Revi Systems

You got your business this far because you’re an expert at your craft and developing client relationships. I bet you’re not getting out of bed excited to optimize your submittal log or review project financials.

How your operate your business is just as critical as the product you deliver if you want to scale from a small shop to a powerhouse. Get your house in order today and you’ll thank yourself tomorrow.

Scaling your construction business requires removing barriers to scale, while continuing to deliver projects that satisfy clients. It’s simple, but not easy.

What’s holding back your growth?

I know I don’t need to tell you this - profit margins in construction are notoriously thin, typically ranging from 2% to 5%. This doesn’t leave much room for investing risk capital in growth initiatives.

When we ask construction firm principals about what’s driving margins down, they often bring up a few common suspects: interest rates, inflation, regulation and wages.

Those factors matter. But what if I told you that you’re thinking about it all wrong?

Here’s the thing. Unless you’re also running the Federal Reserve, those problems are all out of your control. No matter how much you hate inflation or today’s cost of skilled labor, there’s nothing you can do about it.

Instead, I want to turn your attention to some often overlooked productivity drains that you can take action on today.

Unpredictable future business
Weak talent development
Outdated operational systems

Before jumping into these productivity drains, it’s first essential that you fully understand the dynamics impacting your business.

Construction projects have become more complex in recent years. This is due to the increasing sophistication of building technology systems and more stakeholders involved in projects. According to Ed Zarenski of Construction Analytics,

“The work we do today takes hundreds more people in the office to track and bring to completion…The level of reporting that you have to send to the government, to the insurance companies, to the owner, to show you’re meeting all the requirements on the job site, all of that has increased” - New York Times

When projects are more complex, the risk of delays and cost overruns increases. This, of course, can significantly impact profitability.

Increased complexity also places greater demands on the skills and experience of the workforce. Unfortunately, the construction industry faces a significant talent gap, stemming from an aging workforce and a shortage of skilled workers in the 7-15 years of experience range.

This inexperience has a multiplying effect on project costs. When inexperienced workers are tasked with responsibilities beyond their capabilities, it can lead to errors, delays, and rework, ultimately impacting profitability.

Other industries like manufacturing and logistics have also dealt with rising capital costs and weak talent pipelines. However, they have largely overcome these challenges by adopting modern operational systems like Lean Six Sigma and process automation.

Construction firms, though, are notoriously slow to embrace new ways of doing things. This is one of the major factors behind why construction productivity has actually declined since 1970. Luckily, it’s easier now more than ever to transform your operational systems.

If you’ve stuck with me this far, you’re probably aware of these headwinds and are investing in doing something about it. Let’s get into the meat of the main factors impacting construction firms’ profitability and what you can do about them.

1. Unpredictable future business

What does it mean for your business to be unpredictable?

When your business is unpredictable, you're constantly operating in reactive mode. You might have months where you're turning down work because you're at capacity, followed by periods where you're scrambling to find projects to keep your crews busy.

As project work goes, so too does cash flow. This feast-or-famine cycle makes it nearly impossible to make informed decisions about hiring, equipment purchases, or growth investments.

Why is business predictability important?

Predictability is the foundation of scaling any construction business. When you can reliably forecast your pipeline 12-18 months out, you can:

Make strategic hires before you desperately need them
Invest in equipment when it makes financial sense, not when you're forced to
Negotiate better rates with suppliers through volume commitments
Take on larger, more profitable projects without putting your firm at risk

Most importantly, predictability gives you the confidence to say "no" to projects that don't align with your strategic goals. When you're desperate for work, you'll take on anything – often at razor-thin margins that barely cover your costs.

How do you know if you have predictable business?

Ask yourself these 5 questions to evaluate your business predictability:

Can you accurately forecast your revenue 12 months out within +/- 20%?
Do you have a systematic process for qualifying and pursuing new opportunities?
Is your win rate on bids consistent and above industry average?
Do you have reliable repeat customers who provide steady work?
Can you plan staffing needs 6+ months in advance?

What should you do if your business is unpredictable?

The path to predictability starts with understanding your ideal customer profile and project type. Many construction firms try to be everything to everyone, which leads to inconsistent results.

Instead:

Analyze your past projects
1. Which types were most profitable?
2. Which customers were easiest to work with?
3. What size projects best match your capabilities?
Build a targeted business development process
1. Develop relationships in specific market segments
2. Create a systematic approach to bid/no-bid decisions
3. Invest in marketing that reaches your ideal customers
Focus on repeat business
1. Implement a customer satisfaction program
2. Stay in touch with past clients
3. Build strategic partnerships with architects and developers
Create a robust pipeline tracking system
1. Use CRM software to track opportunities
2. Regularly review and update probability of winning
3. Monitor leading indicators of market activity

Weak talent development

What does it mean to have a weak talent development program?

A weak talent development program shows up as a growing disconnect between what your projects need and what your team can deliver.

The absence of a systematic approach to growing your people's capabilities is the real issue, not simply not having formal training programs. When projects become increasingly complex but your team's skills aren't keeping pace, that's a clear sign of weak talent development.

Why is talent development important for construction businesses?

The construction industry is witnessing a dramatic shift in required capabilities. Projects that once needed mostly technical construction knowledge now demand proficiency with digital tools, data analysis, and complex coordination systems.

Effective talent development impacts every aspect of your business:

Reduced errors and rework from better trained staff
Higher win rates through improved estimating capabilities
Faster project completion from tech-savvy field teams
Better cash flow through improved project management
Increased innovation from cross-trained employees
Higher retention rates and easier recruiting
Smoother technology adoption across the organization

How do you know if you have a strong talent development program?

Evaluate your program by answering these 5 questions:

Do you have documented career paths for each role in your organization?
Is there a structured mentorship program pairing senior and junior staff?
Do you allocate budget and time for continuing education and certifications?
Are there regular opportunities for hands-on learning in controlled environments?
Do you measure and track employee skill development over time?

What should you do if your firm’s talent development is weak?

Building a strong talent development program requires a systematic approach that creates clear pathways for growth while ensuring knowledge transfer across your organization.

Here's where to start:

Start with role clarity
1. Document clear job descriptions and responsibilities
2. Create skill matrices for each position
3. Define what "good" looks like at each level
Implement structured mentoring
1. Pair experienced staff with junior employees
2. Set clear expectations for knowledge transfer
3. Create accountability for both mentor and mentee
Invest in training infrastructure
1. Develop standard operating procedures
2. Create a knowledge base of best practices
3. Utilize technology for training delivery
Measure and reward development
1. Track progress against skill matrices
2. Tie advancement to skill development
3. Recognize and reward effective mentors

Outdated operational systems

What does it mean to have outdated operational systems?

Let me paint you a picture: Your project manager is overwhelmed taking meeting minutes and tracking change orders by hand. Your superintendents are calling because the architect is arguing with the MEP consultant. And you’re still only able to win new business from the same roster of developers you’ve been working with for the past 15 years.

Outdated systems are the grinding gears of a business that’s not operating on all cylinders. These issues show up in dozens of ways, but the effect is the same - projects delivered over time and over budget, shrinking profit margins, and headaches all around.

Why are modern operational systems important for construction businesses?

Cashflows are the life blood of any AEC business and, so I shouldn’t have to convince you that efficient business operations are vital. But here’s something else to keep in mind that makes the urgency clear.

Projects are getting more complicated with greater compliance requirements, more reporting to be done, more analysis to be done and new technologies to be incorporated. In order to survive - and thrive - your firm has to keep pace with the changing expectations.

You’ll notice that we’re saying you need “systems”, not processes or automation or technology. That’s because each of these is just a tool in the toolbox that need to mesh well together.

When your systems work right, they deliver:

Real-time project insights that help you spot problems before they blow up
Automated workflows that cut administrative overhead in half
Early warning systems for budget and schedule issues
Seamless communication between office and field teams
Standardized processes that scale as you grow

How do you know if you have modern operational systems?

Take a hard look at your operation and answer these 5 questions:

Do you consistently deliver projects on time and on budget while meeting or exceeding client expectations?
Are your operating profit margins at or above the average for your geography and segment?
Do you have at least 1.5x your current liabilities in liquid operating capital?
Do your PMs efficiently process PCOs, submittals, and daily reports without burning out?
If you landed a project twice your usual size tomorrow, would your systems handle it?

What should you do if your operational systems are outdated?

Here's the thing about modernizing your operations – buying new software is the easy part. The hard part is changing how your team works. But I've seen countless firms make this transition successfully by following this roadmap:

Start with process mapping
1. Write down exactly how work flows today
2. Find the spots where things always seem to get stuck
3. Pick your battles – fix the biggest pain points first
Set metrics-driven goals
1. Figure out what success looks like in hard numbers
2. Track how long basic tasks take today
3. Set realistic targets for improvement
Design systems around people, processes and technology
1. Map out who needs what information when
2. Build processes that match how your teams actually work
3. Choose tech that makes their jobs easier, not harder
Implement in phases
1. Test new systems on one project first
2. Score some quick wins to get buy-in
3. Train your people until they're confident, not just competent
Monitor and optimize
1. Keep tabs on who's using what
2. Listen to your field teams' feedback
3. Keep tweaking until it works for everyone

Conclusion

The construction industry is at a turning point. Those who modernize their operations, develop their talent, and create predictable businesses will thrive. Those who don't will find it increasingly difficult to compete in an industry where margins are thin and complexity is increasing.

The good news is that you don't have to tackle everything at once. Start with one area, make meaningful progress, and build momentum. Remember, the goal isn't perfection – it's continuous improvement that compounds over time to create sustainable competitive advantage.