There is no shortage of work in the construction industry right now. Yet, upfront costs are barriers for many specialty contractors interested in taking on more significant projects but face the challenge of waiting on payment from past jobs.
Delayed payment is felt by nearly 90% of contractors, according to Levelset’s 2021 Construction Cash Flow & Payment Report.
While most specialty contractors aim to take on jobs with higher profit margins, buying materials upfront can drain the available cash needed to make this happen.
Bidding on better jobs necessitates a business model that prioritizes growth and provides the ability to scale quickly. These tips can help specialty contractors get better jobs and grow their businesses.
The solutions
Understand the financials
It’s tempting to only budget for the substantial costs at the start of a project without planning how to handle the later stages. That’s not the most effective way to access more significant projects, especially as the industry faces high material costs and extended lead times. Breaking down project expenses is crucial before taking on one job or multiple projects. Learn more about construction financial management with this free course.
Bid bigger
The lowest bids aren’t always the best ones. Before bidding on a potential project, research is vital. Under-bidding can lead to cash flow issues down the road, so be sure your prices align with the work and services you plan to provide. Learn more about the high cost of low bids in this helpful article.
Strengthen vendor relationships
Vendor relationships are vital to getting the supplies you need for your projects. Unfortunately, we know that waiting for payment from past jobs can cause a trickle effect in the construction payment pipeline. A customer not paying on time directly impacts specialty contractors’ ability to pay their vendors on schedule, creating a cash flow domino effect. One way to improve vendor relationships is by discussing terms and offers upfront. Learn more tips about strengthening vendor relationships, which helps with long-term growth.
Use Materials Financing
Covering upfront costs at the start of a project too often stunts business growth for specialty contractors. Slow payment has become acceptable in the industry, but this norm does not benefit business growth or bigger bids. Materials Financing is a cash flow tool that allows specialty contractors to get materials at the start of a project and pay for them up to 120 days later. Learn how this contractor grew his business during the global pandemic using Materials Financing.
Get materials now. Pay when you get paid.
Enjoy 120-day payback terms with any material supplier.
Specialty contractors work hard to keep their businesses on track, and these tips can help them gain insight or strengthen what they already have in place. Growing a business comes with great responsibility, but it also comes with access to great partnerships.
To learn more about how Levelset can help you get paid faster, be sure to connect with our team.
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