When projects stalled across the country during the initial weeks of the pandemic — some indefinitely because of lost funding — the construction industry became increasingly aware of backlog.
That's not to say tracking and managing backlog was an obscure topic before the public health crisis, but the impact of the sudden economic shutdown of 2020 gave us new perspective. Now that the economy appears to be rebounding, and demand for construction services is reportedly quite high, construction company owners should be sure to stay aware and ahead of their backlogs.
At the risk of stating the obvious, backlog is important to every construction business. Having a healthy amount of work scheduled but not yet started is a key indicator of financial strength. A diminished backlog, on the other hand, implies the contractor is running out of work.
When backlogs fall industrywide, it indicates that fewer projects are coming to market. Many contractors might respond to a low backlog by bidding on more projects than usual or bidding on those outside their normal scope of work. With more contractors vying for the same projects, you could feel forced to bid jobs at lower margins, which in turn negatively impacts profitability.
It's possible to maintain or even grow your backlog in the current environment of struggling supply chains and scarce skilled workers. Here are a few strategies to consider:
When competition for projects heats up, some contractors feel pressured to bid on every job they can find, just to have work and keep staff on board. However, your company should bid only on projects that you have a high chance of winning and that will likely be profitable.
Avoid projects that are outside of your niche or in locations where you won't have the workforce or resources to feasibly fulfill the requirements. Above all, avoid the temptation to bid too low and potentially lose money if you're awarded the work. Our firm can help you identify, calculate and track key metrics related to backlog.
Get in touch today and find out how we can help you meet your objectives.