The Top Five Tips to Improve Profits on Construction Contracts

The Top Five Tips to Improve Profits on Construction Contracts

All businesses look for ways to improve their year-over-year earnings. For the construction industry, though, it’s especially prudent to have a consistent plan in place to keep costs low at all times. The construction space is extremely vulnerable to the overall economic health of countries, states, and even individual cities; the ability to weather an unexpected storm is key to construction in a way most business sectors don’t have to worry about.

With that in mind, here are five proven, efficient tips known to improve per-job profits and give your construction firm the extra breathing room required to make it through a patch of rough economic conditions:

Track Conditions That Most Often Lead to Rework

Rework accounts for major costs across the construction industry, ranging between 2% and 20% of the average project’s total expenses. The potential for savings upon eliminating rework from as many jobs as possible is, clearly, of paramount importance.

A great way to handle this task is to look through past jobs, flag all the rework involved, and see if there are patterns. Start with the most common triggers for rework — a particular worker, materials choice, a recurring mistake that can be dealt with through training — and come up with a plan to eliminate those mistakes.

Streamline and Formalize Communication

Every construction business has its own internal culture, which is often a positive thing. But sometimes, the standards of communication developed over the years are too inefficient to preserve.

If poor communication is a recurring issue that slows down work or leads to mistakes, it’s time for a change. Implementing job tracking software, group communications software (including simple group SMS!), and developing formal methods of how to propose new ideas on handling jobs will limit workers talking past each other and increase productivity.

Update Your Safety Training Protocols

Injuries are an unfortunate reality of doing long-term business in construction. Many construction firms find that, over many years, they’ve had to deal with the impact of multiple injuries and the associated expenses.

Whether through internal revisions or by contracting a consultant, it’s always helpful to make sure your current safety protocol really is capable of producing a safer workplace. Minor upfront expenses associated with revising your safety plan are often but a drop in the bucket compared to limiting theĀ potential human and financial costs of more frequent injuries.

Take Time to Calculate RiskĀ Before Bidding on a Contract

Certain types of jobs are not necessarily worth bidding on. Think of it in these terms: spending that same time, expending those same resources, on a job with fewer risky externalities might lead to a lower payment on paper, but also higher revenue overall as your firm consistently chooses safer jobs that have less potential for unexpected costs.

If you know certain clients consistently push for rework in unreasonable circumstances, certain jobs contain high risk for injuries, or you simply don’t have the resources to efficiently tackle the magnitude of that type of job, it’s often the right choice to put your efforts into safer bets overall.

Switch to Software Tailored to the Construction Industry

Generalized software often gets the job done, but it’s more expensive to train on, contains distracting time wasting features that aren’t actually particularly useful for construction, and often calls for plugins and other external effort imposed upon the software.

It is, in short, a drain on resources.

Using software built specifically for the construction industry, like Sage 100, will drastically increase workflow, speed up training processes (since all the features are targeted towards being useful for your type of business), and lead to fewer mistakes.

Learn More About Cost-Cutting Measures For Construction Businesses

Want even more tips on how to widen your profit margins on each job, or for your cost of doing business year-over-year? Contact the construction software professionals at CFO on the Go today!