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Are your construction company’s financials best in class?

9/23/2016 at 1:24 pm by

Gross profits, return on equity, liquidity, backlog ratio, revenue per employee. Is your company the best in the business when it comes to these and other key financial indicators? Or do you have some work to do?

As I mentioned in an earlier post, one key way to maintain your competitive edge is to compare your organization with your peers.

That’s where the 2016 Construction Financial Benchmarker results come in handy. Just released by the Construction Financial Management Association (CFMA), the latest benchmarking results are packed with detailed analysis of key construction financial and operating data from fiscal year 2015. Take, for example, these year-over-year findings based on all company data:

  • Gross profits overall increased 1.9 percentage points
  • Net income rose 1.3 percentage points
  • Return on assets was up 2.1 percentage points
  • Return on equity jumped 6.3 percentage points

You can also view the data by type of construction work performed, region, revenues, and overall financial performance, so you get a more relevant comparison to your own construction business.

But what I consider to be the icing on the cake, is the financial profile of best-in-class construction firms. Here’s a sample: Best-in-class contractors generally report a return on asset of 24.0% and a return on equity of 58.5%. They also have less debt and a more stable fixed asset ratio. That’s not all. The results also detail best-in-class for metrics such as profit per employee, gross profit margin, and net income before taxes.*

The 2016 Construction Financial Benchmarker results are based on a confidential survey conducted in early 2016. In all, 869 companies submitted FY2015 data and provided detailed financial statements and other required information.

The survey’s results, presented in composite form, are accessible through the CFMA Construction Financial Benchmarker. By using this online tool, you can compare your company’s financial performance directly with the survey’s results.

Benchmarking is key to staying competitive in today’s construction industry. Tools such as the Construction Financial Benchmarker will help you identify what you need to do to keep your business in top form.

* The top performing contractors (top 25%), or best in class, is based on a composite ranking of 5 key performance metrics. Best in class status is determined among all Industrial & Nonresidential contractors.

About the Author

Deb Carpenter-Beck is a writer and marketer with more than 25 years of experience in the construction and real estate industries. She often writes about technology and best practices and is passionate about helping contractors and real estate professionals achieve their business goals. You can follow her on Twitter @DebCBConstruct.

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