How to Increase Profits for Your Construction Business
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How to Increase Profits for Your Construction Business

A Black experience in construction

In the construction industry, razor-thin profit margins may make it seem challenging to maximize gains and see the growth you want. However, with the right combination of tools and intention, you can boost your bottom line and hit your revenue goals on every project. In this post, Join, an industry leader in preconstruction planning software, lays out everything you need to know to streamline your projects and increase profits for your construction business.

An Industry of Growing Profitability

The global construction market is growing rapidly. Projections indicate that the industry will reach $15.5 trillion by 2030. The United States, China, and India are all at the forefront of this growth.

In November 2021, the United States Congress passed an infrastructure spending bill that will funnel $550 billion into the construction industry over the next eight years. Combined with the continued need for residential builds, commercial construction, and a push for cross-sector eco-friendly design, the construction industry in the United States is likely to hit $1.65 trillion by 2026.

Despite this incredible growth potential, many construction businesses struggle to stay afloat. About 75 percent of new companies make it through their first year, 65 percent make it through their second year, and only 35 percent make it through year five. 

For long-term sustainability, construction companies need to equip themselves with the right tools and adhere to industry best practices. By doing so, they'll ensure they get a nice slice of this trillion-dollar pie.

Reduce Your Overhead By Planning Better

When a job is planned right, construction companies realize massive savings. Plus, having a better idea of the materials you’ll need before the job starts can significantly reduce environmental waste. By using a cloud-based platform that connects your estimation tools with your project management software, you can reduce errors, minimize over-purchasing, and nearly eliminate the chance of rebuilds.

To better understand your overhead costs, consider calculating your Return on Overhead (ROOH). ROOH, calculated by dividing your annual net profit by annual overhead, can help you compare the cost of your business’s overhead as it relates to other investments. Ideally, ROOH will give you a clearer picture of what expenses you’re prioritizing and how profitable they are for your company.

*Pro Tip: Experts typically suggest that general contractors should aim for a pre-tax ROOH between 25-50 percent.

Bid Carefully

When you’re trying to meet a potential customer’s design and budget needs, it’s easy to dream up cost-saving measures that aren’t always realistic for the project at hand. Moreover, trying to cut corners for your client usually ends up costing you time and money.

The bidding process lays the foundation for the rest of the project, so it’s crucial that you meet with the client, architect, contractors, and any other stakeholders to develop a realistic budget and timeline. Though customers are usually in a hurry to break ground, taking ample time in the preconstruction process will save you crucial hours down the line, eliminating the need to re-source materials, hire more workers, or scale back on any features.

With the bidding process being as competitive as it is, it's easy to pare back a budget or push forward on a timeline that's outside of your realistic scope to meet a client's demands. But if you want to maintain a solid reputation, gain a base of repeat customers, and increase your profits, you need to be realistic about what you're able to do and when you're able to do it.

Use Target Value Design (TVD)

Target value design (TVD) is a management practice that prioritizes construction and design based on customer constraints. Put simply, TVD helps ensure that projects fall within a realistic scope in terms of budget and timeline, giving both builders and clients a clear picture of expectations.

Starting with the initial concept design and ending with the finished project, project managers must continually update the agreed-upon TVD touchpoints (cost, time, material resources, etc.) to reflect the project’s current standing. This continuous workflow ensures that funds are still being budgeted appropriately despite necessary changes in plans. Ultimately, this will help your business achieve project completion at the lowest possible cost, thus maximizing each build’s profitability.

No matter the size of a build, TVD is difficult to track, even with Excel. However, project plans housed in cloud-based software can be easily updated, making it much easier to stick to the carefully laid TVD flow while allowing for any necessary changes. 

Conduct Post-Mortems

Old habits die hard, but if you find that your old habits are costing you large sums of money, you may be more inclined to nix them.

Project post-mortems allow you and your teams to discuss what went well, what needs to be changed, and how you can improve efficiency down the line. When structured correctly, post-mortems can motivate teams to strengthen their work on the next project, celebrate wins on the previous one, and start brainstorming fresh ideas for new growth opportunities.

Use Technology to Reduce Busy Work

Construction industry leaders understand that time is one of the most valuable resources, and we must use it wisely. Spending too many hours on paperwork, personnel tracking, or other project needs that could otherwise be streamlined can be costly. And as new technologies continue to make their way to the forefront of the industry, spending hours on busy work is no longer necessary.

In fact, we ran the numbers, and Join customers are growing faster than their peers in the construction industry.

At Join, we understand the importance of time management and its impact on a company’s overall success. Our cloud-based pre-construction software is specially designed to help you plan, implement, and deliver top-quality builds that will keep your businesses booming and your customers happy.

If you’re ready to streamline your workflows and maximize your profits, head to our website and request a demo. If you’d like to learn more about our advanced software, contact us today.