As we approach the fourth and final quarter of 2026 let’s review together the business management concepts we have been developing throughout the year.
Back in January I called this year’s blog series “The Schleifer Construction MBA”.
I have attempted to illustrate the business management concepts that I believe must be understood and utilized by all industry principals as construction companies grow from “smaller operations” to substantial enterprises. Many of the “beliefs” that contractors hold dear do not serve them well. We began by pointing them out.
- In January we discussed the science of business engineering. When construction companies achieve scale, they become the most challenging businesses in the world to manage, but the founders have been so busy building projects that they seldom notice that their business has outgrown their ability to manage it.
- In February we discussed how this journey from “a smaller operation” to “large complex enterprise” requires an endless process of recruiting and training expert business managers to stabilize and make profitable a growing construction business.
- Then in March we noted how contractors and their teams are competent builders but often lack the ability to organize and lead a business organization as a cohesive group. We pointed out that a construction company is a team of construction experts who provide construction services to clients. The way this team of construction experts is recruited, trained, and organized is the company’s primary success factor.
- We went on in April and May to point out the three essential areas of business management that contractors need to change their beliefs about.
1. Accounting – Contractors rarely use the balance sheet or cash flow statement as management control tools and most seem to believe budgets are only “aspirational” plans. They do not believe that a five-year analysis of their own financial history can reveal both negative and positive trends that should be used to recognize and manage risk in advance.
2. Strategic Planning – Too many Contractors do not believe in long term strategic planning. They take the business as they find it and attempt to manage their way through the inevitable pitfalls.
3. Risk Management – Contractors are natural risk takers. They spend large amounts of time, effort, and money managing risks in operations but believe that financial risks are just part of being a contractor. Most do not believe financial risk can be avoided and rarely recognize the difference between risk mitigation and risk avoidance.
Contractors are either selling finished buildings, highways, bridges, or sub trades to ultimate owners. Or they are providing owners with construction services. Not both. The legal structure of construction contracts holds the contractor responsible for not only producing a project that meets design specifications and safety standards, but also legally commits the contractor to the cost the estimators hoped would be enough while preparing the bid. Construction contracts are legally binding performance contracts that place the entire financial risk on the contractor’s shoulders.
- In June we finally defined what business is: Business is the purposeful pursuit of profit through the commercial activity of satisfying customer needs at a cost that is less than the selling price. To be classified as a business, an enterprise typically exhibits several key traits:
– Profit Motive: Businesses operate to generate a profit—financial gain after all costs are paid.
– Economic Activity involves regular, continuous transactions rather than isolated exchanges. (With the glaring exception of construction).
– Risk & Uncertainty: Operating a business inherently involves the risk of financial loss or market shifts.
– Value Creation: A business must provide a good or service that satisfies a societal need or want.
- By July we finally acknowledged that most contractors did not rely on and were often not familiar with the following top ten business management practices.
- Double entry bookkeeping
- Balance sheet management
- Strategic planning
- Long term goals
- Profitable acquisitions
- Managed growth
- Transactional Integrity
- Board of directors’ leadership
- Succession management
- Chief Financial Officer’s role
- In August and September, we will continue to learn about strategic planning. We defined it as an ongoing mental organizational process used to point a construction company in a certain direction and help leaders and employees share goals, establish priorities, and allocate resources so that everyone’s daily actions support the company’s ultimate vision.
And here we are on October’s doorstep. The last quarter of this year we will be discussing how to effectively transition a company from an “at-risk operation” to a professional business enterprise. Glad you’re joining us on the rest of this journey.
For more information on construction company management, read more at: MANAGEMENT
For a broader view of management tools, read more at: TOOLS
To receive the free weekly Construction Messages, ask questions, or make comments contact me at research@simplarfoundation.org.
Please circulate this widely. It will benefit your constituents. This research is continuous and includes new information weekly as it becomes available. Thank you
