This is a simplified view of only one aspect of alignment within a construction business. With each stage of growth, you should be getting some alignment locked in as foundations to build upon. Each stage of growth will also introduce new alignment challenges and opportunities.

The first thing every contractor must do is find a customer to pay them for something. This requires estimation of some kind - even if it is just estimating an hourly rate to charge.

You'll then go out and execute the project from purchasing the materials and getting necessary equipment through to final inspection and billing. 

Throughout this process you have been accounting for the project from vendor invoices through to weekly payroll along with all the non-job costs like the lease on your office/shop. 

When the job is complete, you can see your revenue, costs, and gross margin. 

This is what you can compare back to your estimate to see how accurate you are with your estimates. Estimates will never be perfect but there must be a progression toward continually aligning the estimated quantities and costs to your actuals. 

At the end of a period (month, quarter, year), you can see how much your non-job costs were. Start analyzing these in several ways as they relate to your direct job costs. You will find some basic patterns in their relationship to total direct job costs, or labor hours that you can use in your estimates. 

You always want routine discussions and decisions made around three basic questions:

1. Was the performance on this job (or part of the job) typical or abnormal? What does our history show? Note that continual improvement for project execution should always be going on.
2. Does the typical performance align with how it was estimated including quantities, hours, and costs? If not, are there adjustments that must be made to estimating? 
3. Did the accounting system capture job cost information in a way that is accurate and useful for feedback to both estimating and the project team? If not, are there any adjustments that must be made? 

As you grow, these routine discussions will develop into routine processes and standards. 

This foundation must continue to get stronger with each stage of growth. Keep an eye on it though because it's easy for a few things to occur which will hurt you in the future:

1. Well-intentioned but stifling processes will get built. Typically, these come in the form of too much complexity of cost-codes or indirect recovery rates that don't provide value-add for where the company is at. 
2. Metrics and rules-of-thumb become outdated as the industry and contractor change. This can range from not updating labor burden costs with insurance or PTO changes or not updating material costs in the estimating database. 
3. Too much compensating and rationalizing creeps into the alignment process. For example, continually estimating low on labor hours but making up for it in composite crew rate and this permeates everyone's thinking rather than adjusting for the current composite crew rate and their production rates. 
4. Too much concentration of total system knowledge in one individual. This often creates great performance in the short and mid-term because they have the situational awareness to avoid problems 1-3. They will run a very efficient system. The challenge is both their succession and resilience of the organization of something were to happen to them.

Building on the Foundation (Aligned Estimating, Execution, and Accounting) 

With continued growth you will have to continually look at your company and the market and make some strategic choices based on where you want to go. As it relates to estimating, these choices start with your primary market choices and market experiments.

When you are in the first couple stages of growth, your market strategy can be as simple as finding a customer that will pay you. That is exactly what is necessary to get started. As you are growing toward stage 3 and beyond, you will need to continually refine your strategy. 

With that strategy comes a basic business model with high-level time intervals, customer, financial, and resource metrics. This high-level view is the equivalent of a conceptual estimate on a project. It must be granular enough to inform decision making. 

Tying this all together is a business plan that lays out more granular details and targets over the next 1-3 years. This becomes increasingly comprehensive down to specific budgets for indirect and overhead costs along with business development, estimating, and backlog targets.

With a business plan in place, accounting can provide more feedback that helps inform decisions about current operations, the business model, and future strategic choices. Over time you will see the growth of this function from bookkeeping to accounting to financial management, and ultimately to business management. 

Marketing and Business Development

With growth around stage 4, you will start to connect the strategy, model, and business plan alignment with the estimating, execution, and accounting alignment. 

1. Marketing - focused externally and positioning the company where it needs to be based on the strategy. This is not what Atul Minocha refers to as "Little-M Marketing" that involves basics like graphic design. This is the highly focused marketing including RFP responses that connects your desired customers to the company, capabilities, and team. 
2. Business Development - focused on the top-end of the winning work funnel developing relationships and leads that can be turned into opportunities and projects. 

Remember that there are two business development models that work best when integrated. Some roles in your preconstruction, estimating, and project team will typically be the best account managers allowing a business developer role to focus on new relationships. 

Self Evaluation

1. How has your business performed during the last three years as compared to industry benchmarks? 
2. How would you evaluate your business on the Million Point Evaluation? 
3. Are you experiencing any of the 8 Growth Inflection Point Indicators? 

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An unbiased but experienced third-party can be invaluable for helping you see your business, team, and next steps from a different perspective. We will freely share anything we can to help you build a stronger contracting business.