By Ryan Rademann and Anthony Shibata
Your construction company’s ability to earn revenue depends on managing the capacity of your people, equipment and other resources.
How can you make sure your people are fully utilized, but not overutilized? If they’re underutilized, you’re not maximizing possible revenue. If they’re overutilized, you have to either push deadlines with existing clients, or you end up underperforming in order to deliver on your commitments. Either way, it’s bad for your business.
Because you’re securing a project pipeline months into the future — and because there are so many variables with project types, costs and timing — it’s difficult to accurately project utilization. It can feel like one big guessing game.
However, you can make these guesses a lot more educated by using pipeline management tools. With this technology, you can turn historical data into future-focused projections. Essentially, you can grow from a historian who relies on past project data into an architect who makes decisions based on future performance.
The biggest benefit? You can identify what types of projects delivered the highest profitability and most engagement, and which didn’t, which allows you to build profiles of ideal projects to pursue going forward.
The power of centralized data and business intelligence tools
To create forward-looking projections, you’re going to need more robust technology than Excel. Your ERP or job costing system — which contains data on your past projects — must combine with data from your CRM — where your salespeople are pursuing future projects — and funnel through a business intelligence (BI) tool to give you future-focused insights.
By centralizing your data and leveraging BI, you can project what you’ll spend on a project, what you’ll earn, how much of your team will be utilized, and more.
Plan for profitability
With a BI tool, you can visualize data to see what your project pipeline looks like going months into the future. This can help you and your team make a wide range of decisions.
If you’re headed toward overutilization, your sales team will know to prioritize key projects and back off pursuing other projects within that timeframe. If you’re consistently overutilized, you will know to hire more people — and how many people you need.
If you have a month that looks underutilized, the team can go after an appropriate project to fill the gap. And if things overall are looking soft, whether because of the economy or other reasons, you can make proactive decisions about your workforce needs.
As you can see above, Microsoft Power BI visualizes your revenue forecasts so you can make these strategic decisions. For example, if you have a team of people who can execute $4 million of work per month, any month where your revenue is below $4 million, you know you have capacity to sell. Three months in a row with projected revenue above $4 million could indicate a need to hire more people.
Build your ideal client and project profile
One of the biggest benefits of turning historical data into future insights is that you can identify what types of projects delivered the highest profitability, which had the most people engaged, which were the longest running, which came with certain types of problems, etc. Once you know what types of projects are good for your business and what types of projects aren’t, you can build profiles of ideal projects to pursue going forward.
Another benefit is that these profiles help make your sales and marketing process more efficient. Your people won’t spend time going after projects you either don’t want or won’t win, which reduces net loss in the sales cycle.
What’s more, they can use your historical data to determine a bidding approach to each project. Should they price rates more attractively because they know your company always executes similar projects on time and on budget? Should they walk away from an opportunity because the type of project has lost money in the past? Should they pad the bid to give your team breathing room if there’s a delay? Building project profiles improves your bidding and likelihood of success.
Gain an early warning system
With your forecast reporting, you gain valuable estimates on the cost to attain a project, the cost to complete and your profit goals. You can measure actuals against forecasts to continually refine your accuracy. And, perhaps most valuably, you own an early-warning system.
For example, business intelligence technology and the insights it delivers can help warn your salespeople when they need to back out of a bid either because they’re likely to lose it or because winning won’t be profitable. It can also warn when they’re going to win a project that normally would be profitable but won’t right now because of utilization constraints.
Early warning also extends to projects in progress. BI can warn your team that they’re about to go over budget. It can warn that you’re not spending to your projections, which could be a sign that the team is behind schedule. And it can help you audit to determine overall client satisfaction and project quality so you can ensure your company is doing its best work and solidifying its reputation in the industry.
Speaking of your reputation, word of mouth can be critical to growing your business. With centralized data and BI technology, you’re better able to create a customer experience that results in happier, more loyal clients and a valuable reputation that results in higher-profit projects.
How does this work? It all comes down to the transparency enabled by technology. Being able to give your clients transparency into your capabilities, your confidence in a project timeline and costs, and their project’s progress gives them greater peace of mind. After all, every delay that takes a project over its deadline loses a developer money that they can’t recover. In a big enough project, that’s millions of dollars.
If you consistently pull off big projects on time and on budget, you’re creating loyal clients who only want to work with companies like yours, and you’re attracting clients who will pay more for higher quality — and that includes the technology to deliver visibility, transparency and efficiency.
How Wipfli can help
Ready to transform from historian to architect? Wipfli can help. Our technology consultants can assess your current technology systems and determine the ideal way for you to gain business intelligence capabilities. Contact us to learn more about business intelligence tools or to how your business can benefit.
You can also sign up to receive additional insights in your inbox, or continue reading on:
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