Tips For Protecting Your Construction Business

Construction companies are not unlike many other industries in that the strength of a contractor lies within its people.  Contractors have the right people and tools to build “it”.  Contractors also ensure quality by being experts in their trade.

These are very important attributes of a successful contractor.
Another very important and sometimes overlooked attribute of a good contracting company is its leadership and management.  Leaders and mangers (generally owners) hold themselves out as “ethical” and will strive for good customer satisfaction.  To accomplish this, they work to develop good working relationships with their subs/generals and also with owners.  This a valuable asset that takes a good deal of time to develop.  These relationships and the strength of these people is your most valuable asset and it needs to be protected.

If you owned a $1,000,000 Yacht, you would have it insured, you would likely have security on both land and sea, and you would maintain it regularly to protect the value and usefulness of your asset.  Likewise, the asset, which is your people, needs to be protected, insured and maintained with as much or more diligence.

There are many questions you should ask yourself to make sure that you most valuable resource is protected.

1. Do you have a contingency plan?
   1. People get injured or sick.  Do you know what you are going to do if a key person is missing for a day? a week? six weeks? Six months? a year? forever?
   2. Do you have a buy sell agreement, or does your operating agreement talk to that effect?
   3. Do you know what you are going to do upon the remove of a key employee?  How fast can you replace them?  What will it cost you, in outflows (recruiting) or in lost production?
2. Have you properly insured your people?
   1. Health insurance
   2. Life insurance
   3. Short-term disability insurance?
   4. Long-term disability insurance?
   5. Key-man insurance?
3. Does your organization promote a healthy life-style?
   1. Do you have a wellness program?
   2. How is your safety record?  Do you need to look at it again?
   3. Does your organization promote a work –life balance?
4. Have you made an honest evaluation of your employee/owner satisfaction?
   1. Do you know what goals your key people have?
   2. Do they think they have the ability to reach them with your organization?
   3. Have you provided them with all the tools needed?
   4. Do you have a reasonable review process?
   5. Are the fringe benefits of your organization appropriate to your industry, in order to keep important employees satisfied?
   6. Do your key employees feel that they will be able to achieve retirement with your organization?
   7. Is the “right” tone set at the top?

These are just a few items to consider.  A consultant can help you with the finer details of a contingency plan.  There are also tax beneficial ways to structure benefits and activities that a tax professional can help you.  You plan for your people needs to be carefully thought out in advance, and revisited regularly as the organization, the economy and the industry changes.  IF you have any questions please do not hesitate to contact me at 602-776-6344 or by email at rdietrich@pkcpa.com 

G. Ross Dietrich, CPA, CIT
Senior Audit Manager
Price, Kong, & Co. CPA’s P.A.