Masons: Are you Making Money or Losing Cash?

 By Damian Lang

Whether or not you survive in business is really kind of simple. You must take in more cash than you pay out. Yet, most contractors aren’t even sure if they are making money at all. Often, by the time they figure it out, it is too late to make adjustments, causing failure.

At a coaching session I attended, speaker George Hedley made the statement that he is convinced that 90 percent of construction business owners doing under $10 million in sales don’t know how to read a profit and loss (P&L) statement. Over the years, I have come to believe that George could say that for many business owners who do more than $10 million in sales per year, too.

Many of us grew up in the trade, so we know how to build buildings. However, when it comes to being a businessperson, we get lost. It was not until my company was doing more than $10 million in sales and switched to accrual accounting that I hired a CFO to show me how to read a P&L, and to teach me what effect it had on my operations. Of course, business was much easier back then as the economy was good and the competition wasn’t as educated. Hell, I was running my own company doing more than $10 million in sales a year. I was making money without really knowing how or why I was prospering. That won’t work in today’s business climate.

Here’s a wild card many contractors get surprised by: A company can make money and still go bankrupt. Sounds scary, doesn’t it? You bet, and it happens. This can happen if one does not watch his debt load and other expenses, compared to his profits. Let’s say you owe money for a forklift, truck and scaffolding. Then you have rent, taxes, debt interest, owner distributions and other expenses that cost you $12,000 per month or $144,000 on the year.

At the end of the year, you are feeling alright as your P&L shows you earned $70,000 for the year (before depreciation and interest are subtracted). However, the real picture is that you just had a year during which you made $70,000 in profits the way good ole Uncle Sam looks at it, while losing $74,000 in cash paid out from your bank account. Think about it: There’s $144,000 going out the door in payments/expenses, and $70,000 in profits coming in to cover your costs. A total of $144,000 minus $70,000 equals $74,000 less cash. It doesn’t take many years like this to sink a company.

Several years ago, we started teaching all our managers how the P&L affects our operations and even started paying them based on the monthly P&L outcome. They get their bonuses (or incentive, I like to call it) based on three factors of the monthly P&L: total sales collected, gross profit and net profit.

It is amazing how much a company can benefit by letting everyone in management know how important these three factors are to the success of the company. And, when part of their income is based on the outcome of the P&L, it becomes important to them to start thinking more like business owners.

The good news is, it is not a cardinal sin to not know how to read a P&L statement. However, it is a sin not to have an accountant on board who can explain your P&L to you, whether this person works inside your company or is an outside accountant. The P&L should be done each month, and a meeting should be held to see how your company is doing financially as well as what moves you should make next.

If you wait until the end of the year to find out how your company is performing, it could be too late to change course and take corrective actions. Also, don’t forget to ask your accountant for a cash flow statement to ensure you are taking in more money than you are paying out. Remember, profits don’t equal cash, and, to survive, we must take in more cash than we pay out.

Damian Lang owns and operates four companies in Ohio. He is the inventor of the Grout Hog-Grout DeliverySystem, Mud Hog mortar mixers, Hog Leg wall bracing system and several other labor saving devices used in the masonry industry. He is the author of the book called “RACE—Rewarding And Challenging Employees for Profits in Masonry.” He writes for Masonry Magazine each month and consults with many of the leading mason contractors in the country. For information on how Damian can help make your jobsite more profitable using his equipment and systems, email him at dlang@langmasonry.com or call 740-749-3512. 

All rights reserved, © 2013 Damian Lang, President of Lang Masonry Contractors, Inc., and EZ Grout Corp.

Pankow Foundation Partners with BIM for Masonry Initiative

The Building Information Modeling Initiative for Masonry (BIM-M) says the Charles Pankow Foundation (CPF) is now a strategic partner of the initiative to develop standards for masonry in building information modeling (BIM). CPF will represent the initiative as its contracting entity for all university contracts.

CPF was established in 2002 by Charles J. Pankow, a pioneer in the construction industry. It was Mr. Pankow's lifelong passion to lead and inspire new and better ways to build. He intended that this Foundation, drive market-driven innovations in the building industry.  The Foundation is a private, independent, non-profit, public benefit, philanthropic foundation. The Foundation exists to provide the AEC industry with a better way to design and build.

The BIM-M initiative is comprised of a large number of masonry interests and organizations in the United States and Canada working together to advance the cause of masonry products, systems and installation using Building Information Modeling software.

For further information on the roadmap and/or National BIM-M Initiative, contact David Biggs at biggsconsulting@att.net.

CONSTRUCT Donates to Tennessee Concrete Association

CONSTRUCT, an event designed to provide the commercial building team real-world, practical product and education solutions, supports Middle Tennessee State University (MTSU) student research for the Net Zero Building Project by donating $750 to the Tennessee Concrete Association (TCA).

The Net Zero Building Project at TCA is being done in partnership with MTSU and a local group of sustainable construction advocates. The group used an Integrated Project Delivery method, including a design charette, to get input from a cross section of the community. 

The design produced a simple, sustainable, disaster-resistant building that can be used as permanent housing or constructed quickly after natural/manmade disasters such as an earthquake, flood, tornado, etc. This structure could be implemented rapidly to aid in a disaster relief scenario or be stationed in the landscape as a place of refuge before an impending natural disaster. It will also incorporate the principal of modularity to allow for future expansion once the emergency stage has passed.  

Secondly, this shelter is built with the intention of showcasing net-zero energy consumption by using the thermal mass of concrete, thermal tempering of the fresh air supply, and natural convection to provide indoor comfort without an HVAC system. It also incorporates a small PV solar system to produce its own energy and showcases resilient design principles and healthy home finishes. This demonstration shelter allows researchers at MTSU to gather data from a multidisciplinary perspective.  

Lastly, this shelter will provide a vehicle for undergraduate and graduate students to work in a living laboratory.   

“TCA’s Net Zero home is an important project that our CONSTRUCT attendees will have an opportunity to visit and learn about," says Tom Cindric, VP, CONSTRUCT. "We are excited to be able to support the project’s completion.” 

“The Tennessee Concrete Association is excited about partnering with the Construct show to share our concrete Net Zero home with show attendees," adds Alan Sparkman, CAE, CCPf, LEED AP, executive director, Tennessee Concrete Association. "We appreciate this opportunity and we appreciate Hanley Wood's donation of $750 to help us in completing the project.” 

Construction Employment Increases in 26 States Between July and August

Construction employment increased in 26 states between July and August and in 35 states for the year, according to an analysis by the Associated General Contractors of America of Labor Department data. Association officials cautioned, however, that construction employment remains below peak levels in most states and warned of the potential impact of a halt in federal construction investments.

“While we would all like to see even more robust growth, it is encouraging that most states have a larger construction workforce today than they did a year ago,” says Stephen E. Sandherr, the association’s CEO. “It will take a lot more growth, however, before construction employment levels return to their pre-recession levels in most places.”

South Dakota had the largest one-month percentage gain (6.7 percent, 1,300 jobs), followed by Vermont (3.7 percent, 500 jobs), Wisconsin (3.6 percent, 3,300 jobs) and Connecticut (3.0 percent, 1,600 jobs). California (7,700 jobs, 1.3 percent) added the largest number of jobs for the month, followed by New York (4,900 jobs, 1.6 percent), Florida (4,700, 1.3 percent) and Wisconsin. Employment was stable in Alabama and Maine.

Twenty-two states and the District of Columbia lost construction jobs between July and August. Oklahoma had the steepest percentage drop in construction employment for the month (-4.2 percent, -3,000 jobs), followed by Hawaii (-3.6 percent, -1,200 jobs), Nebraska (-2.7 percent, -1,200 jobs) and Utah (-2.6 percent, -1,900 jobs). Texas lost the largest number of jobs between July and August (-4,900 jobs, -0.8 percent), followed by Illinois (-4,100 jobs, -2.2 percent), Arizona (-3,100 jobs, -2.5 percent) and Oklahoma.

California added the most construction jobs for the year (29,100 jobs, 5.0 percent), followed by Texas (24,200 jobs, 4.1 percent), Florida (19,500 jobs, 5.7 percent) and Louisiana (10,600 jobs, 8.4 percent). Wyoming had the steepest percentage increase (12.8 percent, 2,700 jobs), followed by Mississippi (12.0 percent, 5,700 jobs), Colorado (8.8 percent, 10,100 jobs) and Hawaii (8.8 percent, 2,600 jobs).

Fourteen states and the District of Columbia lost construction jobs between August 2012 and August 2013, while construction employment levels remained unchanged for the year in Vermont. Indiana lost the most jobs over the past year and experienced the steepest rate of decline (-10,100 jobs, -8.1 percent). Other states experiencing large job losses for the year include Ohio (-6,100 jobs, -3.4 percent), North Carolina (-3,500 jobs, -2.1 percent) and Alabama (-2,000 jobs, -2.5 percent). Rhode Island (-4.4 percent, -700 jobs), Montana (-4.4 percent, -1,000 jobs) and the District of Columbia (-3.7 percent, -500 jobs) also experienced steep percentage declines.

Association officials said that much of the industry’s recent growth was coming from a few private sector areas, particularly demand for new housing and energy facilities. Those gains have been strong enough to offset declining public sector investments and weak private sector demand in areas like retail construction. As a result, many construction employers would be particularly hard hit by a sudden halt in federal construction activity.

“The impacts of a sudden halt in discretionary federal construction investments could be quite severe, especially on employment levels in states with a number of federal construction projects underway,” Sandherr adds.

View the state employment data by rank, by state.

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Mason Contractors: 2014 Construction Forecast

FMI, a provider of management consulting and investment banking to the engineering and construction industry, released its Q3-2013 Construction Outlook. The markets continue to shift, reducing annual Construction-Put-In-Place predictions to $909.6 billion, down nearly $4 billion from previous predictions. 

Early forecasts for 2014 show annual CPIP continues moderate growth of 7%, rising to $977 billion.

Major market predictions include:

• Residential Construction — FMI continues to forecast traction in residential construction. However, the growth is expected to taper off to 12% in 2014. Total predicted residential forecast is $379.6 billion, compared with the $338.2 billion for 2013.
• Commercial Construction — The current forecast calls for a 5% increase in 2014. Although retail sales as of June 2013 were up 5.7% over the previous year, new bricks and mortar retail space along with commercial other construction growth will remain slow to recover.
• Healthcare —With business owners nervous about the costs of the Affordable Healthcare Act, predictions are slightly unstable. Although the healthcare construction forecast slipped 1% since last year, it is still expected to grow 6% in 2014 to $44 billion.
• Educational — The increase in residential construction and tax revenues will help bring this market back in many areas of the country. Due to budget cuts for government spending at all levels, the national market will rise only slightly in 2014 to 4% over 2013 levels. 
• Manufacturing — The resurgence of the automotive industry is a big boost to manufacturing as is the continuing explorations and mining for shale oil and gas. However, manufacturing construction is expected to drop 2% by year-end 2013 before returning to 4% growth in 2014.  
• Highway and Street — Passage of MAP-21 calls for nearly $38 billion for the fiscal year 2014 for the Federal-Aid Highway Program. This is a major contributor to the CPIP predications of nearly $80 billion for 2014.  

While there is no singular reason for change in these markets, there are a few economic concerns that touch all of them:

• Potential conflicts with Syria
• Downsizing of government and large companies
• The implementation of Affordable Healthcare Act  

To download a copy of the full report, click here. For reprint permission or to schedule an interview with the author, please contact Sarah Avallone at 919.785.9221 or savallone@fminet.com.

 

LATICRETE Masonry Veneer Installation System Receives Award

LATICRETE, a manufacturer of construction solutions for the building industry, says its Masonry Veneer Installation System (MVIS) was honored with a gold medal in Home Builder Executive’s Innovation Awards issue, a national publication for builders of single-family, multi-family and semi-custom homes throughout the United States. 

In selecting the award winners, the publication’s editors reviewed company websites, press releases and promotional materials, along with articles and interviews published during the last year. According to the magazine, gold, silver, and bronze winners were chosen "based upon which manufacturers brought innovative products, features, and/or builder programs to market."

The growing acceptance of adhered masonry veneer facades created a need for higher performance, factory-produced installation materials that would consistently deliver the highest quality installations. To address this, LATICRETE developed MVIS. LATICRETE MVIS products include a waterproofing membrane, polymer-fortified adhesive mortars providing non-sag performance, a scratch and brown coat mortar option, a masonry pointing mortar, and, a 100 percent silicone sealant. The Laticrete warranted system provides a permanent, high-strength installation that is freeze/thaw stable and protected from water intrusion. MVIS reduces jobsite labor and installed costs.