Booked solid: being booked a year out is a good thing--or is it?
What is backlog? First and foremost, backlog measures production capacity--the projected time required, usually expressed in months or weeks, for a company's production crews to complete contracted work. A longer backlog is better, but not too long--most companies are comfortable sitting on four-to-six-month's worth of work, but rarely more than a year's worth.
It's dangerous to count your chickens before they hatch. Most remodelers add a job to their backlog only if there's a signed construction contract in hand. Design/build companies with separate contracts for each phase present a special case, but getting some commitment from the homeowner is still required. For Paul Eldrenkamp of Byggmeister Associates, a design/build remodeling company in Newton, Mass., for example, a job counts toward backlog if "some money has passed hands and the owner's signature is on something--either a check or a contract." That's because historically, once a job is in design, Byggmeister's cancellation rate is extremely low.
The number of jobs in backlog makes a difference as well. Companies with lead carpenters typically assign backlogged jobs to particular leads, based either on pure availability or on the required skill-set. Others do the same with subcontracted labor. Job size matters, too, and a mix of large and small jobs is best. If your backlog comprises only large projects, a cancellation or postponement can put a big crimp in your cash flow. Small companies working on one big job at a time are particularly vulnerable. "We prefer larger jobs," says Candi Hilton of Hilton Enterprises in Stilwell, Kan. "But with a company our size, if one fails through then we're hosed, because that might be all there is."
Backlog mix also affects office and design personnel. Small jobs take almost as much time to administrate as larger projects, but they disappear quickly from backlog. The danger is that jobs included in backlog won't be ready to start on schedule because of incomplete designs, missing specifications, or another paperwork bottleneck. Remember also to include punch list, call back, and warranty work in your backlog. "A mix of projects is part of a good backlog," says Danny Feig-Sandoval of Small Carpenters at Large in Atlanta. "On large projects, there's always lag time for your carpenters--during drywall or exterior stucco or brick work. We fill the gaps with lots of small projects, and we keep some on reserve."
Backlog that is left simply to accumulate eventually either shrinks into empty panic or grows into overwhelming frenzy. You can avoid these extremes by employing backlog as a tool that informs decisions about hiring, training, and marketing. Its reach extends beyond your own company to your suppliers and subcontractors as well. They, too, have a backlog, and your success often depends on how well you can dovetail your schedule with theirs.
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