Construction Tips

Construction Tips for Higher Profit Margins

Construction Tips for Higher Profit Margins on Every Project


Failing to achieve desired profit margins in construction is often due to poor project management, documentation and underestimation of materials and time needed to complete a project. Often, project managers fail to communicate goals effectively, and inaccurate calculations are made which result in low bid prices. Both of these lead to project delays and minimal profit margins.

Fortunately, there are a few steps you can take to ensure higher profit margins on your next construction project.

1. Decide what you want

If you want to make high-profit margins, then decide what you are going to do to make this happen. Examine your company, operations, business development, and financial landscape. After you have completed this, determine what you are going to do to fix or improve any potential problems within these areas. By closely examining your situation and what you want to achieve, you are building a concrete plan of how you need to operate to reach these profit margins.


2. Profit estimates

Calculating exact costs for a proposed project can be quite difficult. Profit estimates are often miscalculated, leading to enormous profit loss. The key to calculating these costs accurately is by carefully assessing overhead, risk and job costs. Overhead refers to costs such as bookkeeper, telephone, insurance, rent, and utility that would still need to be paid even if your crew isn’t working. Risk refers to possible costs from risk factors throughout a project. In estimates, it is important that you include these risk factors in every estimate so that you can measure your true costs against a real budget. Job costs refer to accurate estimations for how long each task will take and how much each task will cost. This is why knowing the productivity level of your staff is so important! If you can accurately estimate your overhead, risk, and job costs, you are on the path to a successful project.


3. Goals and expectations

Define your goals and set expectations! Take the time to consider realistic profit margins and how you will achieve this success. Once you spell out your goals and expectations, your employees can follow suit. Often contractors will aim for high-profit margins without defining what this means for them. Unclear goals and expectations leave employees unmotivated and unclear of what you want from them. Share goals with everyone on your team, and you will receive higher performance and dedication from your employees. Better performance and dedication means better profit margins!


4. Create performance rewards

Everyone loves a little extra motivation. Try implementing performance rewards such as bonuses to encourage your team members to go the extra mile. If you make your employees feel important and valued, you are likely to receive better work. Better work keeps you on track towards reaching your profit margin goals.


5. Training training training

Training is an extremely important and worthwhile investment. Although it might take time and money upfront, it pays off in the end. Education helps employees learn the best and fastest ways to do things which improve your business processes. If you train your employees, you are also less likely to have a need to fire them. Replacing employees can be very expensive, and nobody wants to be constantly hiring


6. Communication

As with everything in the construction industry good communication is absolutely essential in achieving high-profit margins. Make communication a top priority by having regular meetings with clients, employees, architects, engineers, etc. These regular meetings will keep an open line of communication which will prevent any miscommunication or delays. Construction project software is another way to improve communication among your team. Construction software streamlines communication and makes it easily accessible from a phone, tablet, or computer. This keeps everyone on your team on the same page and allows questions and concerns to be quickly addressed. Faster responses and quicker problem solving mean no lost time and no lost profits!


As you can see, there are many steps you can take to work towards improving your profit margins. If you take the time to access your situation and work on building a successful team, you will be on the path to higher profit margins and more success.



Construction Business Owner

Blog: GMA-CPA – Raising the bottom line