The Contractor's Guide to Making More Money
There are many ways to increase profit within the construction industry, but fundamental business maxims have always told us to increase revenue or reduce your costs. For general contractors, making more money in construction usually means working harder and longer. But if you’re already putting in long hours, working even more sounds more like a stressful option.
That leaves us with cutting costs. (Don’t worry! We’re not talking about cutting corners or paying your crew less.) The key to strong cost control in construction is simply running a better business that is more efficient, leaving you with more money in your pocket at the end of the day. So, ask yourself, exactly how much money are you as a general contractor making these days?
Here are some ways you can save money and in doing so, make your next construction job more profitable.
In this article, we’ll cover:
- Efficient and Accurate Bidding Process
- Cost for Construction Tools and Equipment
- Ensure your Construction Crew is Productive
- Maintain Your Equipment
- Reducing Construction Material Waste
- Keep Track of Your Profitability
Have an Efficient and Accurate Bidding Process
The bidding process eats up valuable time, but it is a vital (and necessary) step to ensure making money. You need to get it right... or you can get burned. Bid too high and you might not get the job; bid too low and your profit margin will go right down the drain. Save time and money by bidding only on those projects where you have a high probability of winning. Decline those that you are not interested in or fall outside your expertise. Qualify the project first.
Consider All Your Construction Costs
Once you have all the hard costs for any upcoming project don't forget to calculate in overhead. Every company calculates this differently, so be sure you think about everything cost-wise related to this particular project and your construction company… travel, labor, equipment rental, supplies, materials, fuel, permits, insurance, employee benefits and more. Don’t forget office expenses... and your time consulting (and educating) your clients.
What Overhead Cost to Consider
While it’s nearly impossible to predict an exact total amount involved for any construction project, it is imperative to allow (budget) for change orders and reallocations. Taking a realistic approach by factoring in any predictable aspects of a project… such as weather conditions, material delivery delays, safety protocols, storage needs and fluctuating fuel prices.
Improve Construction Crew Productivity
Running an efficient team doesn’t necessarily mean you’re always cracking the whip. Your workers are an important part of your business, so treat them that way. According to the New York Times “When people don’t care about their jobs or their employers, they don’t show up consistently, they produce less... or their work quality suffers.” A sure way to make money in construction is to have positive and productive workers! Avoid overtime by carefully scheduling projects and factoring in extra time to complete the job. Follow best practices for particular projects.
Maintain Your Tool and Equipment
Proper maintenance makes tools and equipment last longer; in particular, by reducing repair and replacement costs. This ensures the tool’s dependability, safety, lifespan and value. These aspects positively impact any construction company’s productivity and profit.
Tool and Equipment Maintenance Tips
Cleaning a tool is part of tool maintenance; the process removes any build-up collected from the jobsite, thus allowing for a better visual inspection of the tool itself. It’s advisable to inspect for cracks that may lead to unfortunate (and costly) failure of a tool. Aside from just the main tool itself, don’t neglect to check your equipment's accessories and/or replacement parts (blades, filters, etc.)
For all iQ Power Tools masonry and tile saws, the blade, filters, and louvres are all integral parts of the cutting system... and thus, are ALL equally important. The blade is the component that physically engages the tile or paver and performs the cutting. It is important that the blade be matched with the material and be dressed or conditioned. If the blade is not correct or conditioned for the material, it will have difficulty performing the cut.
The filter protects the vacuum motor from damage. It ensures the vacuum motor does not become clogged with particulates, therefore maintaining full proper vacuum power that collects the dust.
The louvres direct the flow of the large particulates into the correct chamber. The centrifugal direction of the blade’s rotation channels the particulates into the louvres and then, to the correct chamber.
Properly storing your tools should be the first and last step of proper maintenance. After using the tool at the end of the day, it should be thoroughly cleaned and inspected. Therefore, at the beginning of the next workday, that tool is ready to go. Storing tools in dry areas is key to preventing any electrical issues.
Note: NO electric tool should be left outside to risk the chance of moisture damage.
Other ways to ensure your tools and equipment are in good condition to make sure to:
- Clean your tools after each use
- Inspect your tools daily prior to use
- Perform maintenance inspection to check the quality of the tool to identify any components needing repair routinely between jobs.
Reduce Construction Material Waste
Having a comprehensive waste management plan in place is another integral part of doing business in construction. Not having an effective plan, not only impacts our environment but it also negatively affects your P&L Report! According to ScienceDirect®, as much as 30% of all building materials delivered to a typical construction site can end up as waste. Is that 30% coming out of your pocket?
Ways to Reduce Waste
Too many contractors accept waste as an unavoidable consequence of construction with not enough consideration being given to how waste can add to a project’s cost. Here are a few ways to reduce waste on your projects:
- Measure once, measure twice and then make cuts to reduce waste
- Accurately calculate your materials requirements – don’t over-order
- Get the right size materials for the job
- Store, stack, and cover all materials to prevent soiling or theft
- Save on disposal costs by taking advantage of recovery debris programs
Keep Track of Your Profitability
One awesome way to make money in construction is by always maintaining precise bookkeeping and accounting records. As discussed earlier regarding bidding, having an idea for average soft and hard costs will not only help with future bids being more accurate, but it will also help in invoicing your customers when the project is complete… both of which improve profitability. Keeping up on day-to-day expenses will ensure that you, your schedule, and your budget remain on track.
The founders at iQ Power Tools started out as contractors... just like you. We are “mason-contractors-turned-manufacturer.” Today, we build smart, innovative, rugged power tools that solve jobsite problems safely and efficiently. We’re all looking to be more efficient in our daily tasks, but safety is just as paramount. Every business owner wants their company to run efficiently to maximize profits, while every employee wants to work in a safe environment to ensure their wellbeing. Check out iQ Power Tools and see what tools we offer to help you work more efficiently, keep your crew safe and ultimately, increase your profitability.
The Most Profitable Trade in Construction
According to ZipRecruiter®, Site Safety Manager is one of the top 25 highest paying jobs in the construction industry in 2022 with Civil Engineer right in line.
What Contractors Make the Most Money?
Elevator installers and repair contractors are said to have a median salary of $88k. “By 2029, opportunities are expected to grow by 7% — well above the average of 4% expected for overall job growth.” 1
What is the Hardest Trade In Construction?
In a recent survey conducted by Craftjack, “Consumers and contractors agreed roofing and demolition are the most physically demanding trades. And while contractors voted carpentry as the third-most physically demanding trade, it barely cracked the top ten for consumers.” 2
How Much Profit Does a Construction Company Make?
Profit margins depend on a variety of factors including location, services offered, wages and of course commercial or residential buildings. Companies should aim for an average profit margin of 15-45% 3