Is your construction company “financially freewheeling?”

The average construction company lives in a state of paradox.

On the one hand, they want to be as profitable as possible (as they should)...

But on the other hand, they neglect tracking their finances almost entirely.

At Highspire, we call this “financial freewheeling.”

And it’s how most construction companies operate — their strategy is to wait until year’s end to see how things went, and hope for the best.

In fact, it’s so rare to come across a company that tracks their finances, that when we do, we commend them!

Do you know what the most profitable construction companies have in common?

The strongest and most high-performing construction companies all understand that what gets measured gets managed.

And as an extension of that, their financial status plays a huge role in all of their decision-making across the board.

They track all their numbers thoroughly, which enables them to consistently:

• Hire more staff

• Take market share from competitors

• Invest back into the company

• Understand what their working capital needs to be in order to keep growing year over year

But, most construction companies don’t track their finances as thoroughly as they should...

For those who do bother to track their finances, they typically only track three things:

1. Revenue

2. Gross expenses (or cost of goods sold, or variable expenses)

3. Overhead expenses

Whatever’s left over after subtracting gross expenses and overhead expenses from revenue is their net profit.

This is a good start... but stopping here means leaving a lot of potential money on the table.

Which is why when we work with our clients at Highspire, we have them drill down one step further.

Before we explain what that is, here’s a quick overview of our usual process for context:

Here’s how we help our clients track their finances

We start by having the client break down their gross profit.

(The basic formula is: gross expenses, or variable expenses, or COGS, subtracted from their revenue).

As a practical example, let’s say this client has a company doing $10 million in revenue, and they spent $7.5 million in gross expenses/variable expenses/COGS.

So they’ve got $2.5 million left over to pay for overhead and keep as profit.

Now, here’s the additional step...

We then take that $2.5 million and break that up into five distinct categories:

1. Operational expense (OPEX)

2. Capital expenditures (CAPEX)

3. Taxes

4. Profit

5. Owner's draw

Why do we go into this level of detail?

Because if you don’t set goals around what both your OPEX and CAPEX should be...

Then you won’t have any understanding of how you’ll actually deploy free cash into assets that will appreciate or depreciate in value.

Additionally , you’ll have no intentionality behind:

• What you’ll take out for profit

• How much to set aside for taxes

• What to take as a draw for yourself

To reiterate, it’s not enough to just know your overall net profit. If you don’t have a firm grasp on all of the above numbers, you’re effectively flying blind!

But on the bright side, like we said before...

Most construction companies barely track their financials at all, and those who do rarely go into this level of detail.

Which means simply striving to hit your financial KPIs in all 5 categories will give your business a strong advantage in growing in a controlled and efficient fashion and put you head and shoulders above what your competition is doing.

Interested in more training like this?

We dive much deeper into the “how” of Highspire’s program.

We teach experienced construction company owners like you how to go from simply making a living, to building generational wealth using your company as the main vehicle for this growth.  

If you’re looking to learn from the best in the game, you’re in the right place — collectively, Highspire’s leadership team has 30+ years of industry experience growing their operating companies, with over $1.5 billion in assets established and 67 million successfully executed development projects.

We’ll show you how to:

• Master all aspects of financial management (plus CFO fundamentals)

• Hone your construction company into a self-managing (and extremely profitable) operating company. 

• Transition into real estate development and investing (and set the stage to eventually level up to capital investments)

You’ll also get access to live coaching from Highspire’s executive business coaches, plus support from a peer cohort of ambitious, like-minded construction company owners.

For more details on the program, click here.

And if you’re interested in joining the next cohort: schedule a consultation here.

Forward always,

Highspire

P.S.

If you want to discuss what the benchmark ratios look like, feel free to reply to this email and ask directly — we’re happy to chat!