“The road to success is always under construction.”
In the construction industry, it sometimes feels like the only way to be more profitable is to work more and more hours. But driving up revenue is only one way to make more money.
Reducing waste is the best way to cut costs. Dollars you cut from your net costs are more profitable than revenue because other factors (labour, goods) are already factored in.
Let’s talk about some ways for your business to make more and still have you home in time for dinner:
Are you bidding on every job that graces your desk? You shouldn’t be.
Every company has a target job and/or client, one that fits your company better than the others. Not only will you do your best work with this client, these jobs will likely be the most profitable as well.
Bidding on everything is tempting, especially with soft sales when you want to keep your guys employed. But not only will it eat your time, it also has the potential to win you jobs that lose you money because they’re a poor fit.
Figure out who your target client/job is. Define the parameters to qualify it.
Don’t bid on jobs outside your target. Monitor how close your bids come to actual costs.
Take the time to learn why a job was unprofitable in the past. Looking at your processes in past jobs will help you reduce waste and become more efficient.
An average of 3 tons of materials is wasted building the average house. That’s about 4 pounds of waste per square foot.
Waste costs twice. You pay to buy the materials, and the insult to injury is when you pay to dispose of it. So be brutal with waste:
- Double and triple check your measurements. Challenge yourself to stay close to the rocks with your materials
- Cut back on your bulk purchases. Buying a season worth of materials isn’t worth the % you save.
- Spend the extra time to store, stack, and secure materials properly at day’s end. This becomes a training issue.
Inventory waste will devour your profit faster than almost anything. Dig deeper into inventory waste here: https://hlhcpa.com/pi-blog/inventory-8-8-deadly-wastes/
Defects are the most frustrating of the 8 wastes. Having to rework a project is a guaranteed profit-killer via overextended schedules, increased chance of injury and long-term damage to reputation.
You can protect your bottom line and reputation with a little pre-planning:
- Do you homework with the contractors you hire to make sure they won’t be a monkey wrench in the job
- Track reworks from past jobs and why they had to happen. Identify the weak spots and focus on them for improvement.
- Look into Lean construction techniques. It’s a whole methodology designed to identify and eliminate waste.