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Michael Strahan

During the 1990s, and even into early 2000, the need to have strong relationships with professionals outside your organization that specialize in the construction industry diminished. Business was good, obtaining credit was easy and relationships were taken for granted.

Today, things are different. It's not just about what you know, but also with whom you align yourself. Surety credit is difficult to obtain, and the importance of outside professionals that understand the construction industry has once again become an important part of your overall business success.

Surrounding yourself and your company with the right people is not enough. Taking advantage of and relying upon the knowledge, expertise and recommendations of those in their respective fields is just as important. Your ability and willingness to communicate with these professionals are essential to ensuring that you and those professionals are working with one common goal in mind: reaching your business objectives to maximize the ultimate success of your company.

Surety agent/broker

This may seem obvious, but think about how often you really talk to your surety broker about your business -- not just about your next bond request, but also about your one- to five-year business plan. Are you certain that you are both on the same page in regards to your business goals?

Ideally, it is recommended that you meet with your surety broker at least three times a year. Two of these meetings can be in conjunction with surety meetings, the year-end recap, or the jobsite visit/six-month update. Your surety broker should help guide these meetings, and ensure that you are prepared in advance.

The agenda of the third meeting might seem unusual to some, but it could prove very beneficial. Before the end of your fiscal year, schedule a tax preparation and planning meeting with all of your professional advisers in attendance. At this meeting, the objective should be to discuss and finalize your plans for the next year, as well as your long-range plan for your business. With all your outside professional advisers in attendance, it is much easier to ensure that everyone is working with the same objective in mind.

Again, considering your surety broker as one of your trusted advisers can make an immense difference. Your broker needs to be knowledgeable about your short- and long-term business objectives. Other meetings throughout the year should occur according to a schedule that you and your surety broker have predetermined. Doing so ensures that you are receiving all of the value-added services necessary to reach your business objectives.

Surety company

With a shrinking surety credit marketplace, it is imperative that you attempt to develop a long-term relationship with a surety company that understands your scope of work, is financially stable, and has an appetite for risk that closely mirrors yours.

Once you have selected that surety company, it's important to develop a relationship with the local branch or regional office, and, depending on your level of credit requests, the home office as well.

At least two meetings a year with your surety company are highly advised. One meeting would be the year-end recap. This is your opportunity to sit down with the surety representative at your office and talk about the good and bad of the prior year and have any questions answered that may exist.

The second meeting would be a jobsite visit/six-month update. At that time, you should consider taking your surety representative to see one of your larger or more complex projects to showcase your abilities. This is also a good meeting, if appropriate, to have a regional and/or home office representative attend.


Probably the only thing harder to find than surety credit is a bank that likes to underwrite construction companies. If you have one of these banks, nurture that relationship. If you don't, find one.

Having a line of credit and/or equipment line that is sufficient to support your business is paramount to your success. While you never want to use your line of credit, you need to know it is available in the event of a temporary cash flow shortage or unforeseen job problem.

You should probably meet with your banker on a quarterly basis. These meetings will give you the opportunity to build your relationship, and allow your banker to provide value-added suggestions that can improve your overall banking program.

One of the quarterly meetings should be your planning meeting. Your banker needs to know your goals, and you need to know if the bank has the ability and willingness to support you. If not, knowing in advance that the bank ultimately can't support your needs will allow you the option to seek another bank at your leisure, rather than in crisis mode.


There are a lot of accountants out there, but not all of them understand construction accounting. Your CPA should be an AICPA member, have a working knowledge of percentage of completion accounting, and understand the unique aspects of construction tax accounting.

Once you have the right CPA, you should meet with him or her four times a year. These meetings should be for tax planning, year-end financial preparation, the recap of the end product, and your planning meeting. While additional meetings may also be necessary, these are the "must have" meetings.


Your attorney is a critical part of your overall risk management plan. If your attorney has not already done this, he or she should review the contracts you use with subcontractors and suppliers to ensure that they have all the necessary legal clauses to transfer risk away from your firm. Your attorney should also review any contracts before you sign them to ensure that you are not assuming more risk than necessary.

You and your attorney should also proactively plan meetings to educate your accounting and project management staff. These meetings should focus on how to ensure that pre-lien notices are filed properly and that everyone understands and complies with the administrative requirements associated with claim issues. Understanding and positioning yourself properly on the front side of an issue will save you a significant amount of time, energy, expense and frustration later on.

Insurance agent/broker

Your insurance broker needs to be risk-management focused, and posses the capabilities to continuously lower your total cost of risk. Your broker should not only know your company and the details of its operations, but also have expertise in all aspects of the development industry from an owner, construction manager, design professional and contractor's perspective.

Your insurance broker should review all contracts before you sign them to ensure that you meet the insurance requirements and are not entering into contracts that contain onerous insurance provisions. Your broker also should review your subcontractor and supplier contracts from an insurance perspective to make sure you request the appropriate minimum limits and coverages to protect your firm.

Lastly, your insurance broker should also be a part of planning meetings, as he or she needs to understand your business in order to properly represent you to the insurance industry.

Building a strong team

Many outside professionals play key roles in your business success. Make sure you have the right team working for you, and that you are maximizing their value to your company. If they are not meeting your expectations, are not willing to make themselves available, or are not experienced in construction, you need to re-evaluate your relationship.

Obtaining surety credit will not get any easier in the near future. To prepare your company for the long haul, you need to be able to count on the team you have assembled. Is your team performing at a level that allows you to secure optimum results?

Strahan is with the construction department at Cavignac & Associates, a leading commercial insurance brokerage firm providing surety bonding, insurance, and risk management solutions to the building industry. More information about the firm is available at www.cavignac.com.

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