The construction sector can be a lucrative place to work. Owning your own construction business ensures you have the best pick over potential contracts and clients, and it’s up to you to adapt to the market in the way you think best. It may take years to get from the up and running stage to the truly profitable stage, but you’ve got a better chance than most to make a journey like this happen.
That being said, construction companies can leak money like there’s no tomorrow. When your profit margins never seem to quite add up properly, it’s a sign something is going wrong in more places than one. It can be hard to account for the ups and downs of the revenue curve, but the more wild and out of control it seems, the more likely it is that your business practices have something to do with it.
That’s what this post is here to guide you through. If your construction business isn’t making as much money as it should be – and you know for a fact you’re capable of doing so – the reasons below could be behind it.
You Promise a Good Price without Thinking About it
Many construction businesses out there massively undersell themselves. It’s hard enough to get work as is; sometimes you have to quote lower than you’d like to ensure the client picks you to do the job.
But if you’re always doing this, it could be harming your profits and making it impossible to turn a revenue that keeps you in business. You’ve got wages to pay, materials to pay for, and utility bills that keep the lights on.
If you’re not getting that healthy baseline you really need, it’s going to get harder and harder to manage your finances in the long term. On top of that, you’re just going to get busier too!
So the next time you want to make use of the marketing magic that is a good price guarantee, think about what you’re actually offering your clients. You want them to see a good price for the job, of course, but this price needs to deliver on quality, labor, and time as well. You can’t perform to your best when you’re not working for what you’re worth!
Scoring a client who’s willing to pay a price like this often means you don’t have to keep bidding for extra work to fill the gaps in your margins.
This project could be worth at least two or three similar projects that pay less, and that’ll leave you more time in your schedule without any of the loss you’d expect to come with it. Multiple benefits can be gained from working to secure clients like this!
Your Security Practices are Out of Date
A construction worksite can be a very insecure place. If you’re working on a bigger project, such as the construction of a whole new office complex or tearing down and refitting a company’s premises, it’s next to impossible to properly close the site off.
Once you’ve downed tools for the day, you can lock up and remove any valuables, but there are still various entry points on show. You also can’t pop the building you’re in the middle of constructing into a safe for the night!
This can leave the worksite open to abuses of all kinds, and not just theft. Damage can be done, by both intruders and the weather, and you could lose a lot of money on replacing materials and labor.
That’s why it’s essential to operate using as many up to date security practices as you can. There are plenty on the market; make sure you invest in a few to keep your projects contained and protected.
You should have an alarm system in place, for one. This can be paired with a CCTV system that operates 24 hours a day. If the alarm goes off, not only will you be alerted, but you’ll be able to see everything that went on while you weren’t there.
Similarly, if you’ve had to set up a temporary office on site, make sure there’s an access control system in place that ensures you’re always connected, and that anything that’s left on location either stays put or can be tracked and recovered. After all, controlling access to the site ensures you know who’s around and if they have the right to be there.
Your Costs Have Changed
The supplier you source the majority of your materials from is probably the best for the job, right? They may have been once upon a time, but there’s no guarantee they’ll stay that way. Indeed, they could hike up their prices with very little warning, and the costs of continuing to work with them could be harmful.
If you have a long established working relationship with this supplier, it’s time to get yourself into a negotiation. You can leverage the length of your relationship here, and use it as a bargaining chip to get the cost of materials down to a more reasonable level. If you’ve been a great client to work with over the past years, they’re likely to agree to this negotiation and work with you.
However, you may need to find yourself another supplier (or suppliers) to take their place. If the cost of doing business is far too high for your profit margins, it’s time to find a replacement on as many links of your supply chain as is needed.
Of course, you don’t want to skimp on quality here, and that’s something to keep in mind. If the cost is rising but the quality of the materials is still just as good, it may be worth keeping your supplier contract for the near future. This will give you more time to leverage your own offer for the ongoing price, as well as research other suppliers in the area who can guarantee the same level of quality.
Construction companies that deliver quality are most likely to be recommended via word of mouth, and pick up new clients on their doorstep. Sometimes it’s worth it to keep paying the price if the work is also more likely to pick up too. Carefully weigh this while you’ve got the time and chance to do so.
Keep Client Feedback in Mind
What is it you do that your clients love so much? And on the flip side of this, what do you do that your clients repeatedly have brought up as a criticism? Most construction businesses will have a score of things to go in each column, so there’s no shame admitting any of the latter here.
After all, you’re going to need to pay attention to both camps of feedback to ensure you’re always delivering the best service possible. The good and bad need to go hand in hand when it comes to impressing the client by working to the highest standard.
Client feedback can be incredibly revealing. It’s something you can bank on to always tell you the truth about how you operate. Even the lightest of criticism will give you an insight into what your clients expect from you. Client loved everything, apart from the fact that one day there was a muddy footprint left on the new foundation? That’s something to think about for your future projects.
While it may seem minor, it provides a look into your client’s psyche. If they found a small mark like this to be the most annoying thing about your work, you’re clearly doing something right! But it also shows that your clients want a high degree of care from the contractors they hire.
If you can provide the highest degree of care amongst any of the construction businesses in the area, your name is going to be passed around more than these others too. It may require a change in worksite hygiene practices for your team, but that could be essential to securing more work at a quote price that genuinely makes you a very healthy profit.
Turning a Profit: What to Remember for Your Construction Business
When it comes to turning a proper profit as a construction business, there’s a few things to keep in mind.
First, price yourself at a reasonable rate. If your work is good, that client won’t mind paying for the quality you deliver! Then think about the costs you’re paying out and where these can be lowered. If the supplier you’re working with has put the prices up, and it’s become impossible for you to keep the contract, tackle this issue as soon as you’re able to.
From here, be sure to keep an eye on the security practices you make use of and how you use client feedback as well. Be sure to collect it after every single job you complete without fail. There could be a wealth of information in there that will improve your service and make you ten times more marketable for your next job.
