7 Ways to Increase Construction Business Profits

Mar 30, 2022 12:00:00 AM
7_Ways_to_Increase_Construction_Business_ProfitsStarting a construction business is no joke. It takes hard work, long hours and a whole lot of dedication. If you do it right, though, construction businesses can grow quickly, and when they do, you might find that you can’t keep up with demand, and your construction estimating software is working overtime.
 
But growth alone does not guarantee that you’re making enough money to make all that work worthwhile.
 
At some point, you might discover that you’re not making as much as you used to. Over time, your business changes, and the pricing strategies you used to use might not be as effective anymore. Many smaller construction companies also opt to compete on price, which might not be as effective when you’ve got a growing business.
 
As leaders in the construction estimating software business, we’ve seen and heard every story, so here are some easy ways you can increase your construction business profits.
 

1. Increase Your Margins

The first option on this list really is the low-hanging fruit when it comes to increasing construction business profits. This can be somewhat nerve-wracking – especially if you’ve been competing on price – but even a modest change can make a big difference. If you don’t have to work as hard to make every dollar, you should see an immediate increase in profits
 

2. Double-Check Your Labor and Overhead Costs

Ideally, it would help if you recalculated your labor and overhead costs at least once a year. Even if nothing changes, at least you will be sure that you are covering all your expenses.
 
It’s a good idea to split these costs when you’re doing your calculations, too – because they usually change independently of each other, and one might change while the other stays the same.
 
The simplest way to do this is to calculate your total monthly direct labor bill (including benefits, workers’ compensation and other employment costs) during a busy month. Do the same with your monthly running cost. Then divide those by the number of working days in the average month to get a daily rate and by your average hours per day to get an hourly rate. Once you have those raw numbers, you can adjust as necessary until you have a comfortable number for each.
 

3. Add Another Crew

If you have enough work to justify adding another crew to your team, this is a great way to make more money – and it can allow you to keep your prices lower while still making more profit in your construction business.
 
That’s because, while the direct labor component of your hourly and daily rate will go up when you add more people, the overhead portion will not increase proportionately. So, if you keep those rates the same, you will actually be making more profit off each hour and day that they work – because of the excess in the overhead portion.
 

4. Negotiate Better Prices

If you’ve just been making do with whatever the going rate at your local hardware store is, you might be able to lower costs and increase profits dramatically by going direct to suppliers and negotiating a better deal.
However, if you’re getting enough work using the higher, near retail rates you’ve been using so far, you could keep pricing jobs using those rates and then make more money on the backend by buying better.
 
Many suppliers base their discount structure on volume, too, so over time, you might qualify for a more significant discount. This means your material costs might even go down more over time if you do a lot of work with those products.
 

5. Streamline Operations

If you’re doing most things manually in your office and in the field, upgrading your technology and streamlining operations can save you time and money.
 
Consider giving your foremen and site supers tablets with software and apps they need to do their on-site paperwork. This saves time, and you don’t have to have all those forms printed or find places to file them in your office.
 
Upgrade your accounting software so you can capture receipts by taking a picture and link your software to your bank account. Being able to accept payments online is another big-time saver, and it means you don’t have to send someone driving across town to pick up checks every time you get paid.
Invest in good construction estimating software too. Estimating can take a lot of time, but with the right software, set up correctly, you can cut this down to a fraction of what it’s been taking you so far. Plus, giving your customers accurate, beautiful quotes faster will probably increase your sales.

6. Increase Productivity

Even a slight increase in productivity can cut costs and increase your construction business profits. There are several ways to do this, but it’s a good idea to spend some time on-site if it’s been a while since you were there. This will give you a good idea about what the problems are and what kind of productivity your crews are getting now.
 
Some of the ways you can increase productivity are:
 
  1. Set production targets and reward crews if they exceed them      
  2. Purchase new tools to replace those that are old or wearing out        
  3. Look for labor saving equipment that might make work easier for your people        
  4. Consider adding additional general laborers to do more of the manual labor on site – they cost a lot less than artisans, and they can help to increase the productivity of your skilled people        
  5. Consider subcontracting some of the more time-consuming tasks that you don’t really specialize in – a subcontractor can probably do it faster and more cost-effectively, and your crews can focus on what they do best
In the construction business world, time really is money, so anything you can do to reduce the time it takes to complete a project (without compromising quality) will increase your profits proportionately.
 

7. Change the Type of Jobs You Work On

If you’re focusing on small, low-cost jobs and struggling to turn a profit, it might be time to shift your focus.
Sometimes, moving into doing the same thing you’ve always done, but in luxury homes or for commercial clients, is a great way to increase profits while still doing what you’re best at.
 
Potential clients might include property developers, local municipalities, or more prominent general builders in your area. Always keep a lookout for new opportunities that can give you steady work at good rates, but never rely on just one customer. Things can change quickly in the construction business, and you don’t want to be left without any work when a big client changes their approach!
 

CostCertified Can Help You Make More Money

CostCertified was designed to help contractors make more money from their construction businesses. The system is set up to be user-friendly and to allow you to speed up your estimating process without compromising on accuracy or detail.
 
It’s more than just construction estimating software, though. It also helps you to create beautiful, eCommerce-like quotes that are interactive in real-time. It allows you to invoice jobs faster and handle change orders with ease. It even plugs directly into your accounting software, so you don’t have to enter financial data manually.
 
We spent years working to build profitable construction businesses on our own, and then we took all the skills we learned along the way and put them into the last construction estimating software you will ever need.
But don’t take our word for it. Reach out to the team and find out for yourself.
 
Change the way you run your business and make more money! Book a FREE 15-minute call now and discover how CostCertified can help your business to be more profitable.