How to Increase Your Construction Profit Margins

Tips From the Experts

In the construction industry, there’s something every business is seeking to achieve: increasing margins. According to the 2018 Commercial Construction Index, approximately 54% of contractors expected to see profits rise over the following year. While increasing profit margins may seem simple to some, it’s hard work. But it’s hard work that can pay off.

Believe it or not, increasing profit margins entails more than just bumping up your prices. It takes a coordinated effort to maximize all parts of your business in order to put a little extra money in the bank. Often times the things we can do to increase profit margins will actually improve the quality of our work and the value we’re offering a prospective customer. It is then that price increases can naturally follow, leading to greater and greater profit margins.

Here’s where to start:

Expenses – One of the most important ways to increase profit margins is to decrease expenses. Expenses come in many forms, but as the age-old adage goes, time is money.  Obviously, you need to spend a certain amount of time and resources managing your business. But there are ways to cut back on wasted time and money when it comes to things like paperwork. Using Trimble Business Center can speed up the bidding process by quickly preparing accurate, 3D constructible models for machine control, construction surveying, and takeoff or quantity estimating. Additionally, leveraging technology and integrated data can improve efficiency and ultimately reduce time wasted.

Buying and Managing Materials– Cutting down on material expenses and efficiently managing materials are other ways to increase profit margins. Look for opportunities to get creative with how you buy and use the material. But beware of using material that is so cheap it sacrifices quality, which in turn can harm your reputation and by extension, your profits.

It's also important to efficiently manage how materials are being used as the materials (rocks, soil, etc.) are moved around a site. Obtaining proper compaction is a key element on the project and relates back to the geotechnical engineering on the project. . These aspects of the project are where an operations management software can provide valuable information to show you the real-time movement of volumes as well as tracking and mapping compaction. Providing this information in real-time enables you to make adjustments or improvements in the workflow to maintain project schedule and improve efficiencies.

Finding Partners – Finding the right partners for your business is an upfront investment that can save you time and money, and increase the quality of your work. Sometimes finding a good supplier, even if their materials are more expensive than another budget option, can save you money in the long run. A really good supplier is a good partner who works with you to provide guidance, streamline your efficiency, and help you become a better contractor. The same goes for finding solid subcontractor partners who can bring value and professionalism to your projects as opposed to speedy, but shoddy work.

Thinking ahead – Planning is super important when it comes to making more money. Before a shovel even hits the ground, anticipating road bumps and obstacles that your project or business might face helps you to recover more quickly or avoid them altogether. One way to help this is by using construction management software. Instead of relying on paper for all of your business workflows, you can easily have all of your business plans in one place. It’s also important to think ahead about opportunities to grow and improve. Planning to take advantage of a new trend or field of work can maximize profits for years to come.

Efficiency on the job site – Being efficient on the job site is where the profit-increasing rubber meets the road—so to speak. If you create a system of working that maximizes productivity and organization and allows for a neat, clean job site. You can avoid workplace injuries, mishaps, mistakes, rework, and the time it takes to deal with all those issues. 

As the site materials are moved around a site, you'll want to manage how efficiently the materials are being moved. Obtaining proper compaction is a key element of the project and relates back to the geotechnical engineering on the project. These aspects of the project are where Trimble WorksOS provides valuable information to show the contractor real-time movement of volumes as well as tracking and mapping compaction. Providing this information in real-time enables the contractor to make adjustments or improvements in the workflow to maintain the project schedule and improve efficiencies.

The more efficient and organized your job site, the less time it’ll take to complete quality work that increases profits.