Construction isn’t an industry that’s particularly noted for its high-profits margins, but instead for its razor-thin margins. While there are many factors that go into how much a company profits, there are several steps construction contractors can take to increase profits by avoiding many types of mistakes and analyzing data available to them. Here are a few changes construction companies can make to increase profits and improve their financial status.

Prevent Unnecessary Rework

Performing rework on a project when it’s late in the journey can be very costly. One way to avoid rework is by making use of pre-construction meetings and clearly outlining what the end result goals are for the company and the customer. By setting up a meeting that clearly establishes goals and outlines specific steps over a timeline, expensive mistakes can be avoided and rework can be reduced to a minimum.

Make Changes To Bidding/Estimation Strategies

While companies want to submit bids quickly for fear of losing jobs to competitors, companies shouldn’t always rush this process. Making mistakes on estimates occurs very often, especially in areas where companies aren’t as knowledgable. Instead of making an estimate for roofing materials costs when roofing isn’t an area of expertise, talking to a subcontractor beforehand is a better option. For construction companies still doing estimations by hand, consider using construction estimation software to get more accurate estimates.

Reduce Project Duration Time

Pre-construction meetings come in handy to remove any unclear goals and avoid timely rework. The longer certain resources are spent on a specific project, the less time those resources can be spent on other things. By reducing project duration time, companies are able to put those resources toward other projects, which can help increase cash flow as they are able to take on more projects.

Construction companies also should be analyzing their procedures and determine what things can be changed to reduce the time spent on them. As an example, at one point contractors might have to wait for the cement to dry. One way of speeding up this step is by using a different type of faster drying cement. It’s important to note that while reducing a project’s duration time is important, quality should not be affected by it.

Make Use Of Technology

Construction companies have a plethora of data at their disposal that often goes unused. Using technology like construction data analyzing software to make key business decisions such as reducing/increasing bids, where to save on costs and reducing how much material is being used or wasted per project is crucial to increasing profits. Having good project management software to monitor costs, progress and scheduling helps with a company’s project efficiency as well.

While technology has upfront costs, this technology investment ends up paying for itself and can be impactful on a companies finances in the long term.

Renegotiate With Third Parties

Reanalyzing contracts with subcontractors and third-party suppliers can go a long way toward improving a companies bottom line. Companies can make concessions that can be favorable toward both parties while saving them money.

Similar to renegotiation with subcontractors, companies can also renegotiate with suppliers. If there is an overabundance of suppliers for certain materials, current suppliers might be more willing to come to the table to lower the pricing.

With that in mind, it is important to remember that long-term benefits outweigh the short-terms, so companies should negotiate carefully. As the industry changes quickly, contracts should be reanalyzed to account for those changes.

Reduce Expenses

Material costs have a habit of increasing every year for several different reasons. While companies tend to eat this increased expense every year, it’s well worth the effort to be on the lookout for potential alternatives. While some customers are strict on the type of materials allowed for their projects, there are others that aren’t as worried. Companies should determine whether there are less costly materials they can switch to using.

Construction companies should also be focused on limiting spending on equipment. For special jobs that require unique equipment, renting this equipment should be prioritized over buying it. Not only does this save money the company would use on buying equipment, but it also saves money that would be used to maintain or fix expensive equipment.