Construction Business Survey Reveals Areas of Opportunity

Business Planning for Growth and Profitability a Missing Link for Construction
Contractors

LAKE SUCCESS, N.Y., June 24 /PRNewswire/ -- Grassi & Co., CPAs, one of the
region's leading accounting, tax and consulting firms with the largest
national construction practice, released its 2009 Construction Industry Survey
results and report. This industry-wide survey, The State of Your Business
2009, was conducted in partnership with McGraw Hill Construction's New York
Construction.

The survey queried construction companies in seven different information
areas: organizational structure, contract types, training and technology,
profitability and access to capital, financial tools, business development and
future vision. The results uncovered the need for implementing best business
practices that increase reliance on sophisticated business planning tools and
programs that focus on ways in which to grow the business over time and rely
on financial techniques to increase profitability.

"Construction contractors should key into business planning for both growth
and profitability," advises Louis C. Grassi, CPA, CFE, and Managing Partner of
Grassi & Co., CPAs, who has been advising construction firms for nearly thirty
years.

Conducted bi-annually since 1997, the survey is the only industry-wide
research tool of its type designed to explore current business practices about
construction companies. According to Seth Horowitz, New York Construction's
Publisher, "This survey is another important information resource for our
readers to learn about more about how to advance their own businesses in a
current challenging economy."

Business Succession Plans Needed
Overall, many of the firms who responded to the survey reported that they did
not have a business succession plan in place. The importance of succession
plans -- especially in the construction industry which has followed a
father-to-son/daughter business model -- cannot be underestimated says Grassi.
"For many companies, second generation professionals are in place; however for
many others, a new generation of leadership has not been formalized, leaving
business growth on an uncertain path," he says.

Reducing Change Orders - Key to Increasing Profits
Many of the firms who responded indicated that change order disputes is still
one of the largest causes of litigation and often leads to profitability
losses. According to Grassi, this result is most telling and indicative of a
growing trend on the part of owners and developers, both public and private,
to implement better project planning procedures and more complete construction
documents as ways to reduce the number of project change orders.

Technology is also playing an increasingly important role in providing more
complete construction documents and drawings to ensure that clashes, conflicts
and the potential for future change orders may be reduced. According to Pat
DiFilippo, Executive Vice President at Turner Construction and his firm's lead
professional on Building Information Modeling (BIM), "Technologies such as BIM
and other integrated project delivery programs are likely to have a
significant effect on reducing changes throughout a project and increasing
overall profitability -- for both the owner and the contractor."

Highlights of the Survey Results
Highlights of the Survey reveal the following results:

Business Planning (Succession Plans)
-- 60% of the respondents did not have a succession plan. In a
generational-based business, succession planning is critically
important. The lack of these plans in the construction industry is
significant for a better understanding of this predominantly, small
business industry.

Joint Ventures and Other Associations
-- 30% of the respondents currently participate in joint ventures.
Larger
projects require increased bonding and financial capacity. Smaller
firms
may be challenged by complex mega-projects. The results of the survey
point to an emerging trend for companies to consider joint ventures
and
other business associations as a way of expanding capacity. This is
also more prevalent in a down economy, as firms can collaborate and be
more competitive.

Training & Technology
-- 57% of the respondents reported they do not have in-house training
programs. With the need for increased training in safety standards
and
new technologies, training both in best practices and technology
emerges
as a 'must have' for many construction companies. There
appears to be need for more improvement in this area.

Profitability
-- 52% of the respondents cited change order disputes as the largest
cause
of litigation. With the need to increase profitability, many of the
respondents may begin to look at ways in which to control costs
through
exploring opportunities to reduce change orders.

Financial Tools and Controls
-- 57% of the respondents stated that their companies have instituted
fraud
control plans. With data from the Association of Certified Fraud
Examiners (CFE) indicating that companies lose an average of 7% of
their
revenue to fraud (CFE), the fact that just over half of the firms
reported fraud control plans appears to suggest that greater control
in
this area is needed.

Business Development
-- 57% of respondents indicated that they have a business plan; only 40%
noted that they have a marketing plan. The survey indicates that lack
of
use of standard business planning tools (i.e., business plans,
marketing
plans) is another emerging trend in the construction industry and may
have a significant effect on the growth of an industry that
demonstrates
generational and familiar characteristics for supporting business
growth.
-- Only 76% of the respondents noted that they have a website. The
construction industry is increasing its reliance on web-based
documents,
forms and communications and the fact that almost a quarter of the
firms
surveyed do not have websites is another telling characteristic about
the way in which a traditional industry such as the construction
continues to operate.

The Future
-- In general, firms surveyed were moderately optimistic about future
growth, despite the current economic downturn. Almost 80% of the
respondents indicated that their firms are growing or at least
leveling
off. However 18% of the respondents indicated that they saw their
firms
declining.

PANIC OR PLAN
The results of the survey indicated that many of the respondents focused on
cash flow versus profitability. While vitally important, cash flow is only one
measure of financial health, and profitability is the ultimate bottom line
factor in financial success. Highly successful contractors that we work with
use the following tools: budgeting, forecasting, monthly financials and
profitability reports. Many of the survey respondents did not report that they
rely on those tools to manage their business.

MORE PLANNING NEEDED
The survey results also indicated that firms need to put a plan in place to
survive and thrive in the current economic climate. While contract
opportunities for both private and public work are reduced for 2009, with
expectations of an upswing in 2010, the need for a realistic business and
marketing plan is critical.

The survey reported on trends including joint venture participation, targeting
larger opportunities and partnering on jobs. According to Grassi, new
associations can create new opportunities for contractors. "Contractors can
be more competitive on bids, more efficient with productivity, and more
successful when utilizing each other's expertise," he says, "We've seen
clients utilizing partners with financial backing, minimizing their own
financial exposure and presenting more competitive bids. The construction
industry is going to overcome the economic downturn. Contractors will emerge
stronger, well-prepared, and more diversified than before."

For a complete report on the Survey Results please visit:
www.grassicpas.com/2009constructionsurveyresults

About Grassi & Co., CPAs
Grassi & Co. CPAs, P.C. features full-service practices in the areas of
taxation, accounting and business consulting. Focused on helping companies run
their operations more efficiently, save money on their taxes and plan for the
future, the firm has headquarters in Lake Success, New York and offices in
Manhattan and North Carolina.

The firm has been recognized as one of the nation's best-run accounting firms
by Inside Public Accounting and is ranked by Crain's New York Business as one
of the 25 largest accounting firms in the New York metropolitan region.

SOURCE Grassi & Co., CPAs

Adam Wolf of Grassi & Co. CPAs, +1-516-336-2466, awolf@grassicpas.com