Many are looking to grow their construction companies. To do this you need additional people, equipment, and of course projects. Sometimes the simple solution seems to purchase another construction company and merge it into your company. But is this a good solution? Well, it depends.

I worked for a construction company which was privately owned and almost a family business when I joined them. Within twenty years the company had grown into a multinational public company with revenue of several billion dollars and profits of a hundred plus million dollars. This growth was achieved by a combination of growing the company from within, as well as purchasing other construction companies. However, not all these purchases were successful, and a few even proved very costly. But, some of these purchases provided the company with the right resources and clients to grow, as well as giving us a springboard into other markets and regions. In this growth, our company became a takeover target for another construction company, which fortunately we resisted and we eventually outstripped the size of that company and became far more successful.
​
So what did we learn from these takeovers, mergers, and acquisitions?

It’s important to carefully analyze the reasons for purchasing another construction company. Only purchase a company if it’s going to offer additional opportunities and add to the balance sheet of your company. These opportunities may be because the new company:

• Is performing poorly and you believe that you’ll be able to turn the company around and make it profitable again, turning a ‘cheap buy’ into a ‘money maker’. Regrettably, this isn’t always as easy as it seems because:
  • The new poorly performing company often demands lots of management time to turn it around. Management time which is diverted away from doing what they were successfully doing – which was running a good construction company. I’ve often seen the diversion of management to fix and embed the new company then adversely impact the performance and reputation of the original company. Know who will devote time to fixing the company and understand that they will be unavailable for other projects within the existing company for several months, and even a couple of years.
  • You always need to understand why the company was failing and what you’ll do differently to turn the company around. Unfortunately, often failing companies are failing for multiple reasons and often the true reasons for the failure, as well as the full extent of the problems, are hidden and only become apparent after the company has been purchased.

• Is working in a different region, maybe another state, and it will help your company expand into this region. Nevertheless, it’s important to first:
  • Analyse the risks and opportunities of the region. Understand whether the new company is operating successfully in the region – are there problems that aren’t obvious, or costs which aren’t accounted for?
  • Check that they are making money.
  • Understand the reasons for their success – sometimes it may just be a lucky contract or an opportunistic period.
  • Ensure that there will be further work in the region.
  • Understand whether the company will provide the appropriate spring-board to expand into the region. Are there other ways to get into the region without spending money on purchasing that company?

• Has established relationships with different clients to the ones you normally work with. However, you must understand:
  • The reasons for these relationships, since they are often built around personal relationships which can be worthless should individuals leave the client’s or contractor’s employ.
  • Whether the clients will continue to provide work opportunities.

• Has expertise in a different field to what your company has. Nevertheless, first check the following:
  • Is this expertise because of particular individuals employed by the company, and will they remain with the company after the take-over?
  • Could these individuals, or others with similar expertise, be engaged by your company at a fraction of the cost of purchasing the whole company just to get their knowledge?
  • Is the whole company expert in this field, or are you purchasing other sections and people which are less useful and may even have to be terminated later at additional costs?
  • Is the company really an expert and is their reputation with clients as good as you perceive it to be?
  • Will having expertise in this field really enhance your company’s capabilities and profits and will the purchase of this expertise earn a return on the investment?

• Has a large pool of skilled personnel. But first, ascertain:
  • Whether the personnel will remain with the company. (I’ve generally found that up to half the employees resign and leave the company that’s been bought within a couple of years of the buy-out – unfortunately, it’s often the better ones that leave first).
  • Are the people as skilled as you think they are?
  • If it would have been cheaper to attract the skilled people from elsewhere, rather than purchasing the company to get the people?
  • How many personnel aren’t good and are dead-wood who will need to be made redundant?
  • The overlap of people and functions between the companies, since it’s invariably necessary to terminate employees when there’s already a person fulfilling that function (this termination process is expensive and causes fear and resentment amongst the new company’s employees – leading to resignations and poor performance).

• Has lots of construction equipment. However, it’s necessary to check:
  • If the equipment can be utilised (remember there’s no choice and you’re paying for all of the equipment whether you can use it or not).
  • Are the items compatible with the equipment already owned?
  • Is the equipment of a similar model and make as equipment already owned? Having assorted models and makes of equipment means additional spares have to be kept and maintenance is more difficult.
  • The condition of the machines and have they been regularly maintained with service histories and records.
  • Are the warranties in place and still valid (because some may have been invalidated if the equipment hasn’t been serviced correctly or the original manufacturer’s parts haven’t been used).
  • The condition of wearing parts and tyres as there could be a large cost to replace them.
  • Are spare parts readily available for all the items?
  • Who owns the equipment – some equipment may be leased or have large outstanding loans?
  • Would it be cheaper to buy the equipment elsewhere rather than purchasing the company? This will enable you to purchase only the equipment that you need and equipment that matches your existing equipment.

• By purchasing the company you may be removing a competitor. But is this:
  • Going to be a benefit worth the cost?
  • Not going to result in another contractor taking their place?

​It’s imperative that a proper due diligence is carried out on the new company before purchasing it. This should include reviewing:

• Many of the items above.
• The financial statements and verifying their accuracy.
• All projects and understanding their safety, quality, outstanding payments, what costs and revenues have been declared and whether these are correct, potential project problems, progress measured against the project schedule, forecast cost to completion, resources, suppliers and subcontractors, the status of claims and variations, if the client is happy (review project progress meetings) and the quality of staff.
• Outstanding debtors and creditors.
• Business systems.
• Employment contracts.
• Accident and insurance claims.
• Unresolved problems on completed projects. You don’t want to find unfulfilled liabilities.
• Prices which have been submitted for projects that may be awarded to the company. Are these prices reasonable and can the projects be completed profitably? You don’t want to be buying loss-making projects!
• Operating Procedures.
• Their tax affairs.
• Outstanding guarantees and warranties.
• Labor relations and agreements.
• The numbers of personnel, their skills and years of tenure.
• Lease and rental agreements.
• Money owing on loans, equipment, and other assets.

...Continue Reading....
​This article was first published on the ClockShark website. To visit this website and continue reading the article click on the link above.
Please share this post

I’m sure we have all heard of construction companies that have expanded, become successful, revenue has increased and their profits have increased, then, the wheels have come off. Profits have fallen and share prices collapse! Some companies even go bankrupt. Where did it all go wrong?

Of course, we all know of the small local builder who kind of ‘bobs along’. They employ only a handful of people, making an average profit most years and every now and then striking it lucky with a really good year. The owner seems content. But then they have a bad year, literally living from hand to mouth struggling to pay their bills, surviving until another good project comes along. Is that what you want to be?

Yet, occasionally we have construction companies that have grown within a generation, from a one-man business to a multi-million-dollar construction empire, that often spans many states and may even have grown into a multinational organisation constructing mega projects in other countries. The company is now worth tens or hundreds of millions of dollars, occasionally even worth a billion dollars. Maybe that’s what you would like your construction company to be?

So it is possible to stay small and successful and is it also possible to grow and become successful. So how do you decide what direction your company should follow, and how do you make those decisions successful?
​
Of course, there are also many companies somewhere in between, which are growing at a steady pace, maybe even with a few contractions when work dries up, then growing again when there’re more opportunities. The one-man company possibly now has a hundred employees and there’s a steady stream of projects.
lick here to edit.

​Growing a company successfully is very satisfying. It enables the original owner to move away from being hands-on where they were possibly working in the field on the project all day, while trying to complete paperwork at night and on weekends. It allows the original owner to take management control while relinquishing some of the smaller day-to-day project management duties. It’s often less physically demanding. It allows the owner to take on other bigger responsibilities and learn new skills.

Of course, it also creates new opportunities for employees, who can grow into new roles and take on new responsibilities while learning new skills. Not many people are happy fulfilling the same functions and jobs forever – most of us want to grow and develop. As the company grows, the employees grow, and in doing so employees earn more and can better their lives and the lives of their families.

Of course, a larger company can take on more projects and work with different clients which allows them to diversify so the company isn’t solely dependent on the success of their current projects. Sure there will be some projects that aren’t profitable and the amount of work in some areas will decline for a period, but having a diversified portfolio of projects and clients, preferably covering a number of different regions, will enable the company to better survive the occasional poorly performing project and the unpredictability of the construction industry. In fact, being bigger will mean that the company executes larger projects that could extend over a period of a couple of years, which might enable the company to get through the lean times easier.

Being the owner of a small company is often a lonely job where you alone must make all the decisions, where you alone must solve the problems. Larger companies usually have experienced and skilled people that can shoulder some of the responsibilities, handle the day-to-day problems on projects, and who can provide advice for solving the more difficult problems.

A successful and well-managed construction company provides employment opportunities for many workers – sometimes hundreds or even thousands.
Of course, a successful growing construction company can make the original owner very wealthy. As the company grows it will take on projects in other regions which may bring opportunities to set-up house in another area which may be more suitable for the family.
​
A larger company means that you can take on larger projects and more challenging projects. At the end of the day building a successful large construction company creates a legacy that others will appreciate, a legacy that’s changed employees’ lives for the better.

​Many construction companies start off successfully. They develop a good reputation and are profitable. The company grows. Then the cracks appear. Quality deteriorates. Projects are no longer profitable. The company starts losing money.
Why does this happen? Well, there are a number of reasons.

• Normally construction companies start off small and the owner is hands-on full-time supervising projects. As the company grows the owner can no longer be hands-on and passes control to managers and staff who aren’t necessarily as focused on ensuring that the projects are successful, and don’t take the same pride in looking after clients and achieving quality work as the owner did.
• Sometimes the new managers are inexperienced. Small businesses often employ mediocre staff because they’re unable (or unwilling) to pay large salaries or attract good people.
• Often owners don’t delegate work correctly. They try and remain in control, but have too much other work and are unable to attend to everything, leaving projects waiting for materials, resources, decisions, and guidance.
• Clients become frustrated when the company isn’t responsive because the owner is busy attending to other business and hasn’t delegated someone else to take the responsibility of managing the project. Clients have become accustomed to dealing directly with the owner and can’t understand why the owner isn’t available anymore.
• In addition, the company undertakes more and bigger projects, sometimes resulting in them having insufficient cash flow. Lack of cash disrupts the procurement of materials and payment of subcontractors, causing delays and, in the worst case, the company goes insolvent.
• Sometimes the company experiences a rapid expansion in a boom period and employs more people, moving into bigger offices and purchasing additional equipment. Unfortunately, these boom periods are short-lived and end just as suddenly as they started. The contractor is left with excess people and equipment in offices that are too large with a high rental.

It’s imperative that the company grows in a controlled manner. The owner must gradually hand over control of various areas of the business to trusted, experienced individuals. The company must progressively increase the number and size of the projects they undertake, ensuring that they always have sufficient cash to finance their operations (including maintaining a buffer for when the unexpected happens) and sufficient resources to carry out the work.

Growing a construction company requires good people and robust systems that can handle the growth and simplify the workload. Managing a large construction company is very different to running a small company.
​
But, it must never be growth at any cost. Some business owners and managers are driven to grow the business no matter what the conditions are. Large companies have shareholders who expect the company revenue to increase every year, particularly after the company has experienced a few years of stellar growth. Unfortunately, construction has periods of growth and times when work is in short supply. It’s inadvisable to try and expand the company in times when work is limited. Use times of low construction activity as an opportunity to clear out dead wood, get rid of people who no longer fit with the company’s vision, consolidate, and importantly train and re-skill people where necessary so that the company is set for better times.

​To read more about the author’s books and find out where you can purchase them visit the pages on this website by clicking the links below:

• '​Successful Construction Project Management: The Practical Guide'
• 'Building a Successful Construction Company: The Practical Guide'
• 'Construction Claims: A Short Guide for Contractors'
• 'Construction Project Management: Tips and Insights'
• ​'Construction Management: From Project Concept to Completion'
• 'The Successful Construction Supervisor and Foreman'
• and 'An Introduction to Building and Renovating Houses - Volumes 1 and 2'

'Construction Book reviews'
To read more about the author visit the page 'Paul Netscher'
Want to contact Paul Netscher please enter your details on 'Contacts'
Find out how Paul Netscher can help you

According to the Bureau of Labor Statistics, there are over 15,000 construction site injuries in the US and more than a thousand of those injuries are fatal. Unfortunately, a large number of these injuries could’ve been prevented if the people in charge put some time and effort into quick but effective training sessions and regular reminders. Moreover, during our research, we found that a large portion of these accidents are caused by the presence of heavy machinery on-site, a critical part of almost every construction site, which is why we’ve compiled a list of construction safety tips when working around heavy machinery using data from the BLS, OSHA, and CDC.

1. High Temperatures
Heat injury is a serious health problem that affects thousands of workers every year. But combine the extreme heat of the summer with heavy machinery and your construction site becomes a lot more dangerous. Metal surfaces of your machinery can easily burn workers. Your operators are at even greater risk as they might get caught out with hot instruments and lose control of the machine. It’s also not uncommon for operators to fall off a machine due to extremely hot metal surfaces when trying to dismount (more on that later).
 
The best way to avoid such injuries? Protective clothing. Workers might not be too excited about wearing bulky clothes in the heat but it’s for their safety. At the very least, they should be wearing gloves at all times. White-colored clothing, regular breaks, and water would further help in keeping body temperatures down.
 
It’s also in your best interest to know when it’s time to stop. Take a look at OSHA’s Heat Illness Prevention Campaign to learn what temperatures are safe for work.

2. Mounting/Dismounting
According to the CDC, falling is the leading cause of work-related injuries and deaths in construction sites, and falls in the construction industry are frequently fatal. In other words, you don't want your workers to lose balance and fall down in an active construction site. The stakes are even higher when there are heavy machinery, like skid loaders, working around them.
 
And what’s the most dangerous and often the most dangerous time to fall? When mounting or dismounting heavy machinery.
 
The best way to avoid such injuries? Use the three-point contact rule, according to which, the worker must maintain at least three points of contact with their hands and feet while mounting or dismounting a machine to limit the possibilities of slipping or falling.

3. Hand Signals
As useful and versatile heavy machinery is, they can be noisy and make it difficult when workers try to communicate with one another. In addition, machine operators (especially crane operators) are often positioned far from those directing the work. Not being able to understand each other can have dangerous consequences on a construction site. One way around this is to use radios for communication. It’s also what most construction sites use to overcome loud machines. But radios don’t always work and you must have a backup in case the radios stop working and your operators and workers can’t communicate with each other.
 
The backup? Hand signals. Train employees to learn and use and understand simple but clear hand signals when the need arises.

4. Regular Inspection
Machines require maintenance - no two ways about it. But the maintenance also needs to be regular or else critical signs of damage or improper fits can go unnoticed. For instance, if a skid loader’s tracks aren’t properly tensioned, it can simply walk out of its tracks and potentially hurt others nearby.
 
There are millions of other ways a lack of heavy machinery maintenance can lead to disaster in a construction site. So put in the time and effort into keeping your machines in perfect condition. Otherwise, you could be paying $991,027 - the average hospital costs for a fatal construction accident.
​
5. Training Session
A proper training session can be as short as 30-minutes. It would be enough to cover the basics of best safety practices when working around heavy machinery. A few of these training sessions will allow employees to understand the common hazards when working with heavy machinery, the correct way to inspect and maintain heavy machinery, and also teach awareness procedures to both operators and ground crew.
 
And that wraps our top 5 construction safety tips when working around heavy machinery. You can learn about these safety tips through official websites of BLS, OSHA, and CDC. ​

Have you selected the wrong contractor or subcontractor for your construction project? The contractor performed badly, with delays and poor quality? Perhaps there were hidden extra costs and their final price when the work was complete was much higher than you expected?
​
Regrettably many construction projects go badly because the wrong contractor or subcontractor is selected. Often owners or contractors are only focused on the lowest price and select the cheapest contractor who is sometimes the wrong contractor and proves to be very costly. It’s therefore important to consider the following when selecting your contractor:

• Does the contractor have the required experience to deliver the work? Don’t just take their word for it, check their references and visit their completed projects.
• Do they have the applicable registrations to do the work? Ask to see the registrations.
• Can they produce acceptable quality? Some construction projects and clients require contractors to have particular quality registrations. But more importantly, have they produced good quality work on their previous projects? Do they have a quality management system? Do they have the required people and skills to produce good quality work?
• Have they worked on similar construction projects? This not only relates to the type of construction work that’s involved but also to the type of project and client. For instance, many contractors may be able to deliver a similar project on a commercial building project in the city, but have no experience on working on remote mining or oil and gas projects which have specific requirements and require more onerous safety standards. There is also a large difference between contractors that build low-cost houses, to those that build houses for the luxury market.
• Do they have the resources to carry out the work? This includes equipment, management, and the craftspeople. If they don’t have the resources can they access the resources and will they be able to manage them?
• Do they have the financial means to carry out a project of this size? Because of the way project finances are structured, with contractors usually only being able to invoice for work once it’s been completed and then they’re only paid one month to three months later, often after the client has deducted retainage monies, contractors often experience negative cash flows on their construction projects until they are substantially complete. The larger the project the larger the negative cash flow will be. Contractors have to be financially secure, with sufficient cash reserves to withstand the negative cash flow on this project combined with the negative cash flows they may be experiencing on other projects they’re working on. But furthermore, if contractors are suffering losses on other construction projects this could cause them financial stress on the new project which could mean they can’t pay for people and materials on your project. In extreme cases the contractor could become bankrupt partway through the project, which would leave you in trouble, facing delays and additional costs, while you find another contractor to finish the project.
• How does the size of the construction project compare to the size of projects the contractor has undertaken in the past? Contractors may have successfully completed smaller projects, but managing a large project can involve different management techniques. In addition, larger construction projects require more resources and more support from their head office. Larger projects also impact contractor’s cash flow more than smaller projects do.
• What other work are they currently doing? If they are involved with other large projects they may not have the resources or the finances to undertake additional work.
• What is their safety record? A poor safety record is often indicative of poor management. But, contractors with a poor safety record shouldn’t be used on your construction project. Accidents delay projects, they result in negative publicity for the project, it usually involves lengthy investigations and masses of paperwork which takes everyone’s attention away from getting the construction completed, and poor safety could get the project stopped until the contractor rectifies the safety breaches.
• Do they have a good reputation?
• Have they got a record of being claims orientated and engaging in legal disputes with their clients? You don’t want to have to waste time arguing spurious variation claims or engaging legal experts to argue frivolous disputes. Sure there will probably be changes and additions on your project, but you should be comfortable that the contractor will deal with these in a prompt and fair manner, as you should also deal with their claims.
• Are they reliable and complete their projects on time?

It always pays to check references, who did they work for previously and were they happy with the contractor’s performance. Even visit their completed projects to see if you’ll be happy with the standard of work. Past performance, however, is not always indicative of how a contractor will perform on a project and I have, on occasion, had good contractors perform poorly on my project due to them being over-committed on other construction projects, which meant they had insufficient and poor quality resources for my project.
​....Continue Reading.....
This article was first published on the ClockShark website. To visit this website and continue reading the article click on the link above.
Please share this post

​To read more about the author’s books and find out where you can purchase them visit the pages on this website by clicking the links below:

• '​Successful Construction Project Management: The Practical Guide'
• 'Building a Successful Construction Company: The Practical Guide'
• 'Construction Claims: A Short Guide for Contractors'
• 'Construction Project Management: Tips and Insights'
• ​'Construction Management: From Project Concept to Completion'
• 'The Successful Construction Supervisor and Foreman'
• and 'An Introduction to Building and Renovating Houses - Volumes 1 and 2'

'Construction Book reviews'
To read more about the author visit the page 'Paul Netscher'
Want to contact Paul Netscher please enter your details on 'Contacts'
Find out how Paul Netscher can help you

​Most of us know the risks created by asbestos and how asbestos related disease has impacted the health of people around the world. Unfortunately not everyone is aware of the products that contain asbestos, so even now there are scores of people who are inadvertently exposed to asbestos every year. Asbestos was formerly used in many products including insulation, floor coverings, electrical boards, and more. People renovating or demolishing buildings more than 30 years old must take precautions and check to ensure they know what products contain asbestos, and then ensure these are handled and disposed safely.

But asbestos isn’t the only silent lung killer. Indeed there are more and more workers in the construction industry being struck down by silicosis. This is caused by breathing in silica dust. Silica dust is created when masons cut materials like concrete, masonry, sandstone and granite. The disease isn’t curable and results in permanent scarring of the lungs. Silicosis is a debilitating disease making even minor physical activity near impossible, and severe cases lead to death. For more read this report.

A relatively new source of silica dust is the use of engineered stone kitchen bench tops and bathroom vanity slabs. According to this report engineered stone consists of 90% silica. These tops have to be cut to size and holes are cut and drilled to accommodate the installation of sinks, cook-tops and plumbing fittings.

In Australia, where cases of silicosis have increased by 50%, new laws are being introduced to reduce the amount of dust exposure, but these probably don’t go far enough since many workers are exposed to silica dust over prolonged periods of time.
In the US, according to a 2015 report from the Centres for Disease Control and Prevention, some 2 million workers are exposed to silica dust, with the highest risks being in mining, quarrying, stonemasons, tunnelling and construction, with many of these workers facing high exposure.

​Want to read more construction management tips and insights? Read 'Successful Construction Project Management: The Practical Guide' by Paul Netscher