Boosting Profitability with Flexible Overhead – A White Paper for Construction Contractors
The Great Recession of 2007 shed a painful light on the inadequacies of the construction industry’s typical business model. Because of the highly cyclical nature of the business, contractors can no longer measure success on how much revenue growth they experience, how much equipment they own or how big their jobs are.
While the recession officially ended in 2009 according to the National Bureau of Economic Research and other gurus, the downturn for construction contractors lasted well into 2013. Now that we are coming out of this lengthy slowdown, it is the ideal time for contractors to question long relied upon business practices and rebuild their organizations using new, sustainable business models. One such model is the “Flexible Overhead” paradigm posited by Dr. Thomas C. Schleifer.
This white paper encompasses Schleifer’s views on flexible overhead – the ability to turn off 15 to 25 percent of all overhead costs in a week or less. To weather the cyclical nature of the construction business and economic downturns, the successful contractor of the future must be able to quickly reduce excessive and unnecessary overhead. Construction businesses can’t simply measure the difference between total sales and operating profit: They also need to measure operating profit to overhead.