CFMA’s
2004 Construction Industry
Annual
Financial Survey Results
Now in its 16th year, CFMA is pleased to announce
its annual financial survey results, compiled
and analyzed by Moss Adams LLP. With more than
240 pages, this report provides insights on factors
contributing to company performance and industry
trends, examines financial data for the year in
detail, reports on the critical issues facing
contractors today and serves as a financial benchmark
for construction companies of all sizes, regions
and types. In this article, we highlight the key
messages of the report, including overall performance
and outlook, the importance of strategic planning
and the advantages held by the best-in-class companies.
Optimistic Outlook
Following Drop in Performance
Participants in CFMA’s 2004 Construction
Industry Annual Financial Survey experienced financial
difficulties in FY 2003, but remained optimistic
about FY 2004 and beyond. The large majority of
participants were expecting increases in sales
and backlog in FY 2004. Expectations varied widely;
however, the typical overall anticipated increase
in volume was 10%, while the increase in backlog
was expected to be 19%—healthy increases
for the year.
 Helping
facilitate this expected growth was the continued
good availability of credit. The vast majority
of participants experienced credit as good as
or better than the prior year.
Despite the optimism, there are a number of factors
that concern contractors of all types. Sources
of future work remain a pressing question, a lack
of trained field help is exerting pressure on
both project capacity and compensation and insurance
costs continue their upward climb.
While overall performance declined, many companies
were financially successful in FY 2003. One of
the factors that contributed to good performance
was the presence and implementation of a strategic
plan, the subject of this year’s Hot Topic.
 Strategic
Planning Helps Companies Weather Tough Times
There are many plausible reasons why a significant
percentage of contracting companies fail to plan
strategically for their businesses. Only 34% consistently
engage in strategic planning throughout the year
and 38% have no strategic plan whatsoever. The
most common obstacle identified by survey participants
was a lack of time, but there are many other impediments:
lack of experience, lack of buy-in from employees
and board members and difficulties with implementation.
However, in spite of these challenges, companies
with strategic plans reported superior margins,
as well as higher returns on equity and assets.
More information on strategic planning for construction
companies can be found in the Hot Topic section
of the 2004 report.
Best in Class Companies
Excel despite Challenges
 Even
during difficult times, some construction companies
experience sound financial performance. Each year,
CFMA examines the top 25% of participants to learn
what factors contributed to their success and
to provide targets for those companies that want
to improve their financial performance. Best-in-class
status is calculated using the following five
key indicators of financial health: return on
assets, return on equity, fixed asset ratio, debt
to equity, and working capital turnover.
 Overall,
there is a significant difference in performance
between the best in class and the average company.
Using the performance of the best-in-class companies
to set “stretch” goals for the year
and to target long-term performance goals for
your company is advisable.
CFMA’s 2004 Construction Industry Annual
Financial Survey is a benchmarking tool that allows
construction companies to compare their financial
performance, as well as their business practices
and strategies, with peers in the industry. A
total of 775 firms participated in the 2004 Financial
Survey. Participants ranged from less than $10
million in annual revenues to over $100 million.
All regions within the U.S. were well-represented.
Key industry sectors, including industrial and
nonresidential, heavy and highway, and specialty
trades, were covered in detail. Several focus
groups including public companies, minority business
enterprises, and best-in-class firms were also
analyzed.
For more information or to order the survey report,
visit www.cfma.org
or e-mail bsummers@cfma.org.
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In
CFMA’s 2004 Information Technology Survey
for the Construction Industry, many leaders in
construction financial management are recognized
for helping companies become more efficient. One
of the key issues is the real-time integration
of financial systems with operations. A firm connection
between these two groups via integrated construction
management software allows project managers to
produce accurate financial pictures of projects.