Running a profitable construction business involves adopting the right steps to keep your company rock-solid, leading to more profit and more room for growth and expansion. Unfortunately, many construction business owners are not able to ensure this, with recent US data suggesting that construction businesses are struggling amid declining survival rates. If you’re keen to improve the profitability of your construction business, here are some useful tips to consider.
Pay more attention to your cash flow
Cash flow is an integral component to look at if you’re eyeing those bigger profits. It all starts with knowing how to keep money coming in. First, get yourself a system for monitoring your cash flow. Think of it like your money GPS guiding you to dodge those potential losses. And when it comes to getting paid, be smart about your invoicing and consistently chase down those late payments. Also, negotiate some smooth payment plans to keep your cash rolling in without delay.
Consider subcontractor risks
Subcontracting can make or break your business. Picking the right subcontractor isn't just about skills but about their project success and the company’s reputation. It is always best to team up with financially savvy and skilled subcontractors. And since surprises can sometimes spring up, have some backup plans in your pocket. For instance, contingency plans for delays, quality issues, or financial bumps can come truly handy to mitigate the risks. It would also help if you stay on the right side of the law when bringing subcontractors into your projects. You may get in touch with a surety company to figure out their financial strengths, experience, credit history, and management capacity.
Regular safety-oriented education and training
Prioritize regular education and training with a big focus on safety, as it’s a crucial aspect of running a successful construction business. It’s not just about ticking boxes but taking a significant step to boost your efficiency, getting the job done, and making your company the talk of the town. Regular training also helps develop your staff, which in turn leads to happy employees and less turnover, meaning less cash spent on hiring and training new staff. The best part is that committing to education and training boosts your business reputation; it increases your chances of better deliverables, top-notch customer service, and fewer accidents, making you the brand everyone wants to work with.
Improve the job estimating process
Making the right job estimates is essential for your construction business. That is because, in this sector, you’ll constantly be bidding for projects, and you need to stand out. To win bids, you need an estimation process that’s on point. It’s all about figuring out the costs for materials, labor, and overheads and adding your profit margin. Precision is your secret weapon here. You can ensure accurate figures by first diving into the nitty-gritty and gathering intel on material prices, labor costs, and anything else that might swing the balance. And if your new build requires plumbing installation, tech tools like commercial plumbing software can help you ace your estimations.
Have a profitability goal
If you’re looking to boost your profitability, you have to set some smart goals. Where do you see your company in the next year? How about five or a decade down the line? You may be itching to grow, acquire new markets, or those big, shiny projects. Or you’re eyeing a switch from public gigs to private playgrounds. Whatever your game plan, knowing your long-term goals is like having a treasure map for your profits. So, sketch out those dreams, set some revenue and profitability goals that match, and you’re halfway there. It’s not just about hitting numbers but shaping the projects you take on, guiding your estimators to hit those sweet markup percentages, and making those dreams a reality.
Double down on your marketing
Marketing is a crucial part of every business, and construction companies are no exception. Think about throwing in 5-10% of your turnover into the marketing pot. Some folks go all in with 20% because it’s not just about reeling in projects but acquiring top-quality, dream clients. Don't limit yourself to just one arena. Dive into the online world and explore the digital space, but don't forget the good old offline marketing. It’s a marketing tag team, and it’s time to double down on it.
Assess your results
After completing a project with top, positive reviews flying all around, remember that it’s not over yet, as the real work’s just starting. Get your team together and critically assess the entire project with a postmortem analysis. Take a moment to peel back the layers to see how your estimated profit matched with the actual deal. Determine whether the job costs were within the estimated range and whether you gave your overhead the attention it deserved during the bidding process. It’s time to get real about your estimates versus the actual costs. Consider it your go-to resource for the next round or future projects.
Follow-up on quotes
Have you ever found yourself burning the midnight oil on a quote, only to have to redo the whole thing because the customer wants changes? That can mean hours down the drain and can be frustrating if you still don't get the job afterward. However, it’s not just about crafting the perfect quote but following up to seal the deal. You’re not alone if you feel like you have to keep redoing your quotes. Behind the scenes, while you’re perfecting your quote, another building might be sliding in with a slick quote flow system. In a competitive world like the construction industry, don’t just send out quotes and wait for feedback. Follow up regularly to show that you’re ready for business and have the client in mind.
When it comes to the construction business, demands change like the weather, scopes shift, and the market evolves. Whether you’re an existing business or a newbie in this game, achieving that profit margin can prove challenging. However, the above tips can make improving profitability a bit less of a head-scratcher.