How to Boost Operational Profitability in Construction

Author: Rieva Lesonsky | April 19, 2017

If you want to increase the profit margins for your construction company, you have a couple of choices. You can get more customers, take on more projects, and do more work. Alternatively, you can net more profits from the work you’re already doing. By boosting operational profitability in construction, you can keep more of the money you make even if you don’t take on more projects.

Fortunately, technology has made boosting operational profitability in construction easier than ever. Here are five steps to successfully increasing operational profitability for your construction company.

5 Ways to Boost Operational Profitability in Construction

  1. Develop Systems

As your construction company grows, operating “by the seat of your pants” won’t cut it anymore. Your company culture may remain casual, but you need to formalize operational systems and processes. Developing standardized processes has several benefits:

  • Because your workers don’t need to reinvent the wheel every time they do something, your construction company’s efficiency and productivity increases.
  • Because your construction company delivers consistent results, customer satisfaction increases.
  • Because you make fewer mistakes, the amount of rework necessary decreases.
  • Because you work more efficiently, you can take on more projects.
  1. Gather Project Information

If you want to boost operational profitability in construction, you need to go beyond pencil and paper or Excel spreadsheets. Invest in project management software designed for the construction industry. (Check out this list of top-rated construction industry software.) Then, use it to collect all project data in one place. Each project manager, foreman, and crew should discuss project status daily, and the PM should update the project management system.

By updating the data daily and reviewing it, you can quickly spot potential problems with a project, redundant processes that are wasting time, and gaps between expectations and reality. For instance, if you discover you consistently underestimate the time a certain process takes, you’ll be able to adjust future estimates to be more realistic.

  1. Collect Customer Information

Customer relationship management (CRM) software is vital to boosting operational profitability in construction. Starting at the first moment of contact, collect information about customers, their interactions with your sales team, your customer service staff and your accounting department. For instance, you may find that one customer is responsible for 20 percent of your customer service calls, or that another has an unusually long sales cycle.

  1. Put It All Together

By regularly reviewing the information you’ve collected about projects and customers, you’ll be able to pinpoint the most profitable types of projects and the most valuable customers. You may find that certain customers require handholding out of proportion to their profitability. You might discover that your team consistently completes certain types of projects more efficiently than others. You can choose to focus less attention on problem customers and focus more attention on landing more of those valuable projects—boosting operational profitability.

  1. Manage the Money

Assessing your success at boosting operational profitability is easier if you choose construction industry software that integrates with your accounting software. You’ll save time re-inputting data and reduce errors. (Check out some other financial tools that can automate time-consuming tasks.) When you have detailed information about job costs compared to estimates, you can give customers more accurate estimates, allowing you to operate “leaner” with less waste.

Review your finances regularly to keep an eye on cash flow. (Check out this list of financial indicators you should review with your accountant.) Are slow-paying customers making it tough to pay your bills? If so, make sure you have an easy financing solution in your back pocket. For example, with Fundbox you can receive an advance on invoices for 100 percent of their value.

When you use Fundbox, there’s no need for slow payers to slow your construction business down.

Ready for more?

Apply for funding and find out if you qualify today