Profitability Archives - Ryan & Wetmore, P.C.

How Can Contractors Best Mitigate Rising Prices?

October 25, 2017

By Jason Dudas

Contractors are often dependent on the price of materials and labor when planning and completing a project. As the August Bureau of Labor Statistics (BLS) data showed signs of a general decrease in inflation rate, pricing for final demand construction has been deviating from that of the overall economy. The accelerating rate of construction inflation is evidenced not only in the overall trend of specific products and materials, but also in the producer price index (PPI) for completed building types.

Consider an Alternate Metric to Value Your Small Business

October 18, 2017

The SDCF metric may be a more meaningful metric to value your small business.

Would you use a complicated discounted cash flow analysis to estimate the value of a mom-and-pop restaurant? How about using a price-to-earnings multiple derived from publicly traded restaurant chains? Neither method seems appropriate for a small family-operated eatery.

As this example illustrates, traditional valuation models don’t necessarily work for small businesses and professional practices. Instead, business appraisers and brokers typically recommend using an alternate metric for appraising small businesses known as “seller’s discretionary cash flow” (SDCF). Read more

Cash Management Increases Your Company’s Chances of Success

September 18, 2017

If you want your business to grow and remain competitive, a solid financial plan and a well-conceived strategy can mean the difference between boom and bust.

The obvious place to start is with a cash-flow analysis.

Review your company’s cash flow statements to understand the cycle of inflows and outflows that stem from accounts receivables, inventory, accounts payable and credit terms. This helps identify any problem areas that need improvement.

A cash flow statement also highlights important distinctions, such as the differences between cash and sales or inventory. A ledger full of credit sales may look good on your Statement of Income, but that won’t help if you can’t pay your employees until you collect on those accounts. Read more

Why Job Costing Is Important

July 11, 2017

Every construction company, regardless of whether they are a general contractor, subcontractor, or something in between, must be able to win and complete jobs efficiently. Business owners and project managers need information to accurately bid and estimate projects, schedule upcoming jobs, and more. And while the job schedule relies on several factors, the most important factor is proper job costing. Proper job costing leads to better profitability, project estimating, management decisions, and timely financial reporting.

While some project managers rely solely on experience, the most successful project managers know how to best utilize the job schedule. The job schedule tells the story of construction projects at a point in time by providing a summary of all contracts the company has in process or has completed on a contract by contract basis.