Capital Use Policies

Capital is to contractors what blood is to our bodies.

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We can survive days without water and weeks without food but seconds after losing blood flow we lose consciousness with death following in minutes.

Leadership Tools: Three Basic Constraints of a Contracting Business.

Conservative capital management enables the execution of effective talent and market strategies for sustainable growth.  It is important to both have high-level capital management policies as well as rigorous daily cash management processes to create this foundation.  

On the policy side consider putting in place internal covenants (rules) similar to what your bank or surety has in place.  Create policies and controls that will enable future successions to take place. At a high-level consider at least the following basics:

  • How much working capital do you need for the amount of work you are doing?
  • How much of a credit line do you need?  How should it be used?
  • What is the maximum debt:equity ratio you should run at?
  • When there is excess capital in the business beyond required needs how is it used?

We help contractors put the right levels of financial controls in place to protect the business in all economic conditions providing for smooth successions and sustainable growth. 

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Our Promises
We love the construction industry. We believe in aggressive business and talent development balanced with conservative operations and financial management. We make six promises to the industry, to our clients, to each other, and to ourselves:
Definition - Discipline
Consistently Doing what needs to be done even when you don’t want to do it. Motivation is doing what needs to be done when you want to do it – related to desire.
Owner Occupied Real Estate for Contractors - Lease or Buy?
There isn't a simple answer to this question. Much of the advice you will get has bias attached. Start your decision making process by building your own models and making general assumptions while looking into the future. Use this Excel model to start.