When to Start Worrying About Your Backlog

Analyze your competitors’ strategies, pricing, and marketing efforts to identify areas where you can improve and regain your market share. Consider diversifying your services, targeting new markets, or forming strategic partnerships to expand your reach and secure new projects.

5. Economic Indicators

In addition to internal metrics, it’s crucial to monitor external economic indicators that can impact your backlog. Keep an eye on interest rates, inflation, and government spending on infrastructure projects. Rising interest rates can make it more expensive for clients to finance new projects, while inflation can increase the cost of materials and labor, making it harder to win bids. On the other hand, increased government spending on infrastructure can create new opportunities for construction companies. Stay informed about economic trends and adjust your strategies accordingly to maintain a healthy backlog.

Maintaining a healthy backlog is essential for the long-term success of your construction company. By monitoring key financial statistics and markers, such as your backlog ratio, bid-hit ratio, DSO, market share, and economic indicators, you can identify potential issues early on and take proactive steps to mitigate the risks. If you notice a consistent decline in your backlog, don’t wait until it’s too late to take action. Analyze your operations, identify areas for improvement, and implement strategies to win new projects and maintain a steady flow of work. By staying vigilant and adapting to changing market conditions, you can ensure the long-term sustainability and growth of your construction business.

Derrick Rebello and Brad Carlson are Partners in the Construction Practice Group at Gray, Gray & Gray, LLP, a business consulting and accounting firm that serves the AED and construction industries. They can be reached at (781) 407-0300 or [email protected]