As a contractor, you know that prices for materials fluctuate regularly. Most of the time, you can anticipate what’s likely to happen and plan ahead. At other times, you get hit with a surprise new tariff that dramatically increases costs. When you’re bidding on projects that won’t be completed for a year or two (or longer), it’s hard to predict now what you’ll pay for the things you need. Here are a few ways you can manage it without losing your profit margins.

Keep an Eye on Rising Prices
Prices don’t always go up with inflation. Sometimes they go down. On occasion, they’ll fluctuate, especially if there is some event like a disaster that forces everyone in the supply chain to accommodate. Sometimes, price increases mean that certain businesses will struggle to keep up. If you want to avoid being one of them, you should keep tabs on the news and regional prices for all materials you use regularly. Update your estimates as prices change so you don’t accidentally use last year’s numbers.

Round Up, Not Down
A good rule of thumb for many construction materials is to estimate how much you’ll need and add an extra 10 percent. You might want to do something similar for material prices, as well. You can’t predict when the federal government will institute a tariff that increases the cost of materials you bring overseas by a margin as large as 25 percent. But you can guess that prices will go up year after year. Look at price averages in your region and how they’ve changed over the past five years. Use that data to inform your estimates, and always round up. Underbidding on materials may make your bid more appealing to clients looking for a bargain. But you’ll pay for it with less money to keep your business going.

Consider an Escalation Clause
Once you sign a contract, generally you’re committed to doing the work at the price you specified. An escalation clause gives you a way to renegotiate the contract based on price increases. The terms are usually very specific, which means that you’ll have limits on the time you can raise prices, how much you can increase them, and how soon you can get payment for the difference. If you can’t reasonably predict what materials will cost you for the project, the clause may make the difference between safeguarding your profits and shaving them off entirely.

Evaluate the Best Terms
In an industry with fluctuating material prices, using escalation clauses can be a way for contractors to avoid cutting into their profits when prices go up. It’s important to choose the right one based on the project. For example, you might opt to share the risk up to a certain point. If the project is relatively short and you don’t anticipate rapid changes, you can offer to shoulder the increase unless it passes a certain percentage.

During longer projects, it may make more sense to activate an escalation clause past a certain amount of time. That helps to accommodate price changes that happen months or years later. Some escalation clauses allow you to raise the price the day it changes. If you want or need this level of flexibility, expect to show your work in your original price estimate.

Keeping a contracting business above water involves careful attention to the prices of materials you use. By tracking material costs and adding escalation clauses to certain contracts, you can protect your income and profits. To discover more benefits of running your own business, contact CSLS today!

Several states, California included, have shut down what they call “non-essential services” until they can get better control over the rising cases of COVID-19. Although construction is currently proceeding mostly as usual, this may not be the case next week. Dealing with a state-level or city-level shutdown presents a number of possible complications for your business. Here are five things you can do to help keep your business going, if you’re forced to cut hours or shut down for a short period of time.

Assess Status of Current Projects
It is common for contracting businesses to have several jobs going. You might be almost done with one and barely starting with another. The first thing you should do is assess where you are at with every current project. In some cases, you may be able to suspend work for a short period of time or change the nature of the project while you wait for a shutdown to end. In other cases, you might simply need to finish some paperwork, which could be easy to do remotely. There’s a high likelihood that you would have to suspend most work during a shutdown. But there may be other ways to run your business in the meantime.

Check on Your Cash Flow
One of the first rules of running a contracting business is to ensure that your cash flow is sufficient to handle temporary delays in revenue. While a shutdown due to COVID-19 might be longer than temporary, it’s possible that your cash flow may still be able to buy you some time. Invest the time to examine all of your expenses, including:

• Payroll
• Workspace rentals
• Equipment
• Supplies

If you made active orders for projects that are now on hold, you may be able to pause or cancel them until you are ready to make those orders again. Finding ways to limit what you have to pay can help ensure that you save most of your money for important things like keeping your employees on-staff.

Consider Financial Support
While the last thing that you may want to do right now is take out a loan when you’re not bringing money in, there are a variety of ways you can look at getting extra financial support while you wait for the opportunity to open business again. This might come in the form of

• Low-interest business loans
• Lines of credit
• Grant programs

Take a look at federal legislation related to economic stimulus and see how the benefits for businesses may relate to yours in particular. It’s an imperfect solution, but it may help you keep the lights on.

Communicate with Clients and Lenders
In any kind of crisis, most business owners try to plan for the worst but hope for the best. This involves making sure that everybody who relates to your cash flow, from clients to lenders, is aware of what you are dealing with and how you were working to minimize problems. It might mean trying to negotiate a new timeline with a client rather than having to abandon a project altogether. It might also include talking to lenders and creditors and requesting some kind of forbearance that allows you extra time to catch up on payments while your income is lower. In most cases, you are much more likely to reach a satisfactory agreement if you talk to them before you fall into violation of the contract.

Get Updates on Limitations
While some experts are estimating that the threat posed by COVID-19 may last for months or even years, it is unlikely to lead to a long-term shutdown of the construction industry. That said, it is hard to tell when barriers to normal business function will lift. You should plan to spend some time every day looking for news as it relates to your field. This will give you the best opportunity to find out when you’ll be able to start working again.

Running a business in the middle of chaos can lead to a shutdown. With these tips, you’ll know what to do to keep your company as safe as possible. For more information about preparing for your contractor licensing exam from home, contact CSLS today!

If COVID-19 has shown anything, it’s that the U.S. is quite unprepared to deal with a large number of sick people. Other countries have dealt with it by addressing faults in their infrastructure, like an insufficient number of hospital beds. And while the healthcare industry is in more need than ever now, these kinds of problems mean that construction contractors have a role to play, as well. Across the state, construction workers are getting ready to help. Here’s what is going on and how you can be a part of the solution.

Stay Updated on Current Guidelines
It may feel impossible to stay updated on the current status of rules concerning businesses in California right now. That said, you should still do everything you can to keep informed. At present, the state still classifies construction as an essential industry. This means that contracting businesses can continue to work on construction projects as long as they maintain proper attention to social distancing and sanitation practices. This may change at any time, so you will want to keep the latest information at your fingertips.

See What’s Happening in Your Area
Right now, the focus is on both containing the spread of COVID-19 and providing additional resources to the healthcare industry to treat people with the virus. Just like China was able to build a new hospital within a very short period of time, the state of California is mobilizing construction workers to expand and retrofit hospitals. This will make it easier for healthcare professionals to identify, diagnose and treat people who may have the virus. If you want more information about what you may be able to do, read local newspapers and social media posts from government officials. This may be the fastest way to get updates.

Get Ready for Action
Watching people come together from a large variety of industries to help produce personal protective equipment and ventilators is an inspiring sight. It is amazing what the population can do if they are only given a chance to use their skills and the resources that they already have. If you are already working on existing projects, it is probably best for you to continue meeting your obligations. But if your well of work seems to be running dry, looking for ways you can help may be able to make a big difference. This is a great time to network with other professionals in your area and see if you can team up to assist, even in small ways.

Take Advantage of Business Support Programs
While the focus is on businesses that are able to donate labor or supplies to battling COVID-19, many industries are also seeing significant cutbacks to their revenue streams. If you were worried about what the virus spread might do to your ability to keep your business running, one of the best things that you can do is start investigating the many local, state and federal programs recently implemented to help keep small businesses afloat. An interest-free loan or a grant may give you the ability to keep paying your bills while you protect your workers and help your community.

If All Else Fails, Minimize Harm
At the end of the day, every person has a responsibility to try to help contain the spread of COVID-19. A novel virus may cause significant damage, and it won’t be apparent how much until the vast majority of the threat has already passed. If you are unable to participate in assistance efforts related to COVID-19, your best bet may be simply to avoid increasing the risk for yourself and your employees. Focusing on what you can do to flatten the curve of rising cases and fatalities is a good effort all by itself.

The spread of COVID-19 has brought out the best in millions of people. If you want to be one of them, your contracting business may be able to help. To learn more about what the construction industry means to your local community, visit CSLS today!

You may already know that automation is shaving months or years off construction projects. As technological innovations improve, the degree of accuracy in various tools allows contracting businesses to consider how they can use automation to get their work done faster. Here are a few reasons automation deserves an important role in your design phase, and how you can best take advantage of it.

Why It’s Time to Automate
Whether you’ve been working in the industry for years or you’re just starting out, there are plenty of reasons to rethink the way you do things. The construction labor shortage exploded by the housing crisis and was made worse by increasing numbers of construction professionals heading into retirement. It’s getting better but it’s still a big problem in a lot of fields. Automation isn’t just gaining popularity–it’s improving in accuracy. This means that you can automate processes that will do the work nearly as well or, in some cases, better than you could do with a skilled worker.

Tips to Incorporate Automation Into Your Workflow
When you aren’t sure what is out there, it’s hard to imagine how automation could possibly make your work faster and more effective. That’s where a little research comes in. You wouldn’t think of hand-writing an invoice that you could easily input into a tool, because this technology has been around for decades. Here’s how you can find ways to make automation a seamless part of your workflow:

1. Identify where your projects are falling behind schedule (or over budget).
2. Research the best solutions to your current issues.
3. Don’t jump at the first option you find, because there may be better ones on the horizon.
4. Take opportunities to test out products before you buy.
5. Read reviews of tools and software systems, to get a sense for their success rates.
6. Test it out on low-impact projects before you automate full-time.
7. Offer employees training in the latest methods.

Give yourself the time to adjust, and you might be surprised how quickly it changes your perspective.

Fields Where Automation Is Taking Off
Even 10 years ago, automation wasn’t a big deal in many areas in construction. With changes happening every year, you’ll find more and more businesses adapting technology to make projects go faster. Automation is currently driving:

• increases in the use and efficacy of modular construction
• availability of self-driving construction equipment
• innovations in drone technology, which allows workers to perform complex tasks from a distance

Right now, a lot of the technology is proprietary. This means that one company’s approach might be completely different from another’s. Within the next few years, you’ll see the best performers rising to the top and spreading to other fields.

Keep Watching for News
Although automation is picking up speed in all kinds of fields, it’s also changing rapidly. This means that if you there aren’t many options in your specialty, or if most of the choices you have are pretty sketchy, just wait six months or a year. You can probably remember a time when drones were terrifying at worst and vaguely helpful at best. They’re now shifting from surveying the scene to interacting with it. Imagine how much better tools and systems will be in five years.

Make Workers a Priority
Although automation is often feared as the killer of jobs, it doesn’t have to be. In a world where there’s years more work available than qualified people to do it, efficiency is king. Automation isn’t going to force or even allow you to get rid of your whole staff in a year. Instead, it will make you and your employees’ jobs easier. That means you can take on more projects and satisfy more clients with reliable deadlines and a shorter turnaround.

Construction automation is becoming an integral part of the industry, and you should consider how it will affect your contracting business. To discover more about the latest tools and technology used by licensed contractors, contact CSLS today!

Sometimes you read about a massive construction project with an estimated budget that just keeps going up. You might wonder how governments, even state or national ones, can keep dedicating billions more. For your business, ensuring that your projects have sufficient funding to keep going is a matter of survival. Here are a few things you can do if you find yourself in a situation where your project is running over budget or lacks enough funding to finish.

Determine Your Obligations
The first thing that you should do is figure out what your obligations are to the project and to the client. This is where an investment into refining contract language that protects you becomes very important. It applies whether you are working directly with the property owner or as a subcontractor. Carefully review the contract that you have signed, and consider hiring a lawyer to help you review it if necessary. This will help you to know what you are required to do, and which actions could possibly put you in trouble.

Look at Additional Funding Options
The most obvious solution is to look for additional funding options. For a reliable property owner with good credit, it may be as simple as applying for additional financing. In some cases, like a lost grant, it may be much more difficult. The right option depends heavily on the type of project and its scope. But if you can find a way forward with this option, you may be able to avoid a lot of stress and conflict in renegotiating or canceling the contract.

Consider Revising the Project
If it’s not possible to get more money, then you may need to renegotiate the contract to limit the scope of the project. Whether or not you can do this depends on the contract and who is responsible for the funding shortfall. For example, if you are working with a client who was only able to secure partial funding for the project, then your personal responsibilities may be lower. On the other hand, if budget overrun came as a result of a fault in your original estimate, you might be on the hook to cover at least part of it. In any case, attempting a reasonable renegotiation of the project may allow both parties to reach a satisfactory conclusion under the new circumstances.

Minimize Additional Investment
The last thing that you want to do is keep investing into a project that is failing fast. How you approach that feeling depends on the contract. If you get to the point where you may need to cut your losses, it’s probably best to consult a lawyer to make sure that this is the wisest course of action. Otherwise, this is an important reason to vet clients and projects for funding or ability to pay. It’s also a vital advantage of regular communication between property owners and contractors, or general contractors and subcontractors. Knowing where you are at on any given day can help you determine where to go next.

Evaluate Solutions for Future Projects
Once you get to the other side of a situation like this, one of the last things that you may want to do is spend a lot of time figuring out how to avoid it. As tempting as it can be to take a break and minimize how much time you have to think about it, it’s better to debrief and make improvements while everything is still fresh. Make notes of miscommunications or errors in calculation that led to the shortfall or overrun. This will help you to implement better practices in the future to cut down on the chances that this will happen again.

Budget overrun in construction is so common it might be part of the job description. But if you want to avoid it cutting into your profits, you’ll work to minimize it in your projects. For more advice on running a successful contracting business, contact CSLS today!

With design-build fast becoming the industry standard, many contracting business owners rejoice. This approach to building puts more decision-making power into your hands, with the ability to influence the design based on your unique skills and experience. The trick is, not every contracting business has a designer. If you don’t, there are several aspects of the design process that you may not know. Here are a few factors to consider and tools you can use to help you determine what you need.

Why Is Design-Build a Popular Approach to Construction?
To know why design-build is taking over the construction industry as the preferred approach for both private and public works projects, you need to understand design-bid-build (DBB). DBB treated the design and construction processes as two completely separate elements of building, with different professionals working to achieve each one. DBB involved a professional, usually an architect, to create a design. Then the property owner would solicit bids from contractors who would build according to the design. Many experts believe this approach is much less efficient and often leads to problems, since the people on the hook for doing the work aren’t involved at all in the design stages.

By comparison, design-build makes the contractors in charge of construction an integral part of the design process. As is often the case, design-build became more popular for private projects well in advance of government projects. But even large organizations are starting to see the benefits of bringing the contractors they intend to hire on board from the beginning. It cuts costs and often takes much less time to completion.

Why Is It Important to Have a Professional Design Construction Projects?
For someone just breaking into construction and hoping to build their own business, the major hitch about design-build is the need to have a qualified professional at the helm. This is partly why DBB worked for as long as it has. The property owner or the organization requiring the project could hire someone with sufficient training and certification, like an architect, designer or engineer, to create a plan that meets building codes and achieves design goals. For the sake of safety and durability, sometimes there is no way around it.

How Can Contracting Businesses Make Design More Efficient?
The thing about design is that while custom is often ideal, it may not always be necessary. Contractors come into a space, take relevant measurements and requirements, and produce a design to fit owner specifications. But this may lead people into reinventing the wheel over and over again. Innovations like generative design seek to improve the design process. Instead of creating something entirely new from scratch every time, people may be able to search through designs that meet certain limits and refine them to suit their needs. This cuts down on time spent constructing the design and helps ensure a better long-term result.

When Should Contracting Businesses Partner with Designers?
If you research established design-build contractors, you’ll usually find that they have a certified interior designer on staff. This person may conduct many of the initial design consultations with property owners and produce a design that the rest of the team can carry out. They may also work with a licensed architect. For many types of building projects, this kind of care is frequently a requirement. For others, like surface-level renovations that do not change the structural layout, it might be more of a good suggestion. In either case, it’s probably wise to network with designers in your area, especially as you get started.

Design-build can be a great way to bring most of your construction project tasks in-house, as long as you can handle the design requirements. To find out more about building your contracting career, contact us at CSLS today!

In order to get your contractor license, you have to prove that you have both skills and experience in the field. Once you get the license, staying relevant becomes your next goal. A lot of people may accidentally work themselves out of a job simply by relying on everything they learned years ago. Systems change, and the best practices to work within them improve as a result. To keep going, you’ll need to improve with them. Here are five things you can do to ensure that your skills remain competitive for your field.

1. Find a Mentor
   In many ways, the construction industry is set up so the people who are just starting out will automatically have lots of opportunities to work with experienced professionals in their field. This doesn’t always mean that you will end up with a mentor that you can call upon for support for the majority of your career, however. Finding a mentor who has the right approach to running a business in your field can be very useful, especially in the first several years. They can help you identify areas that you will need to continue to study, as well as lots of advice for how to keep the business going throughout the years.

2. Take Classes
   Getting your contractor’s license usually takes a fair number of classes and years of working in the field. Once you get that license, it can be tempting to think that you are done with your education for good. However, this might mean that your knowledge stagnates. As new innovations come out, you want to make sure that you have opportunities to know what they are, with a few toward becoming an expert in using them. Taking classes periodically throughout your career, and offering the same for your employees, helps to ensure that everyone’s skills remain fresh and relevant to client needs.

3. Add Another Classification to Your License
   You might decide that you only want to pursue one classification within a specific field. However, this may deny you the opportunity to grow and possibly expand your services and your business over time. Adding to your license gives you a larger repertoire of products and services that you can offer to clients. This can give you better longevity and flexibility to work within a changing industry. Occasionally evaluating your services and deciding if another classification might work well makes sure that you have a steady source of updated skills to offer.

4. Attend Conferences
   One of the best ways to find out what is going on in the industry as a whole, and your field specifically, is to attend construction conferences. You don’t have to attend all of them, and you may not even need to attend them once a year. However, booking time in your schedule and investing the money to attend conferences it is an excellent opportunity to:

• Test out new technologies
• Network
• Learn more about changes in practices for the industry

Many conferences are located in or near California, which means that you may not have to devote as many resources as you expect.

5. Network
   When you find that you tend to work with the same people all the time, and they all do things in a particular way, it may be time to break outside that box. Networking gives you a great chance to get to know industry influencers and find new contacts in your area. You don’t necessarily have to be a great conversationalist or limit your interactions to people who work in your field. Just talking to other construction professionals and even potential clients may help you get a better feel for where your field is headed, with some possible contacts for future work.

Keeping your skills relevant is something that most business owners have to consider throughout their tenure. If you stay on top of it, you will reap the rewards. To discover the benefits of a great career in construction, contact CSLS today!

Recessions happen, and it’s hard to tell when one is going to arrive. Recessions aren’t quite the same as an economic downturn, which occurs at least once every few years in the U.S. Construction can be one of the hardest-hit industries during a recession, although that’s heavily dependent on the region and the severity of the economic problems. Experts tend to watch for certain signs as indicators that a recession is likely, and you should, too. Here are five to keep an eye on, so you have a sense for what may be ahead.

1. Funds Rates Drop
   If you borrow money from a lender, you pay interest. When banks borrow from each other, they also pay interest. The rate they pay is set by the Federal Reserve, and is called the “funds rate.” Higher rates indicate that lending between banks is relatively secure. When the Fed drops these rates, it often comes as a way to persuade banks to keep making these loans to each other. It indicates that financial experts are becoming wary of the health of the finance industry.

2. Treasury Yields Decline
   If you’ve ever bought a bond, you know that this is usually a predictable way to increase your investment. As a general rule, the longer the term of the bond, the better the rate. At certain times, the rate for three-month treasury bonds is higher than the rate for 10-year bonds. Financial experts say that when this happens, it indicates that the long-term investment isn’t as safe as the short-term one. It is often a sign that a recession will come within a year or two.

3. Consumer Confidence Slows Down
   Although much of a recession relates to hard numbers like funds rates or treasury yields, a lot of it sits with what people think about it. Part of the devastation of the Stock Market Crash of 1929 was that so many people took their money and ran. Or, they tried to take their money and were unsuccessful. Consumer confidence may seem like a nonsense indicator, but it tells you what people think and how they may use their money. Confident consumers are more likely to sell a home or buy a new one. They are more likely to invest their money. When people lose that confidence, they keep their money close to hand. They shorten the demand for new housing or other projects important to the construction industry.

4. Employment Changes
   If you’ve paid attention to the news at all, then you probably know that unemployment is around an all-time low for most of the population. This might give you confidence, but it’s important to pay attention to the kinds of jobs that are coming in. Signs of a flagging economy don’t usually begin with massive layoffs. Instead, companies start cutting back hours. They may hire temporary workers instead of regular employees, so that they are not as obligated to provide costly features of employment like benefits. If you notice that the average number of hours is starting to go down, or the type of jobs available changing, this may be an indicator that businesses are getting ready to cut back.

5. New Construction Tapers Off
   The health of the construction industry may not apply to everyone living in the U.S., but it certainly makes a big difference for people working in it. Experts have already noticed that the burst of construction since 2012 is starting to slow down a little in many regions of the country. Although California still has a major shortage of housing and a ton of construction projects for the next several years, this assumes that the market is still strong enough to make it happen. If property prices start to drop, or people begin to worry that they won’t be able to pay for new construction, they’ll be more likely to stick with what they have.

If you have a contracting business for decades, you’ll likely run it through more than one recession. Knowing what to look for helps you prepare for the possibilities. To find ways to make your contracting business the best it can be, visit CSLS today!