In this presentation, the speaker argues that the most profitable part of running a construction firm is not the on‑site work but the boring, paperwork‑heavy contract administration that can reclaim roughly $400,000 a year for a $5 million business. Drawing on McKinsey data and experience with over 400 subcontractors, he quantifies six primary sources of margin leakage: uncaptured change orders ($96K), unclaimed delays ($80K), non‑payment/disputes (unspecified but significant), cash‑drag (the cost of financing the client, $132K), late‑payment penalties ($56K), and administrative overhead. He illustrates the impact with a 2011 oil‑and‑gas contractor case where failure to capture changes led to near‑bankruptcy, contrasting it with a contract‑savvy competitor that thrived. The speaker then provides a step‑by‑step “boring strategy”: pre‑award, scrutinize and negotiate change‑and‑delay clauses, supply a rate table with higher margins, and avoid heavy lawyer involvement; post‑award, submit small change notices immediately, build a record of evidence, and avoid lump‑sum claims at project end. He emphasizes that disciplined contract management is the hidden profit engine for construction firms, especially those with tight margins, and promotes his private advisory program, “The Boardroom,” for owners seeking coaching, SOPs, and a community of growth‑focused peers. The video ends with a call‑to‑action to watch a longer roadmap video on scaling construction businesses.
Chapters
The strategy I'm about to show you is not exciting. There's no hack, there's no shortcut, there's no AI tool that's going to help you do this. It's paperwork, it's process, it's probably the most boring part of running a construction business, and it's worth about $400,000 on a $5 million construction business. Now that number comes from McKinsey studies showing that construction contractors leak about 10 to 15% of their margin every year, plus data from over 400 subcontractors I've Personally worked alongside. The problem is, because it's boring, almost no one does it properly, and the ones that do are the ones that you can't figure out how they're bidding so low and making so much money. So in this video, I'm gonna break down exactly where that $400K is leaking from, why it's boring, and why you just have to do it to make the money. It's the money side of construction. Okay, so where does the $400K actually go, right? So the first one is a big one: uncaptured Changes, variations, change orders, whatever you call them in your country. Okay, so typically that's about $96K. So this is every time they have asked you to do something that your project manager supervisor didn't report to you, didn't get in the door, you didn't turn around the documentation quick enough, it just went through and just— you just let it happen, basically. So that's $96K a year for every one of those ones, and every one of those projects easily tots up to $96K. The next one is captured delays. So you've been delayed, small little delays here and there, or maybe big delays that just got rejected, or maybe your contract says you couldn't claim for them. So that's the same for the changes. You are not allowed to claim for delays and changes because you agreed to a contract that just wouldn't let you get paid. Okay, so on average, that comes up to about $80K in total. The next one is very important, which is non-payment, and I put in disputes as well, right? But disputes are a formal thing. So you would formally get into a suit. So a lot of times it's not actually disputes, it's actually just non-payment. It's just, we didn't get paid for the thing that we said we'd get paid for. Essentially, we just took— they said, hey, we're not paying you for this, or we're not paying you for this little part of this, or whatever. A lot of times what they'll do is they'll go, hey, you know, there's $2K on an invoice that hasn't been approved, and so we're gonna hold back the whole $100K until you agree to take out the $2K. And they knock off the $2K or the $10K or whatever it is, but they play that game the whole time. Okay, and number 4, cash drag. This is one of the big ones that drives me nuts and This is the cost of you financing the clients for them. Essentially, they're getting you to do the work and using you as the bank. Okay, this is actually such a big one. This is $132K a year on a $5 million business that you're just letting go straight down the toilet. And what that means basically is they've asked you to do a change on the project. From the point of you actually spending the money, you getting your guys to do it, and you gotta pay them, from that point to the actual point of money landing in your bank account is a period of time. The longer that period of time is, the more the money sits in their bank account and they have better cash flow. So it's essentially the cost of financing. So you have overdrafts, you have to pay people ahead, all of that stuff is bad cash flow essentially, but it's good cash flow for them. And that's a huge, huge cost. Okay, so that's $132K, and that accounts for delays, accounts for changes, that accounts for late payments. All of these times where they're slow on payments, better for them, bad for you. The next one is actually just late payment costs, full-on The cost to you of not being paid on time. It's not just, oh, I haven't been paid on time. It actually significantly costs you. Okay, so that's another $56K in the whole year. Now, this is specifically, this is the cost of being paid 60 to 90 days later or whatever it is instead of the 30 that you were supposed to be. And then the last one obviously is admin costs. And we don't actually have a figure for this one, but the admin cost for chasing up all this. Okay, so that's in addition to all of this. You can see how quickly it tots up. Like all of these figures easily just by having a contract management system in place where this stuff is done automatically, your team know that this is how it's done, you do it straight from the beginning, will make a massive difference to you. So if you actually break it down, right, on a monthly basis, and you're just a $5 million business, like that isn't a huge business, okay? That is $33K a month, or essentially roughly just over $1K a day. So every day that they don't pay you, they're late approving a change, every time they're late, it's costing you $1,000. This is cash flow. Time is money. Now, none of these numbers are extreme in any way. Like, they all just add up slowly over time. If you understand these, this is where you can reclaim a lot of margin. If your margin's very, very small, this is ultimately one of the main reasons why this is happening. If you've got a construction company where your margins are tight, growth has flatlined, and the whole business runs through you, I run a small private advisory for construction companies and Exactly that spot, and it's called the Boardroom. You get direct coaching with me, you get trainings, you get SOPs, and you can be part of a community of owners that want the same thing— to grow big, sell, or step out and keep ownership. If that's you, click below. And if we're honest, like, contract management is boring work. It's not fun. If you've been in construction, you know, since you've, you know, started your career and you grew up through a trade and you started your business, you did it the traditional way that most people do it, then ultimately you've got to the stage where all of a sudden you've got to do paperwork and you're like the hands-on type of person, and then all of a sudden we got all of this paperwork that has to be routinely grinded out. And in this paperwork is where your margin sits. This is where so much money is made and lost in construction. The biggest and best construction companies in the world have massive teams that do this because they know that this is, this is the difference. If you see a guy out there, how are they winning work? Or what? They're buying the job, right? So they come in super low and they win the project, but then they make all of these changes and delays and they make all of their money in the back end. So many construction companies. I've got a story of there's electrical contractors on this massive oil and gas project. It was so big that they were on 2 different sites, like basically, you know, the same work on 2 different sites. It was like almost a perfect science experiment. It was back in 2011, and I went in to help them with a dispute. And basically there was a very well-established company who were, you know, contractually savvy. They knew what they were doing. And then there's this new company, and this new company is the first time on this major project. Their whole goal was, I'm just going to do a Just do a great job. And they did. They did an amazing job. So much so that they got given additional work. They're so, so easy to deal with. Everyone loved them. And ultimately, when we came to the end, the company that had been around the block for a while was very contractually savvy, made, you know, a lot of money, had a reasonable reputation, did okay. The other guys started off with a great reputation, and they almost went out of business. And the reason they went out of business, because all of these changes they never captured. They're just like, yeah, we'll sort it out, we'll sort it out. And then eventually they got time barred and they said, we're not going to pay you. And then because they got rejected all those things, it looked like they never delivered on their original scope as well. So they put all of this effort into super helping out and it turned around and essentially bit them in the ass. That's the difference between being contractually savvy and understanding margin, understanding that money is in the paperwork, and the other side where just, I'll just do a great job and it'll all work out. That doesn't fly in construction. All right, so let me just teach you the boring strategy very simply. Pre-contract award, when you're negotiating your contract, honestly, it's all to do with Changes and delays. So just keep it simple. Look at the changes and delays clauses in the contract. Just go straight to them, right? Read them, understand them. Is it possible? Sometimes you'll say, you know, for every delay, and you go and say you'll get $1 for every delay, right? Just make sure that if there's delays that you know are potentially going to happen in your trade, that they're carved out so that you can capture them. Like, for example, if you're a civil company, water's a big problem, dewatering, all of that sort of stuff. If you know there's going to be weather issues, you want to make sure that you get paid. Otherwise, you're going to wear the cost of that on a So you got to make sure that all the changes and delays, that if they happen, that you're able to essentially get paid for them. Quick tip, very quick tip, which will make you a lot of money, is that when you do get awarded a contract and the negotiations happen, it's all gone good, just before you sign, ring them up and go, hey, just for ease on, you know, contract admin on the project and make it very simple, can I give you a table of rates just, just for changes and delays? Like, just to make sure that we have no issues with pricing, we can turn around and get to work really quick, we don't have to wait, you know, long because it's already essentially sorted. Does that sound good? Sounds good. Give them your rates, make sure rates have higher margins in them than your contracted rates that you won the job on. So, you know, every single change that goes through, bang, you're going to make a good margin on. So I would say don't use lawyers for the most part. Always try to negotiate these things yourself. They appreciate that. They don't like to be shouted at. They don't like lawyers speak. If you can just explain to them in easy to understand language, then that's what we want to do. Okay, that's pre-award. Post-award, you need to start submitting your changes and delays as they happen. Little small ones. As soon as they're on site, you get your PM to ring you up and go, hey, there's a change on site today. Submit the notice, follow up with EOT. It's more important that you get them in and then you pull them back and you go, actually, no, it was fine, than to do it the other way. So you don't wait until you have multiple, right? And then you put them all together for one big one. That one will get rejected. Get the small ones in. Small ones will be approved as well. You're also building a body of evidence to show them down the line, hey, look at all these changes you've made me do. How was I ever supposed to deliver the job on time? Which oftentimes is true. The idea of submitting early, right, is that they just get used to you and they understand very quickly that, hey, these guys are contractually savvy. They know what they're doing. They're professional. What we don't want to do is don't do anything right until near the end, and all of a sudden we hammer them with loads of changes and delays. That's where they're like, oh no, they're gearing up for a massive claim here, and that's what they don't want to happen. So having done this for a long period of time, one of the pushbacks I always get is someone says, won't I look difficult? Won't I seem too contractual? When you're negotiating a contract, first off, I remember when I was sitting on the other side of the fence, if you're going out to 4 or 5 different contractors for a job, the game is I'm gonna give you this shitty contract. Okay, and then you're gonna negotiate back, and then we'll agree somewhere in the middle. That is the game. It's the opposite if they go to you and you don't come back with anything. It's like, oh, that guy doesn't really— this is his first rodeo, or we're gonna take this guy for a ride. So the game is to go over and back. Just what you need to do is you just need to do it in a nice way. You don't want to be very lawyer-esque. You just know what you want to negotiate and do it in a way where you explain as a business owner why it has to happen this way and why you can't do it another way. So yeah, It's boring. It's notices, it's documentation and tracking dates and filling out paperwork on time. But $400K a year is $400K a year. You scale that up and down depending what size you are. And the ones that do this are the ones that are scaling to $20, $30, $40 million, and everyone else is blaming the market. Now, if you want a full roadmap on how to scale your construction business to $20 million and beyond, go watch the video on the screen right now. It breaks every single piece down. And if you've got a construction company that you want direct coaching with me and trainings, SOPs, and be part of a community of owners who want the same thing too, grow big, to sell it maybe, or to step out and keep the ownership. If that's you, click below.
