How Smaller Contractors Can Improve Year-Over-Year Profits

How Smaller Contractors Can Improve Year-Over-Year Profits

Smaller contractors rarely have the resources to set off a major overhaul in a short time. But, in an industry so tied to overall economic health (and therefore volatile) as construction, it’s not uncommon for contractors to run into unexpectedly tight finances. In these situations, contractors have to figure out ways to improve year-over-year profits without spending too much up front to achieve that.

Here are a few ways to get your profit potential in line, while minimizing spending and risk as much as possible:

Add Charges For Change Orders

Take a look at your contracts. If you don’t already have change order charges, make that happen as soon as possible.

Your original contract should be taken seriously, with a minor penalty affixed for the on-the-fly requests for changes that customers often ask for. The time and effort spent re-adjusting your approach to a contract job should be compensated!

The key here is making the process painless. While you’ll be requesting fees for change orders for any notable adjustment compared to the original contract, make sure it comes off as you doing a favor for your clients. Assist them with the process. Make sure to process change orders as fast as possible. And accept payment with a smile.

Coming up with a reasonable fee on this front is key for covering the somewhat obscured costs associated with change orders. Whenever a contract is amended, you have to consider the time spent across your workforce to adjust to the changes, hours spent on extra work, potential new liability concerns that need to be processed, and more.

Don’t consider this sudden, massive change in direction from even a small change request to be the cost of doing business. Make it official, and make sure you get paid for your time and effort.

Use Software Tailored to the Construction Industry

The omnipresent Microsoft Office software suite works well enough, doesn’t it? After all, it’s the absolute standard for almost any business in any industry, many of which are doing absolute gangbusters in profit terms!

But in many industries, you can do even better, and avoid the dips in productivity associated with Office’s jack-of-all-trades style. And construction contract work happens to be one of those spaces perfectly served by a more specialized software suite: Sage 100 Contractor.

Instead of managing your business through a meticulously managed and modified Excel spreadsheet, why not use a database built precisely for this exact job?

Sage 100 Contractor handles all data in real-time, providing your employees easy entry tools to pass along change order information, equipment costs, and much more. Instead of juggling that information in a per-job Excel sheet loosely connected to your accounting software, you’ll see the full details of your job as it progresses and as changes come in.

Instead of having costs hit you all at once at the end of a project, keep tabs on it in real time and adjust accordingly. And before you even come to your initial contract, you’ll be able to come up with estimates painlessly. While Sage 100 Contractor does require an up-front investment, it’s not major and your business will likely see improved profits by the next year.

Check out our informative breakdown of Sage 100 Contractor to learn more!

Small Numbers Add Up

It goes without saying for any smaller contractor: Little losses can quickly add up to one big number. With the suggestions above, you’ll be able to target these sources of small profit drains and patch them up efficiently.

The real trick here is in making sure you’re properly compensated while being more efficient in your overall approach than the competition. It won’t take long for clients to realize that your smaller firm is the one that gets estimates fast, processes change orders in the blink of an eye (even with that little charge added on to it), and always seems to avoid the obscure miscommunication issues that competing smaller firms often fall into.

Increasing profits isn’t just about tightening your belts, or charging more straight up. Make it about balancing service with costs, and you’ll see the benefits at the end of the next fiscal year.