Analysis of the CFMA’s 2021 Annual Financial Survey finds reason for optimism for civil construction: profitability is on the rise. Industry experts say that even more is possible—with attention to overcoming common internal performance challenges.
The Bottom Line
Construction Pros reports that the 282 civil construction companies participating in the CFMA 2021 survey, “experienced an average 8.1% net income before taxes, which is up from 6% reported in FY2019. Return on assets (ROAs) rose from 10% in FY2019 to 13% in FY2020. The typical civil construction respondent used its assets to generate 2.0 times more sales than assets, maintained a leverage ratio of 2.0, and achieved a return on equity (ROE) of 26%.”
Analysts at McKinsey Insight point out that with clients demanding “higher-quality and more cost-efficient solutions built on more productive technologies and workflows,” the builders who address internal performance challenges are going to be best positioned for increased profitability margins. Specifically, the CFMA report highlights the importance of overcoming these typical challenges:
- Shortfalls in accountability
- Talent management
- Inconsistent performance management from project to project
- Failure to adapt to new technology
- Problems utilizing resources.
Colonial Surety is here to help you increase your profitability too, via The Partnership Account for Contractors®. Get free insights and financial scores just for completing the pre-qualification. Then, once qualified, The Partnership Account provides builders with a surety line of credit—in writing—and a private digital dashboard. Use it to access real time financial intel, including a day to day snapshot of single and aggregate limits and current and available bond capacity. Go ahead: update work on hand, increase your aggregate and move that next project forward. Get started right here, now:
Growing a business requires following the action and right now contractors are wise to track the flow of money for publicly funded builds and nonresidential builds. Repeat business is necessary for growth too and successful builders underscore the importance of making time for relationships. To that end, consider rethinking your online marketing strategy. You’ll find additional tips on growth strategies, including bidding more, right here.
Of course there are always external factors that get in the way of profitability and require monitoring. The pros suggest keeping an eye on these dynamics as you forge forward:
- Fragmented value chains with conflicting goals (e.g. designers don’t necessarily aim to maximize cost-efficiency or that contractors simply pass on additional costs to the owner rather than work together to reduce them)
- Extensive subcontracting
- Complex portfolios
- Competitive pressure.
Building experts also remind us that every contractor can improve profitability by addressing internal challenges and recommend these action areas:
- Leverage machine control technology to get more from every machine hour
- Look for real-time operations visibility.
- Reduce construction waste
- Measure the total cost of equipment ownership
- Invest in staff and training
- Leverage construction management software systems.
- Control of bidding and bonding, online and in real time.
- Powers of attorney to seal and issue their own bid bonds—in minutes.
- Fast, direct, confidential bid bonds—no middleman.
- Direct access to performance and payment bonds on a customized dashboard.
- Real time tracking of bids and work on hand.
- Immediate access to Colonial’s lead underwriter as new opportunities emerge.
- A private Owner’s Dashboard to view surety lines, adjust work and analyze bids.
Founded in 1930, Colonial Surety Company is a leading direct seller and writer of surety bonds and insurance products across the USA. Colonial is rated “A Excellent” by A.M. Best Company and U.S. Treasury listed. Let’s connect today: LinkedIn!