5 Steps to Improve Profit Margins for your Remote Construction & Installation Projects
Learn how a construction CEO increased profit margins with project based budgeting and job costing.
By Rob Tymchyshyn, Co-Founder, Fieldclix Software
By Rob Tymchyshyn, Co-Founder, Fieldclix Software
The unique nature of remote construction adds to the challenges of tracking job costs
Every day in the United States, thousands of field workers are dispatched to remote locations to build out infrastructure projects such as cell towers, charging stations, solar panels, electrical installations, and concrete foundations, to name a few.
Companies managing these remote projects often face many different hurdles including weather delays, missing materials, dependencies on third parties, and other factors that can increase costs and create delays.
To make matters worse, the unique challenges of remote construction projects – short timelines, multiple cost drivers, crews moving in and out of different sites – make it extremely difficult for business owners to track their daily job costs and project-level profits.
Darrin Wagner, the CEO of Test Communications - a growing wireless construction company based out of Slidell, Louisiana - is one of those owners. Other than a monthly update from his accounting system and a few manually updated trackers, he had limited visibility into where his company's money was being spent on a day-to-day basis.
Companies managing these remote projects often face many different hurdles including weather delays, missing materials, dependencies on third parties, and other factors that can increase costs and create delays.
To make matters worse, the unique challenges of remote construction projects – short timelines, multiple cost drivers, crews moving in and out of different sites – make it extremely difficult for business owners to track their daily job costs and project-level profits.
Darrin Wagner, the CEO of Test Communications - a growing wireless construction company based out of Slidell, Louisiana - is one of those owners. Other than a monthly update from his accounting system and a few manually updated trackers, he had limited visibility into where his company's money was being spent on a day-to-day basis.
"With Fieldclix, I get automated, daily updates on all my Job Costs."
Darrin Wagner - CEO, Test Communications
Darrin Wagner - CEO, Test Communications
"We offer a wide range of Telecom infrastructure services, and it was becoming increasingly difficult to manage our field activities with QuickBooks & Excel," Darrin explained. "Our monthly accounting reports could tell me how we were doing as a business, but only after the fact. I was essentially flying blind with no way to determine where we were making and losing money at the project level".
With competition getting more aggressive and sophisticated, Darrin was also facing increased margin pressure during the project bidding process, which further shrunk any margin of error he had to deliver a project on time and on budget.
With competition getting more aggressive and sophisticated, Darrin was also facing increased margin pressure during the project bidding process, which further shrunk any margin of error he had to deliver a project on time and on budget.
A Better Way to Track Profit Margins
Darrin knew there had to be a better way. In 2019, he began to explore different options to track his company's financial performance down to the project level with the goal of establishing baseline measures to identify inefficiencies and opportunities for improvement.
"You can't change without the ability to measure," Darrin said. "For us to be competitive in this new environment, we needed to focus on operational excellence, and that required a new approach for our budgeting and job costing capabilities."
Reflecting on this journey, Darrin has identified Five essential steps to accurately tracking job costs to help measure and improve project margins.
"You can't change without the ability to measure," Darrin said. "For us to be competitive in this new environment, we needed to focus on operational excellence, and that required a new approach for our budgeting and job costing capabilities."
Reflecting on this journey, Darrin has identified Five essential steps to accurately tracking job costs to help measure and improve project margins.
1) Use Software to Accurately Track Project Costs
Darrin's vision was to get accurate and timely updates on all project progress and costs. His reliance on manual data entry from different sources, with multiple trackers, created delays and inaccuracies in the eventual reports.
"I realized I needed a software platform to help achieve my goals," Darrin said. His wish list for a software platform included the ability to manage his projects and crew deployments while also providing accurate, automated daily updates on progress and spend.
"I realized I needed a software platform to help achieve my goals," Darrin said. His wish list for a software platform included the ability to manage his projects and crew deployments while also providing accurate, automated daily updates on progress and spend.
Eliminate Spreadsheets and Manual Data Entry
After an extended search, Darrin selected the Fieldclix software platform to help achieve his goal of measuring performance, establishing baselines, and embarking on a company-wide improvement program.
"It was important to find a software platform that captured operational and financial data in real-time to help make informed adjustments for active projects as well as ongoing improvements to my business, and Fieldclix fit the bill," Darrin said. "With Fieldclix, our office and field teams have one platform to collaborate across dozens of active projects with instant access to the data, reports, and documents they need to perform their job."
Pro Tip #1: Capture both operational and financial data in one platform. It's challenging to manage the entire project life cycle without an understanding of field progress, visibility into daily costs, and the status of your client and vendor financial transactions. Many software platforms only offer either operational or financial workflow support.
"It was important to find a software platform that captured operational and financial data in real-time to help make informed adjustments for active projects as well as ongoing improvements to my business, and Fieldclix fit the bill," Darrin said. "With Fieldclix, our office and field teams have one platform to collaborate across dozens of active projects with instant access to the data, reports, and documents they need to perform their job."
Pro Tip #1: Capture both operational and financial data in one platform. It's challenging to manage the entire project life cycle without an understanding of field progress, visibility into daily costs, and the status of your client and vendor financial transactions. Many software platforms only offer either operational or financial workflow support.
2) Create Project Budgets and Track Costs Daily
Darrin's project managers did a great job managing against projected milestones and dates but had limited visibility into the amount of money they were spending to achieve these goals. "We didn't know which decisions and events were increasing our project costs," he explained, "we focused on getting the job done, but often at the expense of our project margins."
Darrin's goal was to have his Project Managers focus on both the operational and financial aspects of their deployments, with an emphasis on project P&L (Profit and Loss).
"With Fieldclix, we get accurate daily updates on all our costs, including labor, materials, rentals, subcontractors, and field expenses," Darrin said. His Project Managers now establish an operating budget for all cost items at the beginning of the project, which is reviewed and approved before the first dollar is spent.
Darrin's goal was to have his Project Managers focus on both the operational and financial aspects of their deployments, with an emphasis on project P&L (Profit and Loss).
"With Fieldclix, we get accurate daily updates on all our costs, including labor, materials, rentals, subcontractors, and field expenses," Darrin said. His Project Managers now establish an operating budget for all cost items at the beginning of the project, which is reviewed and approved before the first dollar is spent.
Create a Budget reflecting all project costs
"Instead of finding out on day seven of a five-day build whether we're under or over budget, my Project Managers can now see where they stand and make adjustments while there's still time to make a difference."
Pro Tip #2: After establishing your Project Revenue from the Client PO for a specific site build, remove pass-through costs, such as materials to create a "Service Revenue." This is the amount of money you have on the table to play with as controllable spend. Remove the amount that reflects your desired project margin and consider removing an additional amount that reflects your estimated overhead costs (such as PM hours and equipment). The remaining budget is what the Project Manager has available to execute the site build.
Pro Tip #2: After establishing your Project Revenue from the Client PO for a specific site build, remove pass-through costs, such as materials to create a "Service Revenue." This is the amount of money you have on the table to play with as controllable spend. Remove the amount that reflects your desired project margin and consider removing an additional amount that reflects your estimated overhead costs (such as PM hours and equipment). The remaining budget is what the Project Manager has available to execute the site build.
3) Set Profitability Goals
It's one thing to deploy a new software platform and an entirely different matter to get the organization to adopt the new operating procedures.
"A software platform like Fieldclix absolutely changes the game," Darrin said, "it changed our perspective on the Project Manager's role and how they are measured." Darrin now looks for financial management experience when hiring Project managers and has trained existing employees to operate as P&L managers.
"We've established a set of Objectives and Key Results across the business, starting at the corporate level and cascading down through the regions to the project level," Darrin explained. He can now track his revenue, cash flow, WIP, AR and profitability at all levels in the company.
"Now that we can measure with accuracy, we've been able to establish a culture of accountability," Darrin said. "Everyone knows what is expected and can see how they're performing against their targets and peers. More importantly, we can now reward employees for meeting and exceeding their goals."
Pro Tip #3 - Let the system be the bad guy. In the absence of accurate data, the resolution of internal issues can pose a challenge due to differing points of view (such as how much time a crew spent on-site). By leveraging data and reports accepted as accurate across the organization, the potential for internal friction is reduced, resulting in more positive working relationships.
"A software platform like Fieldclix absolutely changes the game," Darrin said, "it changed our perspective on the Project Manager's role and how they are measured." Darrin now looks for financial management experience when hiring Project managers and has trained existing employees to operate as P&L managers.
"We've established a set of Objectives and Key Results across the business, starting at the corporate level and cascading down through the regions to the project level," Darrin explained. He can now track his revenue, cash flow, WIP, AR and profitability at all levels in the company.
"Now that we can measure with accuracy, we've been able to establish a culture of accountability," Darrin said. "Everyone knows what is expected and can see how they're performing against their targets and peers. More importantly, we can now reward employees for meeting and exceeding their goals."
Pro Tip #3 - Let the system be the bad guy. In the absence of accurate data, the resolution of internal issues can pose a challenge due to differing points of view (such as how much time a crew spent on-site). By leveraging data and reports accepted as accurate across the organization, the potential for internal friction is reduced, resulting in more positive working relationships.
4) Define Regional Targets
While rolling out the new software platform and setting up his measurement program, Darrin realized there were no existing standards for project performance he could rely on.
"A lot of people fall into the trap of measuring teams against a national average or other external baselines," Darrin said. "However, the reality is the time required to hang an antenna differs by customer, by region, by site type, and by project team."
Because of this, Darrin created targets based on historical performance and set expectations for continuous improvement at the local level.
As a business owner, Darrin keeps an eye on corporate performance with the confidence that his remote teams are working to meet targets he's set across different layers in the organization.
Pro Tip #4 - In addition to P&L, keep a close eye on your project WIP (Work in Progress), which can tell you how much revenue is expected to come in the door (before completed work is invoiced) as well as the amount of committed costs you have for external vendors. Accounting systems don't often track these metrics, which limits visibility into your true cash position.
"A lot of people fall into the trap of measuring teams against a national average or other external baselines," Darrin said. "However, the reality is the time required to hang an antenna differs by customer, by region, by site type, and by project team."
Because of this, Darrin created targets based on historical performance and set expectations for continuous improvement at the local level.
As a business owner, Darrin keeps an eye on corporate performance with the confidence that his remote teams are working to meet targets he's set across different layers in the organization.
Pro Tip #4 - In addition to P&L, keep a close eye on your project WIP (Work in Progress), which can tell you how much revenue is expected to come in the door (before completed work is invoiced) as well as the amount of committed costs you have for external vendors. Accounting systems don't often track these metrics, which limits visibility into your true cash position.
5) Keep Improving
With his new operational and financial reporting system in place, Darrin now has the confidence to step out and grow into other markets. "I can confidently pursue new services and clients because I have the data to project what our performance is going to look like," Darrin said. "Since we've implemented Fieldclix, we've already grown into two new markets."
Darrin can now meet budgets on 70 to 80% of his projects and expects to continue to find opportunities to weed out inefficiencies and extend his profit margins from a 5% improvement to 10% and beyond.
Darrin strongly believes the investment in the software and associated operational changes brought his company a significant payoff. "We have not only achieved an ROI financially regarding increased profits but also culturally," Darrin explained. "Our team members are striving for individual improvement and being the best version of themselves. They welcome the visibility that Fieldclix provides because it allows them to show off when they win. And My team loves to win!"
Darrin can now meet budgets on 70 to 80% of his projects and expects to continue to find opportunities to weed out inefficiencies and extend his profit margins from a 5% improvement to 10% and beyond.
Darrin strongly believes the investment in the software and associated operational changes brought his company a significant payoff. "We have not only achieved an ROI financially regarding increased profits but also culturally," Darrin explained. "Our team members are striving for individual improvement and being the best version of themselves. They welcome the visibility that Fieldclix provides because it allows them to show off when they win. And My team loves to win!"
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