construction leaders assume it is. For example, workplace culture and the potential for advancement matter as much, if not more, to younger construction workers.
Besides, paying people competitively for hard work that often involves physical labor and mental toughness shouldn’t be an incentive. It should be a given.
Which brings us to the elephant in the room. Workplace culture.
Workplace culture matters more than you think
Workplace culture is driving many construction veterans to leave the industry.
Stop. Read that again.
That stereotype of the silent, tough-as-nails Joe who gets it done no matter what, who never talks about his pain or his feelings, who takes all the yelling and backstabbing without a peep …. Yeah, that guy is an illusion.
The truth is that construction workers are human, and nobody likes being treated disrespectfully. Most of us want to be able to admit we need help, or that we don’t know how to do something, without fear of bullying or punishment from management. All of us want to feel like our work matters, and all of us want to be able to spend time with the family we work to support.
Nobody wants to work in a toxic work environment, and now construction workers are starting to demand better.
This is doubly problematic, as referrals from employees is one of the best ways to find your next rock star employee. Construction is all about relationships, and friendships run deep within the skilled trades. If you have hostile managers, unrealistic expectations, and no career development opportunities, your exiting crew members will tell their friends.
Younger generations list workplace culture, community, and growth potential along with salary as the most important qualities in a new role. To recruit new blood into the industry, construction businesses should focus on culture, continuing education, and career advancement. Your culture and your sense of team matter the most to people. If you don’t have that or know exactly what that is then start right there educating yourself, your leadership team and then make the changes.
Invest early in new, diverse talent
According to the Bureau of Labor Statistics, just 6% of construction workers are Black or African American. About 10% of the labor force is women. That’s a glaring diversity problem. It’s also a labor problem.
Few minorities enter the construction workforce because they aren’t familiar with it, according to the Associated General Contractors of America. Introducing underrepresented groups to the opportunities in construction, through vocational school programs, technical colleges, and other community outreach, can help solve your labor problem and impact the industry’s overall diversity issue.
Investing in diversity is also investing in innovation and productivity. Companies with diverse management teams have 19% higher revenue due to innovation. Basically, if you need new solutions to problems, you need to introduce new perspectives.
Diversity without inclusion, however, is meaningless. Culture is also part of construction’s diversity challenge. Construction Dive recently published a six-part series on racism in the construction industry. Over 40% of respondents to Construction Dive’s related survey said they had seen racist graffiti, and 38% reported hearing verbal abuse or ethnic slurs.
Another challenge to recruiting in construction is the decline of shop classes in the public education system. These classes are often a gateway for students into the world of construction. Shop classes gave students who didn’t want to pursue a college degree a peek into the world of specialized trades in construction.
The good news is shop classes, after a sharp drop a few years ago, are starting to come back. An increase in interest in the industry has also led to multitudes of technical colleges offering certifications and local trade organizations offer apprenticeships and training.
Here’s your competitive advantage in the talent battle — get involved and stay involved.
Reach out to your local technical college and get involved in their construction programs. Volunteer to be an expert guest, or let a class visit your shop and answer questions there. Work with your trade organization to offer apprenticeships. Bringing people in as apprentices gives you a chance to show them your culture, and gives them a chance to see themselves as part of your team. Donate materials to the local high school shop class. Volunteer time to speak to the kids, or bring them to shop.
Invest in people early in their career and they will never forget you and the help you offered. Even if they don’t join your organization, or eventually leave after years of loyal service, they’ll always speak highly of you.
Labor shortages are complex problems with multiple, intersecting causes. Will building a work culture of respect, dignity, and trust at your business solve all of them? No, but having a positive, supportive work culture will help you attract new recruits and keep the rock star talent you already have.
It will also create a place where everyone, including You, enjoys coming to work.
Recommended Reading
Cash is the lifeblood of your contractor business but getting that cash can be a nightmare. We asked Lori J Drake, CBA, Levelset‘s Payment Professional’s Community Manager, to join MF CEO Scott Peper for a conversation about the most common reasons payments get delayed, what to do if a GC payment is late, and how to keep your cash coming in on-time.
Why does it take so long for subcontractors to get paid?
The best place to start is to understand that payments in construction operate on a waterfall model. Subcontractors are at the end of that stream of cash, and so their wait is longer. It typically starts with a bank or financial institution, the one financing the owner or developer.
Are there “bad” general contractors out there? Sure. Bad owners, bad projects. But the majority of the problem stems from the macro factors around construction cash flow — things you cannot change. The owner or developer has already put in a lot of work before the project is off the ground. They typically have put a lot of their own cash in long before they secured funding from the bank or a government fund.
The GCs are in a similar boat — they have a lot to do and manage before the work starts. And of course, the subcontractor does the work, has it checked two or three times before it is approved and submitting it for payment.
Then, if you submit your pay app correctly, you wait 30-80 days for payment.
And that is another reason payments are slow in construction — a complex and laborious pay application system. Many GCs only pay once a month, and if your pay app misses the deadline or has errors, you have to wait another month before you get paid.
Lori recommends making sure everyone on the job knows you exist right from the start. “Send a preliminary notice on any job that you do. … anyone that you want to make sure that your risk is minimized. If you don’t send a preliminary notice the owner of the property, other subs, GCs — anyone in that payment waterfall — if they don’t know you exist, they can’t make sure that you get payments. So that I would say is the number one step.”
Nervous to file a preliminary notice? Don’t be. Preliminary notices aren’t a threat; they aren’t hassling your GC. They are your normal operations, your due diligence to protect your company so you can focus on PERFORMANCE. “When you do great work, you expect to be paid,” says Scott. “To keep honest people honest, we put locks on doors. To keep money flowing when it’s supposed to you let people know you’re there.”
How can subcontractors ensure faster payments?
The first step in ensuring faster payments happens before you ever put boots on the site. Check the credit worthiness of your general contractor. Levelset has a Contractor Profile tool that shows how many jobs a contractor has performed annually, how they performed, the types of jobs, and feedback from the people who have worked with them. “It gives you a whole bunch of information that you really can’t find anywhere else,” says Lori. “It’s kind of like a trade reference on the GC but with a lot more information.”
If you are working on a government project, you can relax a bit. There’s usually a payment bond in place.
Document everything. Follow the spirit and the letter of your contract. Ask your General Contractor any questions you have about documentation, change orders, pay apps — literally anything you are unsure of. Scott puts it like this, “I had a boss that used to tell me, ‘You know, Scott, I can protect you from anything, you just have to make yourself bulletproof. If you’re in the construction world, and you have a contract that says you need to do something specific each day or each week, then do it. Keep yourself bulletproof.”
Submitting the preliminary notice also helps speed up payment. It lets everyone on the job know that you exist and that you are doing your due diligence to get paid. You can also send conditional waivers with each invoice or pay application. The GC has to sign it, acknowledging what you are billing them for, and agreeing to contact you if there are any issues.
Submit demands for payments promptly. If you have 20-day terms with your GC, then remind them you are still waiting for payment on day 21. Don’t worry about appearing annoying (unless your approach is to be annoying, in which case slow payments are not your biggest problem.) “The ones that ask questions are the ones that get paid faster,” says Lori. “If you’re not asking, they’re not worried about it.”
Finally, you can speed up payments with technology. Accepting online payments and credit card payments eliminates the wait for paper checks to make it through the mail. It also removes the chance that your check gets lost in the mail. When you get paid online, you get your money immediately. “Most GCs love to pay with a credit card,” says Lori. “They get rewards off it and get another 30 days to pay their credit card. If you can find a way to do that, it’s definitely going to be in your favor.”
What to do when a payment is late?
A popular, if drastic, option is a mechanic’s lien. It’s important to know the laws in your state — when you have to send a preliminary, when you send a first or second, when you file a lien, when you have to foreclose on a lien, etc. This course of action can lead to negative repercussions, but it is a way to get recourse and get your money back.
Get everything in writing. If your contract says that the GC is supposed to pay in 30 days and it’s day 33, that’s a breach of contract. If the GC doesn’t do what they are supposed to do, even in the smallest detail, it is a breach on contract. Lori says, “If you had any inclination that this person isn’t going to pay you even prior to sending notices, you can file suit on that and then continue to send notices. It’s a very strong law that does get played out a lot.”
Scott adds that working with a construction lawyer can help avoid payment issues and get you paid when an issue arises. Because contract laws, and contract language, can be hard to interpret and different laws and policies can help or hurt you.
For example, if you have a Paid When Paid clause that you’ve agreed to, it may impact your ability to utilize a prompt payment law. A contract lawyer can help you remove some of the ambiguity. Scott says,
“One hour of an attorney’s time to review your contract can pick the four or five or six main clauses that can keep you from a real disaster.”
Simple things like good documentation and good communication with the GC upfront can make a real difference, adds Lori. “Stay on top of your deadlines. Make sure you keep in contact with people. Stay aware of what’s going on with each project and everybody that’s on it. It’ll make a big difference.”
Contract financing is a way for businesses that operate through contracted work to secure funds in advance of the work being performed. If you’ve ever turned down work because you didn’t have the cash flow for the initial labor, materials, or other costs associated with the project, contract financing might be the financial solution for you.
What is contract financing?
Contract financing alleviates the cash flow gap that occurs when you have expenses related to a new project contract, but will not be paid by your customer until after the work is underway or completed. The financing is a loan collateralized by your contract. Contract financing differs from invoice factoring in that the advanced funds are available before you send an invoice. Also, you still own your receivable.
Funding limits vary, but typically a contract financing firm will lend up to 20% of the contract value. (That is Mobilization Funding’s funding cap on contract-backed loans, as well.)
Who does it help?
Contract financing works best for businesses that have a solid performance history and are growing faster than their free cash flow can accommodate. These businesses usually have their operational cash flow management under control, and may even have other forms of funding available such as SBA loans or credit lines from their bank. However, contract financing allows them to grow securely by accepting large contracts without straining their cash flow or drying up their other funding options, which are better utilized elsewhere.
For example, let’s assume Lightning Man Inc. is an electrical contractor in Tampa, Florida, owned by Joe Mitchell. The company has an annual revenue of about $2 million, and is in a phase of rapid growth. They’ve just been awarded a $1.8 million contract with a GC. The work includes all electrical systems in a new corporate campus park. The contract is Paid When Paid, with monthly billing at the end of every month. Joe knows he’ll have at least three payroll periods for his crew, not to mention supplies and materials expenses, before he’ll even submit his first pay app.
A contract-backed loan allows Joe to cover those expenses without dipping into the cash flow for his other projects or the operating cash he needs to pay for his overhead expenses. It also means he can save his bank line of credit for other organizational costs associated with Lightning Man’s growth.
Contract financing isn’t only for construction contractors. If you earn revenue through contract work, and you could use funds to cover the initial costs of that work, contract financing may be a viable funding solution for you.
How does contract financing work?
Let’s stay with our friend Joe aka “the Lightning Man” for a bit longer. Joe knows he needs payroll money before he sends an invoice, so invoice factoring can’t help him here. He calls Mobilization Funding — we’ll use ourselves as an example to keep things easy — and asks about contract financing.
After a quick preliminary chat, one of our team members tells Joe, “It sounds like you’re a perfect fit. You have a great work history, this work is right in your wheelhouse, and your business sounds solid. I’ll send you a follow-up email with our next steps.”
Here’s what a contract financing company typically asks for:
- A complete loan application
- Owner identification
- Copy of the contract for the project
- Company financial documents such as bank statements, tax returns, income statement, balance sheet, and an accounts receivable report
With the copy of the contract, Joe and our Project Funding Manager sit down to create a Cash Flow Schedule. (We have a sample Cash Flow Worksheet available on our site. Click here to access it.) This shows Joe when his project will have cash flow gaps that our loan can cover, and when the project will be self-funding. We align our repayment schedule to when Joe’s customer will be paying him, so that he doesn’t have to use his organizational cash flow to pay us back.
The loan documents are executed, and a bank account under the name and Tax ID of Lightning Man Inc. is opened for the funding. Since the loan is based on the contract, it is imperative to the lender that all funds for this job stay on the job. Through the execution of a funds directive, all monies associated with the project come through this bank account.
In the end, we loan Joe $200,000 for labor and sub-labor on the project. He pays us back in installments as he receives payment from the general contractor. Joe is able to start the job with the right amount of labor and all the materials he needs, which actually ends up saving him money through his team’s efficiency. He completes the project and earns a healthy margin. Best of all, the GC appreciated Joe’s ability to expedite his work and stay ahead of schedule. Lightning Man Inc. has a new and important ally in its quest for growth.
When your business has the cash to start new work without sacrificing other projects, or cash that can be used for other business expenses, your team can get to work with total confidence and YOU can focus on your real job — growing your business.
Read Next
If you enjoyed this blog, you’ll love our newsletter. You can subscribe by clicking here.
We’ve created a lot of resources about the importance of cash flow management for your business. Let’s take a step backward and start at the beginning. What IS cash flow and why is it so important to understand your company’s cash flow?
What is Cash Flow?
Cash flow is the net amount of cash (and other cash-equivalent assets) that move in and out of your business. They flow in when cash is received — which is called inflows — and they flow out when money is spent (outflows).
Cash flow is often referred to as “the lifeblood of your business,” but another analogy is that cash flow is your company’s oxygen. Cash must flow in, and cash must flow out. This flow of cash in and out of your company is needed to keep it breathing — to pay your team and your vendors, to invest in growth and to heal from unexpected challenges or adversity.
There are several types of cash flow business owners should know, understand, and track. Let’s quickly define these, along with a few other terms you should understand in order to manage the finances of your business.
Operating cash flow is all cash generated by the purchase of your company’s main service or product.
Investing cash flow includes cash generated by investments in capital assets or other ventures.
Financing cash flow is the money you take in from debt or equity, less the payments you make on that debt or equity.
Positive cash flow shows that your cash flow is increasing — more money is coming in than out.
Negative cash flow, conversely, shows that your company has more outgoing money than incoming.
IMPORTANT NOTE: Cash flow can shift from positive to negative or vice versa from week to week or month to month. This is why proper cash flow management is so important.
Free cash flow is the money leftover after all expenses are paid. Free cash is one of the most important aspects of cash flow management, as it determines your ability to grow, to recover from a bad project or a bad season. Free cash flow can also impact your team’s performance.
Operating account is the general bank account used to process most of a company’s expenses. Many businesses run everything through an operational account, however, we recommend setting up at least one separate account.
Payroll account is a bank account reserved for payroll activity. Separating this from operations ensures you always have enough money for payroll, and that you can easily track payroll separate from other expenses, ensure the payroll taxes are paid, and any other employee related compensation associated to the business.
How cash flow relates to profit
Obviously not all of the money generated by your company’s activities is profit, but it is all part of your cash flow. Knowing how much of the revenue generated is profit, or free cash, and how much must be reserved for expenses, is critical to cash flow management and the vitality of your business.
It is entirely possible to be profitable and have a negative cash flow. This is especially common if there is a long delay in payment and whether or not you are running using Accrual or Cash based accounting. It is also possible to have a positive cash flow and not be profitable. For example, if a construction contractor company is taking on some additional debt or factoring their receivables they could likely create positive cash flow for a certain period of time. However, if the company’s bids are too low to accommodate overhead and project expenses, or the company’s debt payments or overall expenses are too high, the company will not be profitable despite the additional cash created by the loan or factoring.
Managing your company’s cash flow
The first piece of advice we give clients struggling with cash flow management is, Hire an accountant. Preferably a CPA. This first step is a huge differentiator. The accountant will create a structure to manage your books and your business
A lot of business owners start out managing their own books, only to discover too late that business financial management is far more complex than balancing your household checkbook. Hiring an experienced accountant or CPA pays for itself when you consider:
- the time you’ll save NOT keeping accounts in order, cutting checks, and worrying about the business bank account
- the late fees and overdraft fees you WON’T incur when someone is properly managing company finances
- the potential revenue-generation strategies your accountant will uncover by analyzing your company financials
- the stress relief AND potential savings when taxes are in order and returns filed properly
- the growth you’ll experience when you have a financial game plan that supports your goals
PRO TIP: We see companies that hire and work with an accountant all year save thousands of dollars — more than what the accountants fees are — just in tax savings alone. Many business owners think accountants are too expensive and hire them at the end of the year just to do the taxes. At that point they are very likely not getting any real value, compared to if that accountant was in place all year long and set up the financial system from the beginning.
Whether you hire a professional to manage your accounting or continue to manage it yourself, you need to educate yourself on your company’s financials. What is your monthly overhead? What terms do you have with suppliers? What profit margin are you currently averaging on new work? Even if a CPA is pulling these numbers for you, it is important for you to understand them in order to know what actions you need to take in order to keep your business profitable and growing. This is also the real hidden value in having a CPA / Accountant on your team.
The last tip is to track your cash flow. Expenses can shift and new work or growth can mean new costs as well as new revenue. Tracking cash on a regular basis (weekly, monthly, quarterly, depending on your business’s needs) and estimating the expected flow on projects lets you see problems in advance and solve for them.
Want more cash flow tips? Read this blog next:
If you enjoyed this blog, you’ll love our newsletter. You can subscribe by clicking here.
Purpose-driven goals shifts a company’s objectives away from performance and financial targets and toward larger goals that help fulfill your company’s purpose. Don’t worry — we’re not saying you shouldn’t pay attention to sales, revenue, or new client acquisition. You absolutely should, we do too! But one way to ensure you reach those goals is to align them to your purpose.
Give your financials goals a purpose-driven WHY.
Why More Money isn’t the Goal
Raise your hand if your company’s biggest or only goal is tied to a revenue number.
Wrong idea. Put your hands down.
Why isn’t more money the primary goal? Because unless it is tied to something purposeful, more revenue doesn’t mean you will have more money or have power to improve your life, the lives of your team, or your larger community. For example, we talk to lots of business owners who have grown their company from $1 million in revenue to $5 million. They thought more money would lead to less stress and bigger paychecks but found that the opposite was true. They were working more and taking home the same paycheck with way more stress!
WHY was the money necessary? What was it supposed to do and HOW was it supposed to do it? A purpose-driven goal aligned to a top-line revenue goal would have helped solve that.
Growing your top line revenue from $1 million to $5 million will probably change your business, but it might not necessarily change your life or the lives of your team members unless it is profitable, sustainable, and rewarding. Rewarding is defined as tied to a specific purpose that you and your team are aligned to.
In fact, if your team is already feeling overworked and unfulfilled, more revenue only means more work to do and an even greater lack of fulfillment.
Why Purpose-Driven Goals are Good for Your Team
Purpose-driven goals are shown to inspire teams and improve performance. Money without purpose can drive short-term performance, but it can’t stop things like burnout and employee unhappiness. In fact, Harvard Business Review says that when money is the goal, burnout is more likely. The research was related to entrepreneurs, but we can all relate to feeling drained by work rather than energized by it.
You want to see your team jump up and hustle? Give them a goal they can care about. It might be directly related to your company — like building an outdoor lunch area or a company retreat — or it might be something external, like supporting a charity or organization in your community. Whatever it is, make THAT the goal, and draw a line directly from it to the team’s increased efforts. They’ll stay motivated and more revenue will naturally come from their inspired performance.
Making money is the thing that facilitates the goal. It’s the fuel in the car that is getting you to your destination. It’s NOT the destination.
Our CEO Scott Peper shared an example of purpose-driven goal setting at the Tampa Build Expo, in his class Building a Business with Purpose. He said:
We have a culture initiative at MF called “The One More email.” It is from a line in our core value LEADERSHIP THROUGH ACTION. It says, “Do one extra thing for each person you come in contact with each day.”
To encourage this core value and celebrate each other’s hard work, every MF employee sends out an email on Friday with one example of a “One More” that they did for someone else.
They also get to nominate each other for something extra. The winner each week wins a prize like a gas card, Starbucks card, or even an extra PTO Day.
I expect 100% participation. Here’s the interesting part: The prizes are not enough of an incentive. My expectation that they all contribute isn’t enough of an incentive.
So, I set a goal. The goal is not “100% participation.” The goal is “up to $600 for a charity you care about.”
See, leadership puts money toward the donation every week that we have 100% participation. The team selects the charity every quarter. It is always something they care about passionately. We have donated to K9s for Warriors, the Construction Industry Alliance for Suicide Prevention, and a charity called A Kid’s Place, which works to keep siblings in the foster system together.
The team absolutely crushes it. Why? Because they rally around the CAUSE they are supporting.
Find something your team can believe in, something that will improve their work, their lives, or their community. Make THAT the goal. Then show them how increased revenue will help them achieve it.
Tips for Purpose-Driven Goal Setting
Set individual KPIs. Once you have a goal tied to a performance or revenue objective, you have to make sure that each team member understands the key metrics in their specific role that will contribute to the overall company goal. Work with them to set Key Performance Indicators (KPIs) around their own work that show progress toward the goal.
Goals should be ambitious. They should motivate your team to work harder and collaboratively. But, setting goals too high can have the opposite effect; unattainable goals set by management can feel like a setup for failure. Make sure your goal stretches your team but doesn’t break it.
Milestones should be achievable. If goals are ambitious and lofty, the milestones you set to show progress should be achievable. Think of it like this — if you have a goal to run a marathon, your indicator would be “miles run daily” and your big milestones might be one mile, 5k, 10k, half-marathon, and full marathon.
Set a goal that is bigger than your business, defined by your Purpose Statement, and easily measured by a relevant indicator. Communicate the goal with your team, why it matters and how you will track progress toward the eventual finish line.
Join us in making 2021 your Year of Purpose. Subscribe to our newsletter and we will walk through this journey together.