The 3 Obstacles You’ll Experience When Growing Your Subcontracting Business And How to Tackle Them

Published: June 15, 2022
Last updated: July 28, 2022
Read time: 5 minutes

 

In the 1980’s, a young man in his early 20’s decided he needed to make money. He picked up a rake and a bucket, and began knocking on doors. “For $20, I’ll clean up your yard.” He’d offer, and sometimes, the homeowners would accept. This man would go on to build a multimillion dollar landscape subcontracting business. 

But going from a “rake and a bucket” to a profitable multimillion dollar subcontracting business is no easy feat. You also may have built a similar business from the ground up. Or maybe you inherited it, the latest in a long line of successful subcontractors. But the fact remains – to grow a business – to take it to the next level and the level after that – takes working harder and smarter. 

When you try, you can expect to outgrow your office and lot space; paperwork will pile up; finances will tighten; and your existing crew might buckle under the weight of it all. In this article, we’ll discuss common pains that affect growing subcontracting businesses, and how you can combat them with the right tools. 

Growing Pain #1: Paperwork Piling Up

From bidding documents to contractor agreements, plans and specs, ASIs, schedules, work orders, insurance forms and more, working in the construction industry means handling countless stacks of paperwork. As you grow, your paperwork problem will grow too. Small subcontractors can get away with loose-leaf documents and filing systems, but the larger you get, the more this system will fail you. Project management software with a strong document control feature is the answer to this problem. But if you don’t choose the right one, you can still run into issues.

Difficulties subs often encounter with paperwork management include:

  • Revision confusion – Documents can go through rounds and rounds of edits. Without an efficient way to manage paperwork, it can be easy to lose track of the most up-to-date version.
  • Permission problems – The use of project management software alone doesn’t mean your paperwork problems are over. Internet issues, file permission problems and other setbacks can still make things difficult, depending on the quality of the system you use to store and access documents.
  • Lost time hunting for documents – As you take on more projects, an inefficient project management system can lead to lost, misnamed or corrupted documents. Without one centralized depot, it’s all too easy to lose track of documents. This wastes your team’s time when looking for them. 

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The Solution: eSub cloud – eSub is among the best project management softwares on the market. Built uniquely for commercial subcontractors, it offers an extremely contractor-friendly interface and can be used by subs at any stage of business growth. 

Why It Works: Document management in eSUB Cloud allows you to create, log, email, track, and store project documentation in one centralized web-based repository without any data limits empowers everyone on the project team to know exactly where to find information and know the status of an RFI, submittal, or other critical project documents. 

eSUB Cloud makes it easy to capture and communicate jobsite activities, which then enables the office to have the necessary documentation they need to ensure the company is paid for all the work they do. eSUB Cloud connects everyone remotely while automatically tracking all activities relating to your projects. 

With eSUB Cloud, trade contractors can transition from simple field notes to complete RFI’s faster and easier. This ensures that every party is alerted of the status and that every RFI is reviewed and received quickly, speeding up approvals.

Growing Pain #2: Cash Flow Demands

Even though “business growth” seems like it would mean more cash in your pocket, it can actually feel like you’re short on money all the time. To put it bluntly, growth often means you’re broke because you’re always reinvesting that capital into new projects for future growth. To quote an article we published in 2020, “You can’t press pause on purchasing construction materials or equipment for a new project while you wait for your backlog of unpaid invoices to come through.” This is why cash flow gets tight when you’re growing.

The construction industry is characterized by long payment cycles, where subs can wait over 60 days for payment on a job. This puts pressure on their cash flow, to the point where they hesitate to take on certain projects because they momentarily lack the cash to fund the upfront costs. 

The Solution: Billd – Billd is a unique type of financing tool, built by construction professionals for construction professionals. Many types of financing that you may have traditionally relied on to combat cash flow shortages, like credit cards, lines of credit, factoring and bank loans, tend to fail because they simply weren’t made for this industry or its long payment cycles. On top of all of that, they rack up interest quickly and don’t have sufficient limits for the large material and equipment purchases you see in the construction industry. 

Billd, a construction-specific financing company, eliminates cash flow barriers that subcontractors run into on the way to business growth. Our unique mission is to offer financing that promotes construction business growth. We serve subcontractors exclusively, and always try to function as an advocate and champion for subs; we shine a light on the struggles that subs silently go through, and design solutions to minimize those struggles. 

Billd currently offers two unique financing tools for subcontractors:

  • Material Financing – Material financing eliminates the cash flow burden of buying materials before receiving payment. It’s easy. We pay your supplier upfront for you, and you pay us back when you get paid. You have a comfortable 120-day window to receive payment from your GC. This allows you to say yes to more projects without worrying about how you’ll fund your materials, plus you unlock cash discounts from your supplier, which add up to huge savings over time. 
  • Pay App Advance – Pay app advance gets you paid out immediately for a portion of your approved pay app, instantly boosting your cash flow. The approval timeline is quick and the we do not disrupt your relationship with your GC. There’s 100% transparency around the cost and process, so you’re always kept in the loop.  

This article that we published in July 2020 does an excellent job of painting a scenario for subs who use financing to help with cash, and those who don’t. The example illustrates that without financing, you need 5X more cash to take on a project than you need with financing. You also need to be prepared to survive negative cash flow for 5 months without financing. With it, you begin seeing positive cash flow in your third month of the project.

Growing Pain #3: Not Enough Time In the Day

How do you grow a business when 24 hours in a day simply won’t cut it? Between the piles of paperwork, client demands, crew management and administrative tasks, you may feel like there simply isn’t enough time in the day to grow your subcontracting business effectively. A time management strategy, with the right tools to support it, can make all the difference.

Important tips to help you maximize the time you have in a day:

  • Project management software, like eSub, and technology at large is your best friend in saving time. But don’t double up on systems that leave you entering in the same information more than once. That’s when technology becomes a time waster rather than a time saver. Be sure to use software to create bids; you can get three takeoffs done digitally in the same time it would take you to do one by hand. 
  • Delegation, and hiring skilled people, is equally valuable because it lets you share the load of all the tasks that weigh down your day. Our best advice is to hire based on your weaknesses. If finances aren’t your strong suit, hire a masterful accountant. If operations are too time consuming, hire an experienced project manager.
  • Schedule dedicated time for important tasks that put cash in your pocket, like 1-2 hours/week of phone time for collections. Prioritize it now and be consistent because if you don’t, that’s time spent later chasing down checks that could throw a wrench in your entire week. 

It’s not easy to grow any business, but the size and scope of construction projects makes growing in our industry particularly difficult. That doesn’t mean it’s impossible, and it’s certainly lucrative and fulfilling for all involved. With a careful, methodical approach to business growth, and partners like Billd and eSub at your side, you can build a business and legacy that’s worth the early mornings and late nights. 

About Billd: At Billd, we provide a payment solution that enables commercial construction contractors to free up cash for material purchases while enjoying the flexibility of 120-day payment terms. You get financing for commercial materials upfront with the freedom to pay it back at your own pace. Learn more about how Billd can help eliminate your company’s cash-flow problems so you can win more bids and grow your business.

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Chris DoyleCEO & Founder of Billd

Christopher Doyle is an entrepreneur and business leader with extensive construction industry experience and a record of launching successful startups. He is the co-founder and CEO of Billd, a disruptive payment solution for the construction industry that helps contractors and suppliers grow their businesses with less hassle and risk. Recognizing the cash flow hurdles that contractors face when purchasing materials, Doyle launched Billd to make traditional Wall Street working capital accessible to business owners in the construction industry.