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Latest Project Management News and Articles..come back soon for more updates...Gedas U.K. Adopts Mercury IT Governance Center Cash Flow - Keep Water Out of the Bottom of the Ship A cash flow problem is a drag on the performance of a construction firm. Just as a foot of water in the bottom of a ship would cause it to ride lower, move slower and be a foot closer to sinking, it is problematic. Cash flow is a primary economic factor whether a contractor does well or not. Understanding this issue can keep your company profitable and thus, make your management easier. How important is understanding cash flow? It is a top five issue. Why? Negative cash flow is the leading predictor of construction contractor bankruptcy. ProjectManager - Alpha Consulting US-NJ-Plainsboro The Best Industry in the United States My child is in college. She is starting to ask about industries and careers. Olivia has made me think further about what construction contracting has to offer her. I have concluded it is the best career a young person could choose. You may not believe it, but, the facts will show our business is unmatched. It offers participants long term tangible benefits. However, many people will argue. Let me show you the many virtues our industry has. You be the judge. Contracting is a Variable Cost Business Construction is a variable cost business. Many other businesses have a fixed cost structure. The determining factor to classify a business is to look at the % of fixed cost of the business. The remaining cost is variable. Add these two percentage together, subtract from 100% and what remains is profit. Over 50% fixed costs - we consider this a fixed cost business such as airlines, computer software manufacturers, restaurants just to name a few. They have to drive volume to make the economics work. To pay their fixed cost every month, they must have a certain volume. Under 50% fixed costs - we consider this a variable cost business typically a service business. This means that the most of the cost of the product or service is caused by the sale. Construction is under 20% and in reality, a majority of contractors are under 10%. That places a huge premium on taking the right work not cheap work. Furthermore, we must insist on a margin that is reasonable for the job. In our business of contracting, we cannot use volume as a way to earn profits. We are not an airline. Our resources (good people, your expertise) are too scarce. We have to demand a value for these factors. Thus, we should have a profitable job. ProjectManager - Thinkcentric US-NJ-Whitehouse Station |
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