Running a Successful Construction Company: For Pros by Pros
Comprehensive Guide to Starting, Managing and Running a Profitable Construction Company

David Gerstel

A comprehensive guide to starting, managing, and running a profitable construction business

You don't need an MBA to start and run a thriving residential construction business, but you do need a tight grip on the fundamentals of construction management and construction business organization. In this completely revised second edition, David Gerstel shows how to create accurate estimates, set up an office, shop for insurance and keep the books, how to find the right jobs, figure costs, make bids, write strong contracts and handle change orders. The new edition includes updates on business information technology and a discussion of how the increasing complexity in construction technology has changed the way construction companies are organized.

If you're starting your own contracting business, the systems Gerstel offers will help you get going with low overhead and without drowning in paperwork. If you already own your own construction company, this book will give you the information you need to gain control of your operation.

Introduction:

When the first edition of this book was published in 1991 and the reviews began to come in, one reader commented that sitting down with it was "like having a conversation with a dozen other builders who are sharing their hard-won experience." In fact, the ideas in that first edition flowed from the generosity not only of a dozen, but of many dozens of construction professionals who had shared their knowledge and experience with me. Together we were offering a comprehensive guide to the fundamentals of organizing and running a construction company.

In the decade that has followed, my education has gone on nonstop, as I have continued to learn from fellow builders and from the experience, now spanning over 25 years, of running my own construction business. My understanding of every one of the issues that I write about has expanded and sharpened. At the same time, there have been major changes in the construction industry. Computers were just nudging their way into builders' offices when I wrote the first edition. Now they are as commonplace as telephones and file cabinets. Construction technology has been evolving at a blistering pace with tools, materials, and specialty trades all proliferating and building codes becoming more complex. The changes in technology have brought on changes in the way builders run their companies and organize projects.

When I set out to write this second edition, my intent was simply to put into play my increased knowledge and to reflect the impact of new technology. What I ended up producing, however, is far more than a revision. There are entire new chapters and subchapters -- on computers, on delegation, on design/build, and on many other subjects. The chapter on cost planning, the alternative to competitive bidding that I have developed, has been completely reworked. Every chapter includes new concepts and examples and makes use of new ways of presenting information. In fact, few paragraphs or sentences have survived intact from the first edition. For all practical purposes, what you hold in your hand is a new book.

Even so, readers of the first edition will, I believe, feel at home with this new book. It uses the same logical, three-part organization of material -- Getting Ready, Getting the Right Jobs, Getting the Jobs Done Right. It remains a "what-and-why" book as well as a "how-to" book. While focusing on what you must do to succeed as a builder and explaining why, it provides plenty of how-to advice. You will find ample suggestions and even detailed checklists for creating procedures for key tasks from marketing to estimating and bidding right on through to creating contracts, producing change orders, and running jobs. Finally, this new book comes back again and again to the same core ideas as the first edition. It urges adherence to the same basic principles:

• Plan and focus. To succeed as a builder you must organize and prioritize relentlessly.
• Travel light. Run lean. Operate economically. To prosper over the long run, make careful use of money, material, and equipment. Don't fool yourself into thinking of that fully loaded new pickup as a cost-effective investment in your business when it is really just excessive personal consumption.
• Act with integrity. Easy to say, hard to do. To achieve integrity, work at it nail-by-nail at your projects, encounter-by-encounter with your clients, workers, subs, and suppliers. Integrity is its own reward, but in the building business it is also rewarded with client and employee loyalty -- and by freedom from lawsuits over corner-cutting construction.
• Be fair to everyone, including yourself. Being fair to clients includes seeing to it that they receive good value and responsive service. Being fair to workers includes compensating them fully and treating them with respect. Being fair to yourself includes commanding respect and collecting your due pay -- a reasonable salary for managing your company as well as a wage for any hands-on work you do and a moderate profit. For many builders, being fair to themselves is the far harder part of maintaining the balance. When they don't, we lose them. They can't stay in business.
   

Adhere to your own versions of such principles, and you will build a successful construction company. The qualities of such a company were neatly summed up by a stone mason I met in Ireland a while back. I was walking along a country lane when I came upon him repairing a rough stone wall enclosing a pasture. I stopped to watch, we struck up a conversation, and I explained to him that I was a builder from America and wanted to learn about his craft. "Then don't pay this much heed, lad," he said, gesturing at the wall he was patching. "It's junk, this is. If you want to see a good wall of mine, go on down the lane there, and look at the wall behind the schoolhouse." I told him I would and inquired how I would be able to tell it was a good wall. "What should I look for?" I asked. He thought for a moment, and then he said, "Well, I tell you, it's the same as with a person. It's got character and stability. That's what marks a good wall." I walked on, stopping behind the schoolhouse to admire the stonemason's work. It was some time later that it hit me -- his words describing a good wall also fit a well-run construction company. Like the wall, a good company has character and stability. I hope that my book will help you in building your own company with just those qualities. Good luck to you.

Contents:

Introduction

PART ONE: GETTING READY

1. A Builder's Career
What It Takes
Opportunities and Challenges
Making a Plan

2. A Builder's Tools
Office and Shop
Computers in Construction
Policy Statement
Operating Capital
Insurance

3. A Builder's Numbers
Knowing Your Numbers
Starting with a Shoebox
Moving Up to a One-Write System
Keeping Job Cost Records
Adding Payroll
Leaping to a Computer Program
Going Deeper into Your Numbers

PART TWO: GETTING THE RIGHT JOBS

4. Entering the Marketplace
Marketing
Connecting with Design Professionals
Evaluating Projects
Competitive Bidding
Design/Build
Cost Planning

5. Estimating and Bidding
Nailing Your Numbers
Gathering Information
Calculating Direct Costs
Figuring Overhead
Figuring Profit
Alternative Methods

6. Construction Contracts
Why and Which One
The Agreement
The Conditions
Two Critical Conditions: Change Orders and Dispute Resolution
Subcontracts

PART THREE: GETTING THE JOBS DONE RIGHT

7. Labor, Materials, and Subcontractors
Hiring and Firing
Crew
Project Leads and Delegation
Pay
Subcontractors and Suppliers

8. Project Management
Safety First
Job Setup
Running Projects
Working with Clients

Resources

Glossary

Index

Soft-cover, 8-1/2 x 11 in., 272 pages, with color photos and drawings  Published 2002

ISBN 978-1-56158-530-4

Running A Successful Construction Company For Pros By Pros RC-T070640 $24.95