Developed By Bruce Henderson - For the Boston Consulting Group in 1968 to help corporations analyze business units or product lines. It helps companies allocate resources and is used as an analytical tool in brand marketing, product management, strategic management.
No Two Construction - Companies are alike. Every construction company has a unique blend of ownership and management philosophies, tools, equipment, staff, field employees, geographic location, and relationships with suppliers, vendors and professional service providers.
This Means - That if construction company "A" earns a better than average profit percentage on residential remodel it does not follow that company "B" will be able to do the same.
Get Rich In A Niche - By finding your company's sweet spot, that particular thing you are good at, that people want and will pay good money for and that you are best suits you. Then you spend the majority of your time and effort developing your Business Process Management (BPM) to be the best and only company to service those clients and preferably dominate that market in your target geographic area.
The BCG Matrix - Is one of the many tools in our BPM tool chest. We Job Profitability and Job Costing reports from a properly maintained QuickBooks file to map out a specific construction company's target markets.
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Cash Cows - Are construction projects that you earn the greatest gross margin on. These projects typically generate cash in excess of the amount of cash needed to maintain the business. They are regarded as stable and boring and every contractor would be thrilled to own as many as possible. They are to be "milked" continuously and add more of them whenever possible.
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Dogs - Are construction projects that you earn the least gross margin on. These projects typically "break even" or lose money. Though owning a break-even unit provides the social benefit of providing jobs for your employees and possible synergies to assist other construction projects from an accounting point of view they are worthless because they reduce profits and the construction company's return on assets ratio which many investors, bankers and bonding companies use to decide how well a company is being managed.
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Question Marks - Are construction projects in new markets or a different type of work than the company has been doing which shows potential because they are growing rapidly. Beware of the fact they could consume a lot of cash while you are putting the processes in place to manage these projects. A question mark could prove itself and become a star, and eventually a cash cow. If the question mark does not prove profitable within 90 - 180 days it may be wise to stop taking on those projects.
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Stars - Are construction projects with high gross margins in a fast-growing area like aging in place for seniors. The hope is that stars become the next cash cows. Sustaining the construction business market leadership and increasing the profit picture. When growth slows, stars become cash cows if they have been able to maintain their category leadership, or they move from being a star to a dog.
Warm Regards,
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