The 5-Bs for Project-Based Companies
From Sales to Bank Deposits
By Victor C. Tyler
The Key Take Away
The 5-B’s of business is a new thought process for project-based companies to streamline workflow processes.
- The first B is Business Development – Marketing/Building Relationships
- The second B is Bidding the Work – Proposal Development
- The third B is Building the Work – Project Execution
- The fourth B is Billing for the Work – Contract Accounting
- The fifth B is Banking – Investing & Wealth Building
The civil, transportation and infrastructure construction industry should see more money to rebuild our crumbling infrastructure before 2021 ends with increased competition for those dollars. However, most construction contractors, in particular small minority and women-owned subcontractor businesses (SMWBs), are likely not prepared to take on more work at the level these projects are going to require. A flood of work will require more crews, more equipment, and more technology to manage all of the moving parts.
Despite the traditional catchphrase that “every project is different,” if contractors were to breakdown their projects’ component parts, they will see tremendous consistency across projects that may not be readily apparent. That creates the opportunity to take advantage of historical data from previous projects to be predictive on future projects. In doing so, contractors can reduce risk and potentially reduce cost and project duration.
Not adapting to external market changes quickly enough or continuing to do things the way you have always been doing it, can invite disaster within an organization.
With a little preparation now, SMWB’s can position their businesses to be more successful by turning away from cumbersome practices and investing in new ways of doing business, SMWB’s can level up their businesses, improving processes and systems to make employees more productive, bidding on work that is a better fit, reduce overall costs and consequently, increase profitability.
With a team of business consultants and over 35 years working in the civil and infrastructure construction industry we have developed a new way for a SMWB to look at their business. The 5-B’s is a new thought process for project-based companies and defines new rubrics for what your business system should look like.
One of the great benefits of clarifying and documenting a process is that it generates information that’s helpful for identifying what data to measure and what gets delivered.
The 5-B’s chart is a simple pictorial view of the essential functional components that aligns and connects project workflow, beginning with Business Development.
The 5-B’s Explained
Let’s begin with considering projects as a type of business model. Project-based companies are about running projects as a business. If you are a construction contractor, then projects are your business model. It doesn’t quite matter what the end product or service is. Starting today and moving forward as the economy get back on track, contractors, especially SMWBs need to rethink how they support their business processes and utilize technology.
Generally, contractors organize their primary business activities around projects. Project-based companies involve many traditional industries, and they have the same fundamental business practice – they deliver projects for their customers.
Identifying as a Project-based company, owners/managers will better prioritize and optimize their business activities. They will clearly understand how they should structure the business and what systems and solutions are possible. Understanding their workflow structure gives owners the foundation to scale, grow, and increase profitability.
For most Project-based companies, the lack of standardization and systems integration is the key problem. This boils down to undocumented procedures and controls.
Let’s start with identifying the basic core activities of a project-based company.
This “Get-Do-Account for the work” pattern can further be defined into these Five Key Components of Project-based (end-to-end) functions: Business Development, Bidding, Building, Billing and Banking.
The 5-B’s Components Defined.
- Business Development Component – here you develop processes to better identify who your customers are and your ideal project fit.
- Marketing /Business Plan
- Relationship Building
- Human Capital Plan
- Policies & Procedures
Business Development can further be expanded to business planning, relationship building and human capital planning. Each component involves working with people. See Figure 3.
2. Bidding / Proposal Component – here you build your project on paper first performing cost estimation (work and cost breakdown modeling) keeping your project scope in mind for increased accuracy.
- Bid / No-Bid Decision
- Estimating Costs
- Profit Plan
- Policies & Procedures
The Bidding Component can be further divided into Bid/No-Bid decision-making, estimating, cost modeling and profit planning.
3. Building Component – here you define and document your project execution (building process) with a focus on achieving seamless communications and customer satisfaction.
- Post Award Preparations
- Project Management
- Risk Management
- Policies & Procedures
The Building Component involves the project-based company conducting post award preparations, managing the process, the project resources, and managing the risk associated with the project.
4. Billing Component – here you setup project budgets taken from your estimation models for accurate financial data capturing and for standardize recordkeeping.
- Accounting Policies
- Job Cost Reporting
5. Banking Component – here you standardize reporting, project performance, and improve wealth building (corporately and for employees).
- Working Capital Strategy
- Financial Management
- Investing (Wealth Building)
- Policies & Procedures
The Banking Component is mostly concerned with having a healthy flow of cash for business operations and financial planning tasks, thus leading to business sustainability and wealth building.
Traditionally, small Project-based companies usually operate with disconnected systems and applications. Collected project data end up in various spreadsheets, time-keeping applications, reports, CRM, and all together unconnected hardcopy or digital files.
Most Project-based company owners have not recognized the 5-B’s are integral operating their business successfully.
Therefore, to improve and position a company for success, Project-based companies should setup and control their business processes, utilizing the available technology, to optimize business performance.
How to implement Project-based concepts?
For the first step, under each “B”, standardize your processes around best practices and generated data to derive consistent metrics in that function of the business.
The next step is to unify and integrate workflows across all business functions. You need to integrate data and share it, so that everyone in the organization can rely on it. You can achieve company strategic goals by integrating your processes and data.
The last step is to systemize and automate the first two. This ensures that processes are followed, and data is integrated. Use technology (hardware and software) to assist you in the last step.
These three steps will assist in identifying the processes and project structure that allows Project-based companies to operate with clarity and control.
Employing the 5-B’s concept encourages the standardization and integration for the business owner. As a result, the Project-based company becomes fully aligned as an organization. Additionally, owner/managers know exactly how the business is performing at all times.
To begin the shift to standardization, small business may contact a project-based consultant to better identify, manage, and organize these critical activities. Experienced project consultants can help recognize what processes can be standardized and integrated leading to more projects on time and within budget.
As we enter a post-pandemic economy, improving company sustainability and profitability is what it’s all about no matter the market conditions.