More Opportunities and Methods to Find Work...

The Port of Long Beach has a number of projects on the boards which total well over $2 billion in the coming years.  Some of the work is on hold given the current budget crises our state and local governments face while other projects cannot be delayed and will take place on or near projected start dates.

There are some sites to visit to learn more about the upcoming projects and how you can position yourself to participate in the process of procuring work...

Port of Long Beach Project List 

Port of Long Beach Small Business Enterprise Program

Port of Long Beach Future Work PDFs

Clicking on any of the above links will bring you to pages that also have links to further details and other useful information.  In addition to the above, you might want to visit The Network Bid System which provides "easy online access to Bids, RFP's, RFQ's, Addenda and bid results."  You might also want to check out the Construction Bidboard if you are not familiar with that tool.

In these challenging times, which on the average aren't going to get much easier anytime soon, exploring all options to locate and win work must be in the forefront of all contractor's strategic plans.


As always, best of luck in reaching your business development objectives and let me know if there is anything we can do to assist you in any way.


Glenn

New Enterprise Zones in Southern California

In case you missed it, a few months ago the Department of Housing and Community Development (HCD) announced 3 new conditional Enterprise Zones (EZ) in Southern California.  Anaheim, Harbor Gateway and Santa Clarita Valley will have these zones which replace expiring zones.  The final desigations of these zones are expected by mid year and will be in effect for 15 years.

The Anaheim zone includes areas in which 80% of all Anaheim businesses reside.  For a detailed map (be sure to use your zoom tool when viewing), click here...

The Harbor Gateway zone includes most of San Pedro, Wilmington and Harbor Cities.  For that detailed map, click here...

The Santa Clarita Valley zone expands the zone created in 2007 beyond Santa Clarita's city limits to almost double that existing zone.  The new zone will stretch from Six Flags Magic Mountain west of I-5 to the new Disney ABC Studios ranch near Highway 14 and Placentia Canyon road.

The tax advantages of businesses within EZ boundaries are significant.  They include the EZ Hiring Credit providing up to $37,000 per qualified employee, EZ Sales/Use Tax Credit, income tax credit for sales tax paid on qualified equipment and the EZ Net Interest Deduction for Lenders.


This is great news for businesses in these new zones and will amount to substantial tax savings for many of those businesses.  If you have any questions whatsoever about these developments, as always please let me know.

Another Tax Savings Opportunity!

The Hiring Incentives to Restore Employment (HIRE) Act provides incentives in the form of a payroll tax break when employers hire qualified new employees after February 3, 2010 and before January 1, 2011.  Unfortunately not everyone was aware of this provision however there are ways to go back and claim the benefit (6.2% on wages paid to eligible new hires).  It can amount to significant tax savings.

For more information see this brief our State and Local Tax Group (SALT practice) published below:



Also, feel free to contact me if you or a company you know would like assistance in obtaining these benefits.


Glenn

Looking for Work?

There is a large hospital complex being constructed in Camp Pendleton by the Clark/McCarthy Joint Venture and they are looking for contractors to help build it out.  I believe it's set to be completed sometime in 2014.  It seems that Athena Construction Group will be awarded the contract.

The website you will want to visit is right here.  On this site you can review the overall project as well as click on the "Procurement" tab to see the table of subcontracts already awarded and still to be awarded.  They are also inviting interested subcontractors to complete a registration form on the site.  Per Lou Palandrani of Clark/McCarthy JV, there are still a significant number of opportunities available and you can see the list on this site.  It's clear there is much work still left to bid throughout the rest of this year.  The work is out there, you need to take action and go get it!


As always, let me know if you have any questions or comments and good luck!

Importance of Financial Forecasting

Happy New Year to everyone!

As we turn the calendar to 2011, we look forward to a fresh start and hopefully better times ahead.  Many, if not most or all, businesses know what they are looking to accomplish over short, intermediate and longer time horizons.  They are looking to arrive at a destination and mile markers along the way.  In order to track how the organization is doing in achieving its financial goals, a roadmap should be created.  If a business goes astray in achieving its financial goals and has no barometer to measure against on a line item basis (think income statement line items) to determine why it is off course and by how much, it runs the risk of not being able to timely identify the problem areas and take corrective action.

As we’re mid-way through January if you aren’t done, or at least close, to getting a final financial budget in place for 2011 you should begin immediately.  It really isn’t too difficult a task and it provides a great tool for the business owner to measure actual against expected results.  Rather than simply looking at the bottom line on the interim financial statement and wondering why it’s not what it should be, the budget, used in a regular and timely fashion, provides the much needed benchmark management should have to run the business efficiently and profitably.

In addition to creating a financial forecast/budget, it’s also very important to create a cash flow forecast.  A typical time horizon is 13 weeks, updated on a rolling basis, however you can also create a longer view cash flow forecast as well.  There are few industries, if any, where cash flow forecasting is more important than in the construction industry.  Knowing when, and where, your cash is coming from and going is vital.  Additionally knowing if, when and how much financing from your bank partner, in the form of the working capital line of credit and other debt facilities, is also of the utmost importance in helping you run your business.

There are other advantages to creating these plans as well.  Important business partners for most of our clients include the bond company, the surety broker as well as the bank.  These businesses that extend credit to contractors obviously prefer to work with contractors who have their “act together” in terms of running and managing their businesses.  How do you think your bond company or bank would react if, during your annual or semi-annual meeting with them, you handed over these plans in addition to other management reports that are critical for those business partners to continue extending, and maximizing, the credit you need?  How many of your competitors would you guess actually hand over these financial and cash flow forecasts?  The answer is some perhaps, but certainly not all.  You must take any advantage you can in order to maintain, and again maximize, surety and bank credit.

If you would like templates for either a financial or cash flow forecast, please contact me and I’ll be sure you get a copy.

Parkinson’s Law and the Pareto Principle

You may not have heard these names before, but I’d guess you have heard the concepts that each address by other names/phrases.  I thought it made sense to address both of these as they impact business each and every day.  Also, since my other article this month addresses budgeting and forecasting essentially to aid in business efficiency and effectiveness, I thought these concepts all fit well together.

Parkinson’s Law, in a nutshell, is the concept that work expands to fill the time allotted for such work.  That means that if we tell a worker that he or she must work from 9AM to 5PM every day, that worker will at the end of the day clock 8 hours worth of work regardless of whether they provided 8 hours of productivity.  I’d venture to guess that in many cases, if you told one of your employees that if they completed the tasks they needed to for the day by 3PM, they could go home, they would have little problem getting their work done by 3PM.  This scenario may ring true to some of you reading this.  You may be thinking about the two hours that are essentially “wasted” by requiring someone to stay in place until 5PM just because.  You may also be thinking this is a problem or challenge and I’d tend to agree!

One of the greatest areas of risk, particularly for subcontractors, is the management of labor.  It is also one of the greatest areas of opportunity as well.  In a competitive bid environment, there are many variables that don’t change dramatically from one contractor to the next in terms of putting together a number, or price such as materials and fixed overhead.  One area that has the potential to be a “game changer” in making you extremely competitive is how you manage and incentivize labor.  In my above scenario, the employee gets paid the same whether they do a full 8 hours, or 5 or 6 hours, of work in a day.  The employee most likely fully realizes they are not producing 8 hours of quality work and they either know how to get to 8 hours of work in a day or they are just purely underutilized and there is possibly too much labor in the company relative to the real need.  

What if you as a business owner, both empowered and incentivized your employees to produce more quality work in less time?  What would that mean to a subcontractor’s pricing potential if they could be lower by say 20% in their labor line item to their bid?  What would that capability mean to their overall business?  We all have many intelligent people who can be utilized more effectively if we allow them to do so and reward them when they produce results.  If in fact you could tap into the inefficient and wasted time in the labor area of your business and maximize that potential?  If you reduced labor costs on a bid by 20% across the board (easier said than done I understand, but it can be done if executed correctly with your team), that would save a typical subcontractor doing say $20 million in revenue $800,000 (assuming a 20% direct labor starting point).  If you split the savings evenly with your labor force, you would be able to hand out $400,000 in bonuses and increase your equity in the business by almost $250,000 (your 400K share less taxes)!  I’d venture to guess that many of your employees would be interested in their share of $400,000 annually (or whatever your savings would be) if given the opportunity to help identify inefficiencies and maximize productivity.  Further if you were a contractor offering total compensation, including this bonus, which exceeded that of most of your competition, you would be better able to attract top talent further potentially enhancing efficiency and capability.

Pareto Principle

The Pareto Principle is best known as the “80/20” rule.  Examples often used are 80% of your business comes from 20% of your customers, 80% of your HR/employee headaches come from 20% of your employees, etc.  It doesn’t necessarily have to be 80/20, it could be 70/30 or 90/10, but 80/20 tends to be the more likely scenario/example.

When doing a business plan, it may make sense to focus on your 20% if it’s a good thing (as in the 20% of your customers/sources of business) or mitigate/reduce the 20% of your headache areas (those employees and/or customers not worth doing business with).  Focusing and growing the more productive areas in your business is an excellent use of time producing the highest yield.  It will allow for more time to do what matters to you whether that be continuing to focus on how to grow your business and employees as well as perhaps spending more time with family and friends.

If 20% of the activities you do yield 80% of your desired results, do more of those types of activities and/or do them better!  Borrow the time from the 80% of the lesser productive activities (ideally the bottom, lowest productive percentile of course) and re-allocate to that top 20%.

We’ve known these principles all the while, I thought it would be nice to discuss them as well as offer the proper names for these often discussed, important and solid theorems.

The Importance of Corporate Culture

Last weekend I attended a Holiday party a client graciously invites me to each year.  We've all been to numerous Holiday parties over the years and they are generally good fun and we enjoy good company!  This particular party last week was very different in one way...this company's marketing group put together a film production chronicling a number of subplots and themes (one such example is the "rumor" that tunnels exist below their office building which they were accessing by going under their desks...looked to be true!).  The main message of the film was congratulatory in nature.  This company, and its President, have been in business for 30 years.

The performance given captivated the entire audience for what seemed approximately 30 minutes, give or take, in duration.  It wasn't as much the message that really grabbed my attention (no offense, 30 years in business is quite an accomplishment).  No, it wasn't as much the message...it was the messengers that really made quite an impression on me.  Virtually all the employees of the company were featured in this film (yes, it was good enough of a production to be called a film) and they were HAVING FUN!  One of the ladies was even singing the "I want to be a billionaire so f*&^%!g bad" song at one point and then the original song played in the background...good times!

This company has figured it out, something special that can't easily be quantified or bottled.  It would be great if we could all have organizations where the morale was at the high levels I saw depicted throughout this film, especially in these tougher times!  Although not easily quantified, the business results are generally very directly correlated to the attitudes and morale of the team producing those results.