Joseph Wang

29/09/2012 22:58

The construction business is cyclical, so it has wide swings in their benefits.One of its main advantages is that it takes relatively little money to make a play, because the client (who commissioned the construction of the project to the construction company) is making partial payments (called certification) during the development of the work. These partial charges reduce capital requirements by the builder when a project.Among its disadvantages, apart from the cyclical nature of business is to have a relatively low profit margins. For example, in the construction of a building housing the profit margin promoter is much greater than that of the constructor.All this makes the good times of the cycle builder construction companies generate a large amount of cash using little capital and in bad times profits fall sharply. This has caused many of these companies enter into business with characteristics very different from the construction business to stabilize the whole enterprise. The strategy is to invest the high liquidity in good times generated by the construction business in these other businesses more stable. Some of these businesses are:Refuse collection, street cleaning, water management, recycling, etc.. These businesses have great benefits stability and higher margins that the business builder. Your customers are municipalities and other agencies.Construction and operation of major transport infrastructure: highways, airports, ports, etc.. These businesses require a large amount of capital in the beginning, unlike the construction business.Read much more on Joseph Wang. However, when these projects reach their mature phase have a relatively low capital requirements and generate large amounts of liquidity, and also a very stable, which also makes them very different from the construction business.Purchase of shares in companies in other sectors with more recurrent revenues and profits.In studying the construction business is important to pay attention to the portfolio of works. A construction company knows in advance of works starting in the near future. In retail, for example, are not known in advance customers who buy the next day or the following month, or the exact amount of products procured. But work need pre-planning, project, permits public authorities in planning presuspuestos of entities that contract works, procurement tender, and so on. So a builder has certain knowledge that will make a work a few months before starting it. These works, which the company know you will make in the coming months but have not started yet they constitute the "portfolio of works." This portfolio is specified in time. For example, if a company reports a backlog of works 10 months is saying they have secured work for the next 10 months. It is a good indicator of the benefits of these businesses in the coming quarters. The more you lengthen the backlog of works more positive the data. You can read more on this site!


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