Expanding Into New Construction Trades

The construction industry is continuously evolving, with new avenues and job opportunities emerging as technology advances and market demands shift.

For construction companies looking to expand their horizons, venturing into new construction trades can provide a competitive edge and enhance revenue streams.

However, expanding into new trades comes with its own set of challenges, especially in terms of managing cash flow.

Contractors must consider labor costs, material costs and adding new cost codes to their accounting process.

If contractors attempt to diversify their trades without taking these accounting factors into consideration, they will be limiting their profits and may face unexpected project delays.

In this blog we will explore how construction companies can successfully navigate these new opportunities while emphasizing the importance of accurate construction accounting to address new challenges.

Key Takeaways

• As contractors attempt to expand into new trades, they should research the market(s), schedule training for their employees and see if they have crossover with skillsets and materials to easily expand into new trades.
• Contractors should focus on developing strategies or leveraging software to improve construction accounting as they prepare for new trades.
• Precise construction accounting enables contractors to more effectively manage cash flow, project future costs and profitability and maintain compliance with financial standards.
• By investing in construction accounting software with job costing — like FOUNDATION® — contractors can leverage real-time data to make more informed decisions as they expand their operations into new trades.

Identifying New Opportunities in Commercial Construction

There are several ways for contractors to identify and prepare for taking on new trades . These steps involve:

1) Market Research

The first step in expanding into new trades is to conduct thorough market research. Identify emerging trends — such as green building or the use of construction software.

Understanding the market landscape will help companies assess where their skills can be adapted or where new expertise can be developed.

2) Training and Upskilling

Once potential new trades are identified, companies should invest in training their workforce.

This could involve formal education, apprenticeships or partnerships with trade schools.

Upskilling existing employees not only enhances the workforce’s capabilities but also boosts morale and loyalty because they feel their employer is invested in their long-term success.

3) Diversifying Services

Consider how current capabilities can be adapted to new trades. For instance, a general contractor could branch into a specialized area like roofing. There are three simple options available for contractors to have success:

1. Using roofing subcontractors
2. Send employees to shadow roofers
3. Transition into roofing with smaller projects

By leveraging existing resources and client relationships, companies can create additional revenue streams and build their backlog.

As construction companies create a plan to expand into new trades, they should understand how these changes could affect their company’s finances.

The Role of Construction Accounting

As construction companies venture into new trades, accurate accounting practices become essential for sustained success.

Expanding into unfamiliar territory can lead to financial mismanagement if not monitored properly. Here’s why construction accounting is crucial during this transition:

Cost Management

Each new trade will have its own unique costs associated with materials, labor and equipment.

Accurate construction accounting allows companies to meticulously track these expenses, ensuring that budgets are maintained, project goals are met and profitability is maximized.

Financial Health

With new construction projects comes the necessity for detailed financial reporting. Construction accounting provides insights into each job’s profitability, allowing companies to make informed decisions about future projects and investments.

Cash Flow Management

As new trades may require upfront investments in tools or training maintaining healthy cash flow is essential.

Proper accounting practices help monitor receivables, payables and overall cash flow, ensuring the business can meet its financial obligations without jeopardizing growth.

Many construction companies have invested in construction accounting software to help them more effectively manage cash flow and project their company’s future finances.

The Benefits of Construction Accounting Software

Implementing construction accounting software can significantly streamline the accounting process, reduce errors and enhance overall efficiency as contractors expand into new trades. Here are some key benefits:

1) Automated Construction Accounting

Construction accounting software automates many repetitive tasks, such as invoicing, payroll and expense tracking.

This automation not only saves time but also minimizes human error, leading to more accurate financial records.

Ensuring financial information is accurate is always important, but particularly when pursuing new trades because it helps less experienced contractors compile precise financial reports fast to make data driven decisions.

2) Real-Time Reporting

Advanced software provides real-time insights into construction project costs and profitability.

This allows construction managers to make timely adjustments and informed decisions, reducing the risk of financial surprises down the line as they expand into new trades.

3) Integration with Project Management Tools

Many construction accounting software solutions — like FOUNDATION — integrate seamlessly with project management tools.

This integration helps ensure that financial data aligns with project timelines and milestones, fostering better communication and coordination across teams.

4) Improved Compliance and Auditing

Accurate records are essential for compliance with regulations and when preparing for audits.

Construction accounting software helps maintain organized financial records, making it easier to comply with construction industry standards and requirements.

This is especially important as contractors attempt to establish themselves in new trades.

Trust FOUNDATION to Help You Expand into New Trades

Expanding into new construction trades presents a range of opportunities for companies.

However, to ensure success in these new ventures, accurate construction accounting is paramount.

With FOUNDATION, contractors can:

• Automate processes
• Reduce errors
• Project financial performance

By leveraging FOUNDATION, contractors can ensure their operations are prepared as they expand into new trades. For more information about FOUNDATION, click here.