In the construction business, sometimes increasing your profit margins can be difficult. What it costs you to do the job may not leave much room for high gross margins due to the expensive nature of construction projects.
Everyone has differing opinions on how exactly you can start to increase margins at your construction business but what no one is arguing is, as ForConstructionPros.com puts it, “If you don’t figure out how to increase margins, you’re not going to see a huge jump in your bottom line.”
Below are some tips on things you can do today to improve your construction job profit margins. Hopefully one or more of them will lead you on the path to even greater success.
How to improve profit margins at your construction business
- Identify and avoid bad clients: No one likes to say goodbye to a client, or turn down a potential one, but it’s important to recognize the bad from the good. Bad clients – those that don’t pay on time, haggle with you on cost, or are indecisive about the details – slow you down and have the potential to bring your costs up. The longer you spend on a back and forth with these clients, the more time you spend on the project. Weed out clients like this and start fresh. Find new clients that will appreciate you and pay you fairly for the work you do.
- Re-evaluate your priorities: Constructionbusinessowner.com asks the question, “Are you a money-maker or a money-saver?” Money-savers spend their days figuring out where they can cut costs – hiring inexpensive labor, doing jobs with too few people, etc. Money-makers, on the other hand, find ways to constantly move the business forward. They work on developing loyal customers, training a strong management team, and seeking out higher-margin projects. If you don’t consider yourself a money-maker right now, try shifting your priorities and you’ll soon notice a big difference.
- Lower overhead costs: There are three easy ways to do this – make the investment in the appropriate equipment, decrease worker inefficiencies on the job, and cut down on material waste. If you can spend less money on each project, you’ll automatically increase your profit.
- Raise prices: Don’t sell yourself short. Give your work the value it deserves by raising the price of your bids. ForConstructionPros.com writes, “Do not underestimate the benefits of being able to sell your work at higher prices. Nothing improves your financial outlook faster.”
- Streamline your construction business: Utilizing tools like construction CRM software can help make jobs go smooth from start to finish. From bids to real-time data updates, nothing will help you run a more efficient, profit-gaining business than this type of technology.
From these tips, take only the pieces you think you need to help improve yourself and your business. Pretty soon you’ll be well on your way to higher profit margins at your construction company.