Cash Flow Myth #3 of 4: We Have Enough Capital to Not Worry About Cash Flow. From the time this type of thinking starts to permeate the organization it is just a matter of time before there will be a cash flow crisis. While it is true that construction is a relatively low margin business (https://dbmgt.co/2NxIaBq) if the business is run well it does provide a great Return on Invested Capital (ROIC). Part of being well-run is not putting more capital at risk in the business than it needs to run. We see similar sized and types of contractors run on very different levels of capital. You don’t want to be under capitalized to the point where you are paying all bills late and not able to invest in the future. You also don’t want to be so over capitalized that you are failing to get a good return or your discipline around cash flow management slips. Excess capital should be set aside to fund smart growth, a succession plan, acquisitions, other investments outside the contracting business or for a rainy day. Ask your CPA, banker, surety or consultant how much capital your peers operate on. Set your target capital levels at the lower end of that and design your cash management systems to make that work. https://dbmgt.co/2Gzl8va
D. Brown Management’s Post
More Relevant Posts
-
Contractors must have a clear scoreboard and keep everyone focused on the most important objectives that will improve their score. 3 "Must Do" and 3 Supporting Metrics:
To view or add a comment, sign in
-
There are many "Strategic Possibilities" developed from "Strategic Brainstorming" that must be explored to make choices that will best position a contractor to win over the long-term. These "Strategic Decisions" must be made and integrated at all levels. #strategy #dbmteam
Levels of Strategic Decisions (The Basics)
dbmteam.com
To view or add a comment, sign in
-
The business of building is largely about aligning projects and people. The Talent Value Stream (TVS) ensures talent will never be a constraint to your growth. #businessplanning #talentvaluestream #dbmteam
Talent Value Stream (TVS): The Basics
dbmteam.com
To view or add a comment, sign in
-
As a contractor navigates the different stages of growth, the complexity of their business model evolves, including their organizational structure, management systems, and people. Seeing this model visually helps identify bottlenecks and constraints. #businessmanagement #businessplanning #strategy #dbmteam
Contractors Business Model
dbmteam.com
To view or add a comment, sign in
-
Every contractor will navigate very predictable stages of growth. Each of these represents about a tripling of headcount and requires different leadership focus, strategies, structures, and systems. Stress and failure points are also very predictable. #leadership #management #strategy #dbmteam
Stages of Contractor Growth and Growth Inflection Points
dbmteam.com
To view or add a comment, sign in
-
Building projects requires technical expertise and resources. Building a construction business is about developing and aligning those capabilities with customers. Growth and time require different leadership focus, strategies, systems, and structure. #career #management #strategy #talent #dbmteam
The Business of Building
dbmteam.com
To view or add a comment, sign in
-
Decision quality IS NOT linearly related to information quantity. In complex environments with elements of uncertainty, data quantity quickly reaches a point of diminishing returns but increases decision confidence which puts you into the danger zone. #businessmanagement #strategy #talent #dbmteam
Decision Quality and Information Quanity
dbmteam.com
To view or add a comment, sign in
-
Defining what you want in quantifiable outcomes is extremely difficult. It's 10X harder to define those outcomes throughout the whole company from field to CEO. Defining the leading activities that create those outcomes is another 10X more difficult. #businessmanagement #metrics #dbmteam
Contractor Scoreboard - Disciplined Execution
dbmteam.com
To view or add a comment, sign in
-
Outcomes are created through doing the right activities. Data is only a proxy for that activity and a metric is a synthesis of lots of data points. Metrics are valuable, but always have a skeptical view of proxies for performance - especially with growth. #businessmanagement #scoreboard #technology #dbmteam
Connecting Metrics to Activities and Outcomes
dbmteam.com
To view or add a comment, sign in
-
There is a high correlation between contractors that have consistently GREAT safety records and consistently GREAT profitability, growth, morale and talent retention. #culture #safety #talent #dbmteam
Correlation Between Safety Culture and Profitability and Growth
dbmteam.com
To view or add a comment, sign in
2,121 followers