If you own a construction company, you know that there are two main objectives: create something and make a profit. But for many construction businesses, making it profitable can be hard—part of the reason is how contracts are gained, and bids for work are solicited. In projects for the public sector, for example, the contract goes to the lowest bidder, no matter the quality of the work or the expertise and experience of the construction company.
Construction companies also need to think about the competition that there is locally, and a result of fewer work opportunities, it can lead to bids being much more competitive and the business itself working on very thin margins to have enough work to stay in business. The cost of building materials is another factor to consider, rising steadily. All of these factors combined can impact the profit margin of a company, some of which are out of the control of the business itself.
As a construction company, it is important to focus on the things you can control, such as reducing costs, bidding better, and ensuring that the work is of the highest quality. So, with that in mind, here are some things you can do to improve your profit margins as a construction company.
Shop around for materials
You may have always used a particular vendor for the needed materials. While you may know them and like what they provide, will they always be the best price for you? For example, when choosing water tanks for your construction project, you will want to choose one that does the job but is also affordable. If you have only ever stuck with one supplier before, it is time to shop around.
Rent vs. buy
Maximizing the profitability of your construction company hinges upon smart, cost-effective decisions. Excavation equipment rentals present a game-changing opportunity in this regard. Instead of investing large capital in purchasing, maintaining, and storing heavy-duty machinery, excavator rentals can help streamline project costs while ensuring optimal performance. Rental excavators offer advanced capabilities and flexibility to meet diverse project demands. Moreover, this approach also fosters scalability, allowing your construction company to take on larger projects without substantial equipment investment. Your company can enjoy enhanced profitability due to decreased overhead expenses, improved efficiency, and increased project capabilities. Remember, renting excavators can transform your cost structure, drive growth, and elevate your construction company's competitive edge in the market.
Improve productivity
Productivity is measuring how effective the effort that you are putting in is. In the construction industry, you will usually measure how many hours something takes to construct to measure your productivity. Taking steps to maximize productivity on a job it means that you are working more efficiently to control things like costs and stay on the job schedule. If you have projects that get completed under budget and ahead of schedule, then the profit margins for those jobs will be much higher. That is why you need to identify where there are some productivity issues and take steps to improve.
Know your exact costs
If you want to be more profitable, you need to understand the costs of each job or project. This will include things like exact overhead costs, not just estimates. If you haven’t a clear idea of what projects cost to complete, then you can’t know if you'll be making money on a job or losing money. Be specific, and include everything, from materials to labor, fuel, water, and everything in between.