How business intelligence tools can help your construction firm thrive

By Matt Gelb, Ryan Rademann and Jason Muhlstein, Wipfli

What projects have you taken on in the past that turned out to be the most profitable for you? Why were they the most profitable? Can you reliably repeat that success going forward?

Chances are, without strong data and the tools to collect and interpret that data, you’re chasing past success with gut instinct. And while experience is incredibly valuable, it can be supplemented with business intelligence (BI) tools that manage the many variables that go into profitability and then deliver significant insights. With insights comes solid, proactive decision making.

This article examines how technology can help contractors better understand the past, better manage the present and better predict the future.

Better understand your past

Job profitability is the number one area construction firms seek to understand. And measuring true job profitability relies on your past, collecting that data, interpreting it and then using it. How quickly you can answer questions and make timely decisions relies on having the right data in the right place, which means having the right tool.

If you’re a subcontractor, a BI tool can tell you whether it’s worth it to accept a quote you received, based on how much profit you made in the past on similar projects. If you’re a general contractor, a BI tool can tell you, based on your past jobs, whether a job you’re looking to take on will be profitable for you and potentially by how much. And we can’t discount private equity (PE). Many PE firms have been acquiring construction companies, and they are driven by the need for data. They want to know seemingly everything. A BI tool can feed that data need.

… MEASURING TRUE JOB PROFITABILITY RELIES ON YOUR PAST, COLLECTING THAT DATA, INTERPRETING IT AND THEN USING IT.

Business intelligence dashboard and reporting

With all the emphasis placed on data these days, you probably have a lot of it collected. But it’s way too easy to drown in that data. Which of it is relevant to your business? How does it all work together? How can it answer your biggest questions?

Perhaps the best thing about business intelligence software is that it provides one central place for you to view your data. The magic of BI is in how it integrates data from all of your systems and visualizes it in ways that make it easier for you to make decisions. And it all comes down to the dashboard.

Dashboards allow you to customize what data you want to see and how you want to see it. One of the biggest benefits for construction firms is a type of early warning system the dashboards enable. Often, a couple jobs during the year get out of hand and require your firm to make up the costs by taking on other jobs. But what if you were warned when job costs and actuals started to outpace estimates? Then you could make adjustments to get back on course and/or determine what jobs you need to take on to make up for the predicted profit loss.

Dashboards track this data and visualize it in charts that make it easy for you to see when a job looks like it may get out of hand, giving you enough time to make the most effective decisions.

The reporting that a BI tool delivers is also incredibly valuable. Oftentimes, we see construction firms trying to pinpoint these mistakes they’ve made in jobs that forced them to eat costs later on. Reports can help you understand whether you’ve underestimated job costs on past jobs such as man hours required or subcontractor costs. This can help you more accurately predict job costs for future, similar projects.

Business intelligence tools in action

One of the CFOs in our peer exchange built a comprehensive data visualization tool to manage and streamline data and reporting. This BI tool lets them view profitability by client, market sector and state. As a result, they’ve been able to identify bids that have been problematic in the past and avoid them in the future, while shifting assets over to more profitable projects. It’s also enabled them to review the performance of PMs and track revenue and profitability against their targeted billing amounts per year. It’s a clear success story of how understanding your past helps you become more profitable in the future.

BI tools are all about melding past, present and future to give you the full picture. For the construction industry in particular, technology means more proactive, targeted decision making, less cost eating and higher profits. But your “today” is equally important.

Better manage your present

What’s working can be a tough question to answer. Allocating resources can be an especially big pain point for construction firms and general contractors. How do you know whether you’re using your resources most effectively? If you aren’t, how do you get there?

The most effective use of resources can deliver big savings, but it can also help alleviate another issue that’s only been getting worse: the lack of talent entering the construction industry. Competition for workers is fierce. While effective resource use won’t solve the problem, it will help you do more with the team members you do have.

Effective resource management

No matter what types of benefits effective resource use can deliver, a BI tool is the way to get there. It combines factors such as geography, staff expertise, budgets and project timelines to determine where your team members are now, what they’re working on, and where you can deploy them next. And we all know how much business development (BD) efforts are informed by capacity awareness. A BI tool can help you figure out when you need to turn up your BD efforts so that you can prevent a situation where team members have finished one project and are waiting around for another.

With visibility into how one project shift or delay might affect the next project’s resources, you can optimize resources and people. Sounds perfect, right? Technology is essential for making this possible. A BI tool can give you the data visualization you need to see these spikes and resource capacity issues and predict what strategic decision you should make and when. Without good data visualization, it’s hard to interpret the mass of data you have and what your next steps should be.

Better predict your future

Success in the construction industry can often come from gaining answers to key questions. What is your production revenue? How are you collecting on it? How do you value incoming leads? What is the probability you can expect to win a certain bid? How do you spread revenue from one project throughout the year? Forecasting is a universal need in the industry — and it’s a huge area that BI tools are designed to help with.

Scoring leads and understanding your best prospect profile

A BI tool is all about data, so feeding it the right data gives you the right answers. It can help you score leads not only based on geography, services and relationships but also based on past project profitability. If you worked on a similar job in the past, the BI tool knows what that job’s costs and margins were. If you don’t make as much on those types of jobs — or even regularly go into the red on them — you can potentially de-prioritize that lead and focus efforts on jobs that bring in your optimal margin.

By collecting all this data on past and current projects and then visualizing them in different ways, a BI tool can help you understand your ideal prospect profile. And when you know who to go after, you can increase your chances of successfully winning future bids.

Some BI tools can actually provide predictive opportunity scoring. For example, Microsoft Dynamics 365 AI for Sales is a machine learning model that scores opportunities on a scale of 1 to 100 based on the likelihood of you winning the bid. It shows you the top reasons influencing the score, too.

By prioritizing leads and opportunities and providing you with strategic recommendations, it helps you focus on the opportunities that truly matter. And with additional time spent on the worthwhile opportunities, you can improve those relationships and further increase your chances of winning the bid.

How strategic is your technology?

Technology — not just BI tools — in general can help construction firms and contractors be the architects of their own success. For example, when you send email blasts, are you sending them to everyone on your email list? Many companies don’t know who they should send which emails to, how to track engagement, and how and when to follow up afterward. So, they just send emails to everyone and hope they catch a fish on the line.

But using a robust marketing automation tool can help you do email marketing the right way. By creating more targeted emails tailored to a specific audience (think back to the perfect prospect profile), you can maximize your efforts and further increase your chances of success.

And what about self-service portals? Giving subcontractors the ability to log in and submit bids would make your life a lot easier, wouldn’t it? Think about what types of self-service functionality would benefit your company, granting employees time back in their day to focus on higher priorities. Things like giving owners and investors access to project statuses, leveraging BI to share statuses via easy-to-consume visualizations, and giving users the ability to review and execute contracts or change orders.

The technology is out there. No matter what technologies you use, they all can feed data into a BI tool. In the past, more data hasn’t always been the best thing, as it meant more data to sift through and decide what’s important. But BI tools are changing that. They have the power to combine data in different ways, showing you all angles of your business and giving you the insight you need to make proactive, strategic decisions.

About the authors: Matt Gelb, Partner, can be reached at 920-662-2903, Jason Muhlstein, Consulting Partner, can be reached at 952-548-6744 and Ryan Rademann, Manager, can be reached at 312-871-3386.