For construction business owners, exit planning deserves the same level of attention as any major project. One tax strategy worth understanding is the qualified small business, or QSB, stock exclusion, which may allow eligible shareholders to exclude a significant portion of the gain from the sale of qualifying stock. Recent changes under the One Big Beautiful Bill Act expanded the potential benefit, making this an increasingly important consideration for contractors thinking about succession, a future sale, or long-term ownership strategy.

The opportunity can be substantial, but the rules are complex and timing matters. Business structure, asset levels, operating activities, holding periods, and the way a future transaction is structured can all affect eligibility. For contractors, that means the best time to evaluate the QSB exclusion is well before an exit is on the horizon.

Read the full article below to learn how the QSB stock exclusion works, which construction businesses may qualify, and what to consider as part of your long-term exit planning.

When you’re ready to create yours, be sure to take a close look at the qualified small business (QSB) stock exclusion. Since the 1990s, this tax break has given eligible taxpayers the opportunity to gain substantial tax benefits from selling QSB stock. And last year’s One Big Beautiful Bill Act (OBBBA) further enhanced the exclusion. Let’s take a closer look at how it can apply to exit planning.

C corporation requirement

To qualify for the exclusion, business owners must be shareholders in a QSB corporation, which is a special type of C corporation that meets specific requirements. At the entity level, QSB corporations are generally treated the same as regular C corporations for legal and federal income tax purposes. So, most of the standard advantages and disadvantages of C corporation status apply.

On the plus side, these companies are subject to the flat 21% federal corporate income tax rate. On the minus side, C corporations pay taxes once at the entity level, and then shareholders may face additional tax when they receive dividends, compensation or other taxable distributions, or sell their shares. These two levels of tax obligation are commonly referred to as “double taxation.”

However, individual taxpayers who own QSB stock can potentially enjoy a significant tax advantage. A special gain exclusion rule may allow them to avoid federal income tax on up to 100% of the gain from selling their QSB stock. That’s right; when you’re ready to exit your construction company, you may be able to sell your shares in that QSB corporation and pay substantially reduced, or even zero, income tax on the gain!

Eligibility requirements

To be eligible for any gain exclusion, various requirements apply. You must acquire the shares in question after August 10, 1993, and upon original issuance by the corporation (or by gift or inheritance). Also, your company must be a QSB corporation on the date the stock is issued and for substantially all the time you own the shares.

In addition, the corporation must satisfy the QSB gross-assets test when the stock is issued. This means its aggregate gross assets can’t have exceeded $75 million at any time before the issuance and must not exceed that amount immediately afterward. A $50 million threshold applies to stock issued on or before July 4, 2025. The $75 million limit will be indexed for inflation after 2026.

Another stipulation: Your company must actively conduct a qualified trade or business. Service businesses and certain others don’t qualify. (We’ll discuss this further below.)

Timing is critical, too. To take advantage of the 100% gain exclusion for sales of QSB stock, you must have acquired the shares after September 27, 2010, and held them for at least five years. In addition, for qualifying stock acquired after July 4, 2025, the OBBBA allows the following partial exclusions for shares held for less than five years:

• 50% gain exclusion for QSB stock held for at least three years, and
• 75% gain exclusion for QSB stock held for at least four years.

Any gain not excluded under these partial exclusions is generally taxed at a special 28% federal rate, plus the 3.8% net investment income tax, if applicable. The OBBBA increased the per-issuer dollar limitation on eligible gain from $10 million to $15 million for qualifying stock. (Other limitations may apply.)

Finer points to consider

There are additional requirements and finer points to consider. For example, during substantially all of the holding period, at least 80% of the QSB corporation’s assets generally must be used in the active conduct of one or more qualified businesses. And only “reasonable” amounts of working capital apply toward this requirement. So, if your company holds significant cash, real estate or investments not related to your construction operations, you could have trouble qualifying.

Also, as mentioned, your construction company must be a “qualified trade or business.” The tax code lists a variety of ineligible fields. Construction isn’t among them, but engineering and architecture are. So, eligibility could become more complicated if a substantial part of your company’s operations or assets is attributable to providing engineering or architectural services rather than performing construction activities. Contractors offering design-build or similar integrated services should analyze this issue carefully.

In addition, businesses whose main asset is the reputation or skill of one or more employees also aren’t eligible. This shouldn’t be an issue for many construction companies, but it could present a barrier for very small businesses or one-person operations who, for example, position themselves as master artisans in custom carpentry or another niche. (The application of this limitation is highly fact-specific; your tax advisor can provide further information.)

The entity question

As noted, only stock issued by a QSB corporation qualifies for the exclusion. However, many construction businesses are structured as pass-through entities. These include partnerships, S corporations and limited liability companies treated as partnerships for tax purposes. If you run your business under one of these structures, you have a critical decision to make: Should you convert to a C corporation with the goal of having newly issued shares qualify as QSB stock?

There’s no simple answer. By converting, you’ll forfeit eligibility for the qualified business income (QBI) deduction, which can allow you to deduct up to 20% of QBI. But, then again, the federal income tax rate for C corporations is currently 21%. So, the trade-off may prove worth it if you expect to incur substantial gains on your exit.

If you’re leaning toward converting to a QSB corporation, advanced planning is vital. You must carefully structure the transaction so the newly issued stock satisfies the original-issuance and other requirements. The qualifying holding period generally begins when that stock is issued, so you’ll need to hold the shares for at least three years to qualify for the 50% exclusion. If you can hold out longer, you may be able to exclude more or even all of your gain.

Important: The exclusion generally applies only to an eligible shareholder’s sale of QSB stock. It doesn’t shield gain recognized by the corporation if the business’s assets are sold instead, making the anticipated form of a future transaction an important planning consideration.

Powerful tool

The QSB exclusion can be a powerful exit-planning tool, but it isn’t a last-minute strategy. Determining whether it fits your construction business requires careful analysis of your entity structure, long-term goals and anticipated departure date. We can help you weigh the potential savings against the costs and trade-offs of qualifying for this tax break.

Publicly funded construction projects can create meaningful growth opportunities, but they also bring wage and compliance requirements that contractors cannot afford to overlook. Federal rules under the Davis-Bacon Act, along with similar state prevailing wage laws, may require specific hourly wages, fringe benefits, worker classifications, payroll procedures, and record keeping practices. Misunderstanding those obligations before bidding can quickly turn a promising project into a costly problem.

Recent regulatory changes have added another layer of complexity, particularly around how prevailing wages are calculated, how fringe benefits are credited, and which workers or off-site activities may be covered. In the article below, we break down the key rules contractors should understand, the risks of noncompliance, and why Davis-Bacon requirements should be built into the bidding process from the start.

The federal Davis-Bacon Act (DBA), along with similar state laws often called “little DBAs,” generally requires contractors on covered projects to pay laborers and mechanics locally prevailing wages and fringe benefits. Federal regulations that took effect in 2023 changed several important rules, though a later court order temporarily blocked certain provisions. Let’s review the essentials.

Prevailing wage calculations

The U.S. Department of Labor (DOL) determines prevailing wage rates for worker classifications in particular geographic areas and types of construction. For applicable jobs, you must identify the wage determination incorporated into the contract, properly classify workers, and pay at least the applicable wage and fringe benefit rates.

Under the methodology generally used before the 2023 regulations, the DOL first determined whether more than 50% of workers in a classification received the same wage rate. If they did, that rate was considered prevailing. Otherwise, the DOL generally used a weighted average.

For wage determinations issued or revised under the 2023 regulations, the DOL reinstated a method used before 1982. That is, it still begins by determining whether most workers receive the same rate. If not, the DOL now uses a rate received by at least 30% of workers in the classification. If no rate meets that threshold, it uses a weighted average. This methodology may produce higher prevailing wages for some classifications and locations.

Fringe benefit accounting

A prevailing wage generally consists of a basic hourly rate and a fringe benefit amount. You may satisfy the fringe benefit requirement by paying cash, providing qualifying benefits or using a combination of the two. Creditable benefits may include:

• Health, long-term disability or life insurance,
• A retirement plan, and
• Certain paid leave.

In some cases, providing benefits can be more cost-effective than paying the entire fringe amount in cash.

The 2023 regulations also codified the DOL’s long-standing annualization principle. Subject to limited exceptions, the hourly credit for benefit plan contributions is calculated based on all hours an employee works during the year, including hours on both DBA-covered and noncovered projects.

As a result, you could receive less credit than expected for benefits provided to an employee who divides time between public and private work. And you may need to make up the difference through additional benefits or cash wages.

Covered projects and workers

The regulations address DBA coverage beyond work performed at a project’s primary construction site. Depending on the circumstances, coverage may extend to certain secondary sites, including locations where prefabricated or modular components are produced specifically for a covered job.

The rules also address energy infrastructure projects, work involving portions of buildings, and certain demolition, remediation and removal activities. In addition, the DBA rules may apply to some flaggers, survey crew members and other employees working away from the primary site if their duties are sufficiently connected to a covered job.

Bottom line: Don’t assume that an employee falls outside the DBA rules merely because the person’s work takes place off-site or involves transportation, surveying or support services. Transportation work requires a particularly careful, fact-specific analysis.

Important regulatory update

In June 2024, a federal district court issued a nationwide preliminary injunction preventing the DOL from implementing or enforcing three portions of the 2023 regulations. The affected provisions address:

1. The distinction between materials suppliers and contractors or subcontractors,
2. DBA coverage of contractor-employed delivery truck drivers who spend more than minimal time at a covered worksite, and
3. The automatic application of DBA requirements to covered contracts when the government contracting agency mistakenly omits the required clauses.

The remaining provisions continue to apply. Although the injunction remains in effect as of this writing, consult current DOL guidance and, if necessary, legal counsel when evaluating suppliers, delivery drivers or contracts that don’t expressly include DBA requirements.

Potential cost of noncompliance

The consequences of noncompliance may include liability for unpaid wages and fringe benefits, withholding of contract payments, contract termination, and debarment from future federal contracts. Additional penalties may apply under related laws or in cases involving falsified certified payrolls, false statements or other misconduct.

The regulations also prohibit retaliation against workers who report possible violations or participate in an investigation. When pursuing state- or locally funded work, you should separately determine whether the project is subject to another prevailing-wage law. State and local requirements may differ significantly from federal rules.

Build compliance into the bid

Keep DBA compliance in mind when considering federally funded construction projects. Evaluating the requirements early can help you prepare more reliable bids, establish appropriate payroll and recordkeeping procedures, and reduce costly surprises. Contact us for help evaluating all the financial details.

Aging accounts receivable can create serious cash flow pressure for construction businesses, especially when payments are delayed by change orders, retainage, project disputes, slow approvals or unclear expectations. The article explains that contractors can protect financial performance by treating receivables as a proactive management issue, not just an accounting task. That starts with stronger credit checks, especially for larger jobs or owners requesting extended terms, along with clear contract language that defines due dates, payment methods, late-payment consequences and lien-right considerations.

The post also emphasizes the importance of making invoices easy to understand and easy to pay. Contractors are encouraged to review invoice design, offer convenient payment options, monitor payment patterns and identify repeat slow payers before the problem grows. A formal collection policy can help create consistency by outlining when reminders, direct follow-ups, past-due notices, work pauses, late fees, legal action or collection support should occur. The central message is that accounts receivable only strengthen the business once they are converted into cash, and better systems can help contractors collect faster, protect margins and improve cash flow.

1. Consider more frequent credit checks

When assessing a project owner’s ability to pay, your level of due diligence should match the level of risk. Commercial contractors often review credit reports, financial statements, banking relationships and trade references before agreeing to payment terms. Meanwhile, residential contractors may rely more heavily on deposits, progress payments, financing approvals or other indicators of financial stability.

Even if credit checks aren’t typical for your business, consider doing one for larger jobs or owners requesting extended payment terms. Look closely at payment history, debt levels, cash flow and, when feasible, references from lenders or other contractors.

Under some circumstances, it’s also wise to reassess credit risk periodically. For example, before starting a new project for an owner you’ve worked with before, determine whether their financial situation has changed. You may want to do this during long-term jobs as well.

1. Be ultra-clear about payment terms

Naturally, each contract should include payment amounts and due dates. But try to add language stipulating consequences for overdue balances. Examples include late fees or finance charges if permitted by law and the contract, and the possibility of outstanding debts being turned over to a collection agency. Also, take the necessary steps to preserve your lien rights promptly. (State requirements vary.)

In addition, consider attaching an addendum to the contract that clearly outlines all payment terms and methods. You might email it to project owners, too, to help ensure they always have it on hand.

Offering different payment methods may further boost your chances of getting paid on time. Common examples include credit cards, ACH payments and digital payments via widely used apps. Some construction businesses have invested in online payment portals. If you go this route, be sure to provide the link early and often.

1. Regularly refresh your invoice design

When’s the last time you reviewed and updated the design of your invoices? Many contractors underestimate the importance of aesthetically pleasing, easily understood invoices. Critical elements include:

• A simple but detailed explanation of charges,
• Easy-to-find due dates,
• Comprehensive payment method options, and
• The correct web address of your payment portal (if you have one).

You might also want to include early payment incentives on your invoice, such as a 1% to 3% discount or a reduced price for other services. Doing so can instill the kind of loyalty that leads to repeat business or positive word-of-mouth.

1. Closely monitor payment patterns

Tracking trends can tip you off that you need to modify your accounts receivable practices. Monitor metrics such as days in accounts receivable (days sales outstanding) and the average time between invoicing and receipt of payment. If the results exceed your standard payment terms, you may need to be more proactive with collections.

Keep an eye on the payment histories of project owners you work with often. For those you identify as slow payers, consider changing their terms (for example, requiring a bigger deposit on the next job) or ramping up your collection efforts (for instance, sending earlier reminders or reaching out to someone directly).

1. Formalize your collection policy

Many contractors take an ad hoc or case-by-case approach to late payments. But this can inadvertently send a message to both project owners and your employees that accounts receivable, as a business function, isn’t a high priority.

Ideally, your construction business should have a written policy for enforcing payment terms and initiating collection efforts when necessary. It should be supported by a multistep, escalating process for communicating with owners.

For example, you might begin with a friendly reminder shortly before payment is due, followed by a written notice immediately after the due date passes. From there, your process should follow additional steps, such as:

• Having an accounting or administrative staff member call to confirm the invoice was received and ask when payment can be expected,
• Asking the project manager or an executive who knows the owner to follow up directly, and
• Sending a formal past-due notice that cites the payment terms and warns of next steps.

For significantly overdue balances, your policy should specify when to pause additional work, if allowed under the contract; assess late fees as permitted; pursue lien rights where applicable; or refer the matter to legal counsel or a collection agency.

1. Ask for help

In accounting terms, accounts receivable are considered an asset. But they don’t do your construction business much good until you convert them into cash. Our firm can help you evaluate your current practices, identify opportunities to strengthen your collection policy and processes, and leverage your financial data to improve cash flow management.

Cybersecurity for construction companies is no longer optional. As contractors rely more heavily on cloud platforms, project management software, mobile devices, client portals, and shared vendor systems, they also create more opportunities for cybercriminals to get in. From payroll records and banking information to bid details, contracts, and building plans, construction businesses often hold the exact kind of sensitive data attackers want most.

The risk is not limited to large firms. Small and midsize contractors are often attractive targets because they may have fewer internal cybersecurity resources, looser controls, and busy teams focused on deadlines instead of digital threats. Phishing, malware, ransomware, and business email compromise can lead to stolen funds, disrupted operations, reputational damage, and major financial fallout.

In the article below, we break down the most common cybersecurity risks facing construction businesses today, why the industry is especially vulnerable, and what practical steps contractors can take to better protect their systems, finances, and long-term operations.

Common vulnerabilities

Over the past decade, construction businesses have increasingly adopted a variety of technological advances. Examples include cloud infrastructure, networked devices and building information modeling software. Perhaps you use project management platforms and client portals to share information with multiple parties, such as project owners, architects, engineers, subcontractors and vendors.

The great thing about these tools is that users can tap them at any time of the day or night, from a wide range of locations and devices. The bad thing about them is that they create many potential access points, what experts call the “cyberattack surface”, for cybercriminals to infiltrate your network and get to its treasure trove of valuable data. Construction businesses commonly store:

• Project owners’ banking or payment information,
• Employees’ payroll data,
• Estimating and bidding details,
• Contract documents,
• Building plans,
• Intellectual property, and
• Sensitive information about subcontractors and vendors.

In addition, reliance on third-party vendors or shared systems can introduce “supply chain” risks, meaning a weakness at a subcontractor or service provider could further expose your systems to cyber risks.

Most contractors lack in-house cybersecurity expertise and allocate insufficient resources to fully protect their operations. Moreover, in an industry where pressing deadlines are always looming, employees or others might cut corners on existing security measures, further compounding vulnerabilities.

Typical attacks

Cybercrimes evolve as quickly as technology itself, making it difficult to pin down the most dangerous or common at any time. Phishing and malware, however, consistently rank among the top threats in the construction industry.

Phishing refers to schemes in which cybercriminals trick victims into sharing sensitive information, including login credentials, or clicking links that install malware. Attackers are increasingly using artificial intelligence to craft highly convincing emails or even impersonate voices, making these schemes more difficult to detect. Meanwhile, malware includes 1) ransomware, which can lock critical data or systems and may involve threats to leak stolen information unless the victim pays a hefty sum, and 2) spyware, which stealthily transfers data to the criminals.

Another common threat is business email compromise. In this type of scheme, cybercriminals impersonate a trusted party, such as a project owner, materials vendor or subcontractor, to trick employees into wiring funds, changing payment instructions or sharing sensitive information. Contractors can be particularly vulnerable because they often juggle multiple jobs, vendors, invoices and payment deadlines.

In a recent, highly publicized attack, a small, family-owned construction business was victimized by phishing and malware, resulting in payment fraud. An employee opened an email believed to be from a materials supplier. It was actually a malicious phishing message laced with malware that cybercriminals used to withdraw $550,000 from the company’s bank accounts in just one week.

The consequences of any cybercrime can be devastating. In addition to losing the stolen funds, your business may have to delay work if its cash flow dwindles. What’s more, you might suffer reputational harm and end up on the hook for substantial remediation costs, including statutory penalties and legal damages.

Key countermeasures

If cybersecurity is something you’ve been procrastinating on, start with the basics. For example, prioritize security updates to systems and software. They often patch weaknesses that cybercriminals may already be exploiting. Leaving those vulnerabilities unaddressed is like leaving a door open for hackers.

Employee training is also critical. Staff members often unwittingly allow cybercriminals access to a construction business’s network. Teach your workers to recognize the telltale signs of phishing messages and other types of “social engineering.” While you do, restrict access to key systems and data by putting them on a “need to know” basis. And mandate multifactor authentication, especially for email, banking, cloud platforms and remote-access tools, so users need more than a password to log in.

Of course, even with strong cybersecurity measures in place, no system is completely secure. Prepare for potential breaches by creating an incident response plan (IRP) that contains formal procedures for reacting to a breach and restoring affected systems. Well-crafted IRPs tend to be more effective than on-the-fly reactions. You can base your plan on reputable guidance, such as the National Institute of Standards and Technology Cybersecurity Framework 2.0.

Risk assessments are vital as well because cybersecurity protections can quickly become obsolete. Thoroughly review your systems and safeguards at least annually, or whenever you adopt new software, add vendors, expand remote access or experience significant business changes. Assessments can help you identify gaps before cybercriminals exploit them.

Finally, consider how cybersecurity aligns with your broader risk management strategy. This includes evaluating cyberinsurance coverage, understanding policy requirements, and ensuring internal controls over payments and data access are appropriately designed and followed.

Don’t let it slide

Precisely what any construction business’s cybersecurity should look like depends on many factors, including its size, specialty and technology. But one thing’s for sure: Letting it slide exposes you to countless costly risks. Your financial advisor can help you prudently budget for protective measures and track your return on investment.

As construction firms look for smarter ways to win work, manage risk, and improve project outcomes, the Construction Manager at Risk, or CMAR, delivery method is gaining renewed attention. Unlike more traditional approaches, CMAR brings the contractor into the process earlier, creating opportunities to influence budgeting, scheduling, constructability, and coordination before construction begins. That early involvement can create real advantages for owners and contractors alike, especially on complex projects where planning and cost control matter from day one.

At the same time, CMAR is not simply an opportunity for greater influence. It also comes with greater responsibility. Because the contractor typically commits to delivering the project under a guaranteed maximum price, success depends on accurate estimating, disciplined cost control, strong preconstruction involvement, and careful management of changing job conditions. In the article below, we break down why CMAR continues to gain traction, where it can create value for construction companies, and what firms should weigh before taking on the added risk that comes with a larger seat at the table.

Work starts early

Sometimes referred to as Construction Manager as Constructor, CMAR engages the contractor early in the project. It also typically makes the construction company responsible for delivering the job under a guaranteed maximum price (GMP). Generally, if costs exceed the GMP for reasons not covered by approved changes or other contract adjustments, the contractor bears that risk. This approach places additional pressure on job costing accuracy, cost control and cash flow planning throughout the project life cycle.

In keeping with its name, CMAR establishes the contractor as the construction manager during the design and planning phases. This involves working with the project owner and designer to develop the budget and schedule. The construction business also reviews building plans, prepares initial schedules, advises on materials availability and estimates costs as the design takes shape. During construction, it transitions to general contractor. Because financial performance is closely tied to early estimates, aligning preconstruction budgets with project accounting is critical.

Not quite the same

CMAR is similar to the design-build delivery method, with one big difference: The contractor doesn’t assume the design obligation and then subcontract it out to a consultant. Instead, the project owner offers two contracts, a design contract with an architect and a CMAR contract with the construction company.

During the CMAR preconstruction phase, the contractor typically provides advisory and estimating services while the design is still being developed before assuming full construction risk under the GMP. After the contractor submits a GMP proposal and the owner accepts it, those terms are added as an amendment to the CMAR agreement, making the contractor responsible for delivering the project.

Pluses and minuses

Your construction business may benefit from signing on to a CMAR contract in various ways. For starters, the GMP can provide greater pricing clarity at the outset of a project. Second, early involvement allows you to provide design input and ensure the job is feasible, reducing the risk of delays and disputes. Third, you may become the owner’s primary point of contact for construction-phase coordination. This can help streamline communication and cultivate a positive business relationship.

Naturally, there are risks. As mentioned, your business is on the hook for costs beyond the GMP. So, it’s critical to estimate costs accurately and watch for unanticipated events that could increase expenses. Common pressure points include labor cost escalation, materials price volatility, supply chain disruptions and change order disputes, all of which can erode margins if not proactively managed.

Also, sometimes the other parties to a CMAR contract bring in the contractor late, undermining the construction company’s ability to weigh in on the design. To reduce this risk, try to negotiate involvement as early as possible and clarify in the contract when you’ll begin providing preconstruction input and reviewing design decisions.

In the driver’s seat

CMAR can offer meaningful advantages to construction businesses prepared to take a more active role in planning, coordinating and controlling projects. But the allure of a GMP must be weighed carefully against the financial exposure that comes with sitting in the driver’s seat. We’d be happy to help you evaluate whether this delivery method would make financial and operational sense for your construction company if the opportunity comes along.

When it comes to valuing a construction business, quick formulas can be tempting. Many contractors hear rules of thumb like a multiple of EBITDA or a percentage of revenue and assume those shortcuts will give them a reliable number. The reality is far more nuanced. A construction company’s true value is shaped by much more than top-line revenue or earnings alone. Factors like leadership strength, customer concentration, workforce stability, backlog quality, contract mix, bonding capacity, reputation, and long-term growth potential all play a major role in what a business is actually worth.

That is why relying too heavily on simplified valuation formulas can create a false sense of certainty and lead to poor decisions. Two companies may look nearly identical on paper, yet carry very different levels of risk and opportunity that significantly affect value. In the article below, we explore why valuation rules of thumb can be misleading for contractors and why a more thorough, professional approach can provide a clearer picture when planning a sale, succession strategy, or future growth.

When a business valuation is needed, many contractors want a quick answer. That’s understandable. But an overly simplistic approach can create a false sense of certainty, especially in an industry where leadership ability, financial performance and operational risk can vary widely from one company to another. The next time your business needs a valuation, beware of rules of thumb.

Tempting shortcuts

Simple valuation formulas are typically based on industry averages and passed along by word of mouth. For example, to do a “DIY” business valuation, some contractors may use a multiple of earnings before interest, taxes, depreciation and amortization (EBITDA) or a percentage of annual revenue plus inventory and tools. Other rules of thumb are based on actual sales transactions in the construction industry.

Whatever form they may take, the problem is the same: Basic calculations don’t account for all the elements that drive a construction business’s value. These include factors such as:

• Management expertise,
• Workforce stability,
• Backlog quality,
• Contract type,
• Bonding capacity,
• Growth potential,
• Cost structure, and
• Reputation.

Many of these elements are qualitative and hard to capture with a single financial metric. In addition, rules of thumb can become outdated as market conditions change and vary by geographic location or specialty. As a result, applying a rule of thumb may under- or overvalue your company.

An example to consider

Let’s say Construction Company A and Construction Company B each have EBITDA of $1.5 million. According to one valuation rule of thumb sometimes used in the construction industry, each business is worth three times EBITDA, or $4.5 million.

The two businesses are nearly identical in most respects, with one critical difference: Company A derives 70% of its revenue from three local developers, while Company B doesn’t rely on any one project owner for more than 5% of its revenues. Given Company A’s higher level of risk, Company B is likely worth more, even though the formula values them equally.

There are many other factors that affect value but aren’t reflected in this rule of thumb. Perhaps one business has stopped investing in equipment maintenance, workforce development or other upgrades needed to sustain future earnings, temporarily inflating EBITDA but placing the company’s future earnings at risk. That lowers its value to a prospective buyer. Or maybe the other business has done a better job of controlling costs, making it more profitable. That raises its value.

Important decisions

Whether you’re looking into a business sale, developing a succession plan or plotting strategic growth, a professional valuation can provide a clearer picture of what your construction company is really worth. So, don’t hesitate to consider one when the time is right.

Just watch out for those rules of thumb. Although they can offer a rough starting point, overly simplistic methods shouldn’t drive important decisions. We’d be happy to support your business throughout the valuation process.

Running a profitable construction business takes more than keeping crews busy and projects moving. It requires tight operations, smart resource management, and a constant eye on the small inefficiencies that can quietly eat away at margin. The good news is that improving performance does not always require a major overhaul. Often, the biggest gains come from refining the day-to-day details such as how labor, materials, equipment, and information move through a project. In this article, we explore how lean construction principles can help contractors reduce waste, improve workflow, and create stronger financial outcomes across every job.

Lean construction principles focus on reducing waste, improving workflow and making better use of key resources such as labor, materials and equipment. And you don’t necessarily have to undertake a complete operational overhaul to implement them.

By identifying and correcting small inefficiencies across your business, you may see a positive impact on financial performance. Even modest improvement in productivity or materials handling can meaningfully boost job margins. Here are some ideas.

Review transport and deployment

Unnecessary transportation of equipment, materials and labor before they’re needed can waste time and effort on a construction project. One way to reduce inefficient movement is to use fleet management software to track vehicle locations, reduce idle time and coordinate deliveries so equipment, materials and crews reach jobsites more efficiently.

Of course, getting resources to the jobsite is only part of the challenge. Once there, work can quickly stall if crews must wait for preceding tasks to be completed. Productivity may also suffer when project teams are delayed by pending plans, unanswered information requests, job progress updates or required approvals.

Again, the right technology can help keep work moving. Construction management software and mobile apps allow project teams to share plans, updates and documentation in real time from virtually anywhere. By leveraging these tools, you may be able to improve coordination, reduce delays and keep projects on schedule.

Track waste and defects

Under a lean approach, “motion waste” refers to unnecessary movement or unproductive activities. Examples include making multiple trips across the jobsite to obtain materials or using unnecessarily labor-intensive methods when more efficient tools or processes are available. Extra movement and exertion put workers at heightened risk of fatigue or injury and may increase the likelihood of accidents, especially in inclement weather or on difficult-to-access parts of the jobsite.

Develop ways to monitor motion waste and use the data to identify strategies to reduce it, such as:

• Scheduling crews in more logical (leaner) sequences,
• Staging materials closer to where they’ll be used, and
• Improving communication between field supervisors and crews or subcontractors.

There’s also the ever-present risk of construction defects. Costly rework can result from either outright errors or installations that violate building codes or project specifications. In addition to increasing labor and materials costs, rework can delay project completion and erode job margins. Take a similar approach here: Capture and analyze data on defective work and engage in a continuous effort to reduce mistakes.

Watch out for overproduction and overprocessing

In construction, overproduction occurs when a task is completed faster than scheduled or before the next sequential task is ready to start. It may seem like a good thing, but these scenarios can result in downtime or wasted materials. Plus, the jobsite can become needlessly congested, increasing safety risks.

Watch out for overprocessing, too. Sometimes also called “excess processing,” this term refers to redundant steps that don’t add value, such as altering or double handling supplies or materials. It can also include inefficient administrative workflows, such as double data entry, multiple approval signatures, redundant daily reports or unnecessary email chains. Over time, overprocessing can increase overhead costs and slow decision-making across projects.

Pay special attention to materials and inventory

Although many contractors don’t maintain traditional inventory, materials stored on-site or in a yard still represent tied-up cash and potential waste. Lean construction principles encourage keeping only the materials needed for upcoming tasks and coordinating deliveries closely with project schedules.

To support this approach, review job schedules regularly to align deliveries of materials with upcoming job phases. Communicate closely with suppliers and adjust orders as timelines shift. Also, to improve ordering accuracy over time, keep records of materials usage during projects and supplies left over at the end of each job. Better visibility into materials usage can help you identify purchasing trends and negotiate supplier pricing. These steps can also reduce waste, free up working capital and keep jobsites more organized.

Lean into lean

For contractors, operating efficiently on every project can mean the difference between turning a profit and suffering a loss. By exploring lean principles, you may find ways to run jobs more smoothly, which can lead to stronger financial results. We’d be happy to help you identify cost drivers, track job performance and implement processes that support long-term profitability.