Many industries deal with thin margins, but it can be a real problem in construction, where work is often awarded to the lowest bidder. Plus, there are so many factors that can affect a project’s profitability, and even all those foreseeable risks can’t always be prevented. So, it’s always important to be proactive in finding ways to improve construction company profits.
This is even more pressing a topic these days, as rising costs for materials, rising labor costs, and supply chain delays are creating additional challenges. Here are some reliable ways to improve construction company profits.
How to Boost Profits for Your Construction Company
- Set profit goals – Business 101 covers the importance of setting SMART (specific, measurable, achievable, relevant, time-bound) goals. And profit goals are among the most important. Where do you want to be in 1, 5, and 10 years? What’s your detailed plan for getting there?
- Enhance productivity – Of course, getting more done more efficiently reduces costs and helps prevent missed project deadlines. Here are plenty of ways to increase productivity at the construction site.
- Prevent workers from waiting around – Speaking of productivity, crew members waiting around at the job site is a major cause of lost productivity and wasted labor pay. Read up on common reasons workers get stuck waiting and how to prevent it.
- Be proactive about preventing rework – Rework can be a serious drain on productivity and contribute significantly to rising labor costs during a job. Take a look at some of its common causes and the best ways to avoid rework during any construction project.
- Make sure you have the manpower – Labor shortages make it difficult to get jobs done well, efficiently, and on time, and can even keep you from bidding on the most profitable contracts. Use these hiring strategies to help keep your crew adequately staffed.
- Keep close tabs on your costs – Some construction companies don’t keep close enough track of their overhead and job-specific costs to fully understand their profitability. Be diligent about tallying up every direct and indirect cost of every contract.
- Submit better bids – A clear grasp of a job’s costs is an important starting point to knowing which projects to bid on. But there’s a lot more involved in submitting solid bids on the right construction jobs.
- Stay on top of preventive maintenance – There are lots of benefits of preventive maintenance for your heavy equipment, and it’s one of the less obvious ways to improve construction company profits. It helps maintain machine productivity and prevents costly downtime.
- Analyze the finances after every job – Once a project is completed, perform a full analysis of your total costs and revenue. Did you accurately estimate your costs and timeline? What factors increased your costs or caused delays? Did you actually make your expected profit? Use what you learn to protect and improve your profits on the next job.