Brendan Hollis, CPA, CM&AA, a partner in the Denver office of Aldrich CPAs + Advisors LLP, specializes in providing tax and financial planning services to construction contractors, manufacturers, and distributors. He discusses the current challenges and opportunities for Colorado construction companies and their owners.
Q1: What’s on the minds of construction company owners in Colorado right now?
Brendan Hollis (BH): While overall economic data has been solid, construction company owners are seeing a slight softening in Colorado. There’s obviously still a lot of building happening, but the backlog is not as strong as it was, and private work is not as solid as public.
Low interest rates and pandemic-era programs like the Paycheck Protection Program and Employee Retention Credit have ended, so the cash flow that came from that environment has stopped, so now construction owners are having to change their strategies.
Having the right insights and financial data to truly understand what’s happening at your company and in your jobs is critical.
Q2: What are some current patterns in where Colorado construction companies are focused?
BH: Colorado is still a destination, even if the number of people moving in has decreased compared to a few years ago, but there’s still a lot of dirt across the state that can be developed. For example, Colorado Springs has more room for expansion, and the economy there is diversifying and drawing in people.
Contractors want to be thoughtful about expansion. They want to have a solid understanding of any market they move into. They want to be sure they understand what their place is in the new market, what staffing is like there, and what they need to do to ensure you get costs right.
Q3: How have the recent rate cuts impacted construction?
BH: For private work, the higher interest rates have already been priced in during the last four years of increase. Some jobs weren’t penciled out as financially feasible and, as a result, weren’t getting done.
While interest rates have come down a bit, we’re seeing owners starting to buy new equipment, but it can be a challenge for some to get financing and obtain land.
Cash flow is especially critical for owners to maintain a strong grip on work in progress right now. Owners are meeting with project managers, supervisors, C-suite, CPAs, and so forth on a regular basis. It’s essential to stay on top of where each job stands to monitor costs and mitigate against profit fade.
Q4: How can owners of construction companies get the most out of service providers like tax, accounting, and banking?
BH: Successful construction owners work to ensure their entire professional team understands their goals and works in collaboration. If your CPA, surety/insurance agent, and bankers all understand your objectives, they can be in constant communication to keep credit lines flowing. Each has a perspective, but having everyone’s voice helps ensure you can meet your goals.
Q5: Transition plans seem to be increasingly top of mind for owners of construction companies. What are you hearing from owners who are starting to think about the next phase of their lives?
BH: Baby boomers, and even some older members of GenX, are starting to think about what’s next, which includes potentially selling their business or transitioning to family. There are pros and cons for every option, from an external sale to a family transfer. Internal transitions, where a family member is succeeding the owner, can be more tax advantageous due to the trust that naturally exists within the family.
The most important thing to remember is that it’s never too soon to start thinking about a transition, which can easily take 5-10 years to plan and execute. The best place to start is to bring a team together: a CPA, M&A advisor, wealth advisor, and lawyer well-versed in transactions. When everyone on the team understands and focuses on your goals, that ensures the transition is done in the most tax-advantageous way for you—and sets the company up for success into the future.
Q6: What do you hear from construction clients about why working with Aldrich is different?
BH: When it comes to tax and accounting, owners have consistently told me that having accountants who really know construction—not just ones who do work for a few construction clients here and there—is crucial.
Aldrich has consistently been ranked as one of the top construction firms in the US, and we have a real deep understanding of the needs of builders in the Western US, something we are incredibly proud of. But the thing I hear consistently from construction CEOs and owners is how much we care. We take the time to understand their goals and work to help them achieve them, both professionally and personally.
About Aldrich
The Aldrich Group of Companies includes a Top 100 Accounting Firm nationally providing tax, advisory, and consulting services to businesses and individuals. Working closely with businesses, business owners, and individuals, The Aldrich Group of Companies manages financial, wealth, tax, benefits, and business transition strategies. We serve clients with deep industry expertise in construction, manufacturing, healthcare, nonprofit, telecommunications, utilities, professional services, food processing, agribusiness, real estate, and a variety of privately held companies and individual clients. The Aldrich Group includes the following professional services firms: Aldrich CPAs + Advisors LLP, Aldrich Wealth LP, and Aldrich Advisors Capital LP.
