Owners of successful construction businesses know they have to stay laser-focused on every tactic to boost profitability. Following are several characteristics of the most profitable construction businesses.
1. They know when to walk away from a job
No matter what business we’re in, we are constantly asked to lower prices for the work we do. Value your work and know what it’s worth. Know how low you can afford to bid and still make a profit. One key to being profitable is knowing when to walk away from a project before it even starts.
2. They know that the integrity of the company’s leaders is critical for long-term profitability and success
When people like you and trust you, they will do things to help you when you’re not looking. In other words, when a company’s leaders are good to employees and treat them fairly and with respect, most of those employees will go out of their way for the company and its leaders. Your company’s profit will be driven in large part by what your employees do for you when no one is looking.
3. They know that having a merit-based performance review system in place will make them more profitable
Your employees are more important than even your customers. Your profit is based on the work your employees do for you. Without high performing employees, you will have little to no profit.
A merit-based performance review system will help build profitability in your construction company. Recognizing them for their performance will help keep good employees working for you longer.
Read more in our blog post, Why Construction Employees Really Leave.
4. They know “profit” is not a dirty word
Culture shifts in recent years have led many to consider “profit” to be synonymous with “greed.” Profit is not a dirty word. If you don’t make a profit, you can’t do anything else. You can’t buy supplies, you can’t pay employees and you certainly can’t feed a family.
5. They know to limit certain employees’ freedom with pricing
You must first know what you can afford to bid in order to make a profit. Then, give the people who are responsible for bidding the tools and training they need to prepare good bids.
Let’s face it — not everyone is good at bidding jobs. Some employees want to give away too much, and don’t understand the costs connected to contract performance, such as variable and fixed costs. This lack of understanding will cause you to lose profit, or worse, not make any money.
A burdened hourly rate calculator is one tool that can help you develop accurate hourly rates for your employees.
6. They do whatever it takes
No one should be above doing grunt work to get a job done. Owners and management team members should be ready to make tough decisions, and remain disciplined and focused. One example of this is taking a disciplined approach to change orders.
Leaders of profitable construction companies also make the time for weekly work in process meetings, for example, to review where jobs stand. Highly profitable companies take this a step further and use a tool like a contractor’s work in progress calculator to keep up to date on the profitability of current jobs.
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