A Hardscaper's Challenge: Planning for Profit and Success

Jimmy Reed ?EUR??,,????'??? ICPI Instructor; Contractor Liaison, Pavestone, LLC

The best investment in labor efficiency is to continually train workers and offer opportunities to expand their certifications and skill sets. Cross training across multiple specialties makes workers more effective and ultimately saves money.

Large residential and commercial projects come with many potential pitfalls, which can make a big difference in a project's profitability and a company's long-term success.

Planning is one of the most important components to having a successful and profitable project. Some basic questions for hardscapers to consider include

?EUR??,,????'???? How many mobilizations and how many square feet at a time will be made available by the general contractor?
?EUR??,,????'???? Where will you store your materials, and how much can you store at one time?
?EUR??,,????'???? How far are the materials from where the work will be done? What size/type of delivery trucks can access your job site?

Time spent moving product is crucial to reaching maximum profit on any project, so the equipment used should be carefully selected for best results. Other factors to consider:
?EUR??,,????'???? What working hours are allowed for the project?
?EUR??,,????'???? What other subcontractors might be working in the area that might slow work down?

There will be many other pieces to the puzzle, but planning the transportation and movement of materials before starting a project is a basic step that will only benefit the bottom line.

Estimating vs. ''Guess-timating''

Just because the project calendar is full does not guarantee a profitable enterprise. Don't let ego or a busy schedule fool you ?EUR??,,????'??? watch the numbers closely. There are plenty of very good installers in this industry, but how many take pride in their estimating work? This is where the paver meets the road, or becomes the road, as it were. Hardscapers need to be good at installation, but should be even better at estimating.

Bids placed without consideration of overhead costs are effectively set at break-even levels, with little margin for error. Overhead should be a line item on every estimate, and include all operating costs, like materials and labor; auto and liability insurance; office supplies and travel expenses. Cost-effective contractors should develop customized spreadsheets to keep track of operations costs for accurate estimating.

Estimates are like mini profit/loss statements. While the financial picture of each estimate shows the expected profit on that project, there should also be a line in the estimate that shows the break-even number. Why? Because without a break-even number, you have no footing to negotiate your price on a project. And in this economy, negotiation will be important to any job. The item most often overlooked on a contractor's estimate is overhead recovery.

Remember, if a percentage of overhead is not included in every estimate, then every bid is essentially set at break-even levels. On an estimate or profit/loss statement, every line item is a percentage of the sales price or project revenue. Overhead should be one of those line items. Good estimating is not ''guess-timating!'' A good estimate is built from the bottom up, not by guessing or using a price based on assumptions or hearsay from other bidders on the project.

Advance work on a large residential or commercial project should include planning for transportation and movement of hardscape materials. Project areas must be checked thoroughly before starting base material installation, since once work begins, chances to correct existing problems are lost. Hardscapers should make absolutely sure the installation area has been properly compacted, up to and including asking for compaction reports from the general contractor.

Another thing to remember is that the money you earn is revenue, not profit. Profit is equity building in the company, and will be necessary when applying for a loan for new equipment or vehicles. When the man at the bank asks to see your financial statements, particularly your balance sheet, having cash on hand will go a long way ?EUR??,,????'??? maybe all the way ?EUR??,,????'??? toward approval of that loan.

The Cost of Doing Business

Many contractors believe the best way to improve profit margins is to reduce overhead, since it's the largest and most glaring cost. But this can be dangerous and lead to diminishing returns, since overhead is really just another name for the cost of running a business.

External conditions like weather and terrain should be included in project planning. Projects in the mountains can bring ever-changing weather conditions, along with terrain factors that make it difficult to move materials. These factors should be addressed in the estimating process.

The most straightforward way to move the bottom line is to raise prices, but that is not always the most practical. Another option is to take a hard look at the costs of goods and services, possibly reducing those dollars spent. For most contractors, this starts with the cost of labor. Percentages vary, but usually fall between 17 and 22 percent, and it is worth checking to see how your company compares.