Construction Business Scaling Financial Model - 10 Year
Originally published: 31/10/2022 11:52
Last version published: 20/12/2023 13:09
Publication number: ELQ-52356-2
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Construction Business Scaling Financial Model - 10 Year

Create a cash flow forecast based on unique assumptions for a construction contracting business. Includes a three statement model.

Description
The main focus of this model is to get a clear picture of the cash requirements and resulting returns of starting / running a construction company. It was made with scaling in mind so it is easy to model multiple jobs happening across time and different types of jobs that have different terms / revenues / costs.

The model is run off of three modules that let the user define attributes of a given job. Everything runs off a monthly timeline.

Each Job Type Assumption Layout Has the User Define:
 - New jobs started per month
 - The % of a given job that gets completed over time (it could be a single month or any number up to 120 months) This drives recognized revenue and wage allocation.
 - Average value of a contract
 - The % of the total value of the contract collected in each month (drives cash flow and the difference between this percentage and the job completion percentages will result in either receivables or unearned revenue on the balance sheet)
 - The average cost of materials per job and average cost of equipment rentals per job (defined in detail on a separate schedule that flows directly into the assumption area.
 - The % of the total materials / rental costs that is paid per month.
 - Wages (based on 10 slots that could be employees or sub-contracts or a combination)
 - Average hours worked by wage slot, count per wage slot, overtime/regular hours per wage slot, payroll taxes/benefits per slot
 - A sanity check will show the resulting average hours worked per day per worker per slot for each month a job lasts for.

All of the above is to forecast revenue collected and construction costs based on the number of jobs started per month. There are other configurations in the model to define:
 - Fixed Cost Schedule (managers, sales and marketing, legal, and general on-going fixed monthly costs)
 - Launch year
 - Forecast end month (up to 120 months)
 - Exit Value / Multiple
 - Taxes
 - Other Capital Asset Purchases (if you were to buy some or all of your equipment instead of rent)
 - Other one-time startup costs
 - Debt assumptions

After the above is configured, the following output reports will automatically update:
 - Monthly and Annual Income Statement, Balance Sheet, and Cash Flow Statement
 - DCF Analysis / NPV for the project as a whole and for individual investors / owners
 - Annual Executive Summary, including IRR and ROI
 - Cap Table
 - Monthly and Annual Pro Forma detail (this shows you how all the assumptions flow across time by job type and cost type.

In order to make all the assumptions work dynamically, three matrix tabs were used. This is the best in practice logic to make forecasts for cohorts of things happening. In this case, it is the jobs started per month and the configurations tied to a given job.

This template is also included in two bundles:
- All Models Bundle: https://www.eloquens.com/tool/P8Y4TX4v/finance/financial-forecasting-models/financial-models-120-useful-and-usable-logic
- Industry-Specific: https://www.eloquens.com/tool/lrNGt2jL/strategy/business-plans/business-sector-bundle-35-bottom-up-financial-models

This Best Practice includes
1 Excel model and 1 Tutorial Video

Acquire business license for $70.00

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Further information

Create a financial plan for operating a construction business.

General construction contractors, up to three job types.


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