Three Ridiculously Easy Ways to Increase Profitability in Construction Companies
Three Ridiculously Easy Ways to Increase Profitability in Your Construction Company
Have you ever wanted the “easy button?” Who doesn’t?! If there was an easy button for running a construction contractor and turning a profit, we would have loved it. We never found the easy button, but we did find three ways that consistently increased our profits. These were easy to implement and easy to get other team members involved. It became even easier when we implemented a scorecard.
“What gets measured, gets improved.”
Have you ever really focused on a single area of the business and noticed improvement only to then find another area in trouble? Choose carefully what you focus on as it is where the energy and improvement takes place. Focusing on process? Great! Processes improve. Focusing on increasing efficiency and profitability? Awesome! Efficiency and profitability improve.
What would you like to measure so that it improves? Write it down.
Now, how would you like to track it?
If it is financial in nature, our Free Financial Scorecard could be a great helper. Click here to learn more.
People like to Win
Carefully crafted competition where the employees and the company win can increase morale and profits.
According to an article in Fast Company magazine, winning a competition activates the reward centers in your brain. These reward centers then release dopamine and increase the desire to experience it again.
Now imagine your team competing against company goals and winning?
Identifying a common goal and a common reward can be highly motivating and everyone gets what they want. The company value increases, the employee’s value increases and the reward mechanism in the brain allows for it to happen again.
What would you like to “win” at?
Know your Minimum Numbers
Knowing the minimums for your business can make it easier and faster to make decisions on what work to go after.
Many of our contractors feel at a loss when they don’t know
- The minimum amount of revenue they need to break even
- The minimum percentage markup/margin on that work in order to break even
- The minimum overhead coverage needed
- The minimum estimates to produce in order to generate the revenue they need to break even
However, when these minimums are known and even communicated within the company
- better decisions are made on customers and contract terms
- job estimated margins can be negotiated (because you know what you need)
- job type, duration, complexity, and schedule can be discussed so that the company is covered
We like to use a scorecard to track these minimums so that everyone can see what it will take to be successful. We use the “goal” line for either the minimum OR a goal. Either way, we know the numbers we want to hit or beat.
These three simple things have increased profitability in not only our construction company, but in our clients’ companies. Want the easy button for a scorecard to help you with Measuring, Competition and Known Minimums? Atlas CFO has a free template especially for construction contractors. Click here for the template to be delivered to your inbox.