There are two ways to increase profit: increase revenue or reduce costs. For contractors, making more money often means working harder and longer. But if you’re already putting in long hours, working more probably sounds like a stressful option.
That leaves you with cutting costs. Don’t worry — we’re not talking about cutting corners or paying your guys less. It’s about running a better business that leaves you with more money in your pocket at the end of the day.
Here are five ways you can save money and make your next construction job more profitable.
1. Get better at bidding on jobs
Bidding on jobs takes time but it’s important. You need to get it right, or you can get burned. Bid too high and you might not get the work. Too low and you lose money on the job.
Start saving by cutting down on time you spend on bids. One of the best ways to make bidding more profitable is only bid on projects where you have a high probability of winning. Skip projects you aren’t interested in or fall outside your expertise.
Even if you think you’re able to win the bid, qualify every project first. Remodeling suggests meeting with clients before you bid. Ask for specifications lists, and educate clients on what your business has to offer that others don’t. Communicate why they should pick you even if your bid isn’t the lowest.
Consider presenting your bid in person. You can explain the bid and answer questions right on the spot, plus make a personal connection with your potential client.
- Carefully select the right projects and only ones you know will be profitable.
- Check how close your cost estimates came to actual project costs. Make adjustments on future bids to increase profit going forward.
2. Get the most out of your crew
Running an efficient team doesn’t mean you’re always cracking the whip. Your workers are an important part of your business, so treat them that way.
Research shows happiness matters to employees. According to the New York Times: “When people don’t care about their jobs or their employers, they don’t show up consistently, they produce less, or their work quality suffers.”
Keep your workers happy, and your business will benefit, too. Some examples of low cost perks for increasing morale include:
- Buying lunch for your crew occasionally.
- Paid time off for your workers when they need to watch kids, visit the doctor, or run errands.
- Hosting company parties to reward your team around holidays.
Avoiding overtime can also save money and increase productivity. Overtime means you’re paying more for your labor, and workers are typically less productive when they work overtime. One study showed up to a 15% decrease in worker productivity for 50-hour and 60-hour weeks. This means you could be throwing away 15% of your money whenever your crew works overtime.
Last but not least, follow best practices. As an example, here is our tile setting estimate template.
- Keep workers happy. Listen to and help them solve their problems on the job. Tell them when they’re doing a good job and offer more perks like the ones above.
- Avoid overtime. Carefully schedule projects and build in some extra time to complete jobs.
3. Consider the total cost of tools and equipment, not just the purchase price
Spending more on tools and parts seems counterintuitive. Why spend more if the cheaper one can do the same job? It’s actually not the price of the tool that matters most.
Cheaper tools and parts often need to be replaced more often. For example, Concrete Network says: “Moving up from a standard to a premium blade may boost the cost 20% or more, but you’ll get a higher concentration of diamonds and significantly longer blade life.” While the upfront cost is lower, the cost over the long-term per cut is cheaper.
Always consider the long-term cost of your tools–including how much it costs to operate them–and carefully evaluate their impact on your business. A tool that cuts dry instead of wet and eliminates slurry, whether that is in masonry or tile cutting, is a great example of lower operating costs.
- Before buying, estimate the cost to use a tool. For saws, look for lower cost per cut to save money. You can calculate cost savings for saws using this sheet.
4. Care for your tools
Proper maintenance makes tools last longer and reduces repair and replacement costs. Maintaining tools also makes sure they’re safe to use.
Keep a checklist and schedule for tool maintenance. For example, here’s a basic power tool checklist from This Old House:
Every time you use a tool…
- Brush, vacuum, or wipe off dust; the same goes for battery chargers.
- Inspect power cords for nicks; replace cords with frayed jackets or exposed wires.
- Tighten any loose screws or bolts; put a drop of Loctite on the threads to keep them in place.
At the end of the year…
- Look for cracks in motor housing; don’t use a tool with cracks larger than a hairline.
- Lubricate parts where metal rubs on metal.
- Follow the instructions in each tool’s manual for specific maintenance procedures.
- Create checklists like this one for your tools.
- Keep maintenance records for every tool that needs to get serviced. Track this in a calendar or notebook to make sure proper maintenance happens on time.
5. Waste less material
One estimate says about 12 percent of masonry materials are wasted on the typical job and end up in a landfill. For constructing a whole house, that’s about 2.5 to 4 tons of waste (about 3 to 5 pounds of waste per square foot). This loss costs you twice – the cost of the materials as well as the cost to dispose of the waste.
- Measure and make cuts to reduce waste
- Accurately calculate your materials requirements
- Store, stack, and cover all materials to prevent soiling or theft
- Save on disposal costs by taking advantage of recovery debris programs (learn more here)
What other ways have you found to save money on your jobs?
image by: RobVSF