Penny Pinching is Good for Your Construction Business
Updated: Jun 23, 2020
You’ve moved up from “Have hammer, or wrench, or paintbrush – will travel,” to running a construction contracting business. Now, you have much more to be concerned with than simply finding a project, doing it, and getting paid for your effort. You have a business to run, one which should be profitable.
And in the construction business, just as in other businesses, cash in king. That is simply how it is. To run a profitable construction contracting business you must learn how to master the cash, how to make decisions concerning the cash, and how to prudently use the cash.
Are you making a profit?
While there are a number of things which you can change concerning how your numbers are adding up (or not adding up,) in this article the subject will center on ways you, a construction contractor can tighten the belt, can be more frugal, can pinch a few more pennies on your way to making a profit.
And while we’re on the subject of decisions, let’s back up a minute and understand that those expenses in your accounting records represents a decision you’ve already made. It takes fortitude to look at a particular expense, challenge yourself, and think about the decision you made, then perhaps taking steps to change or improve it.
First things first
When you first started out you had ways to “get by,” to make ends meet, to keep going while you looked for that next job. Now, you have people working for you, running crews, driving your vehicles, using your tools, performing the back-office duties. You have jobs back to back or over-lapping and you have lots of expenses.
It is time to revisit your ability to “get by.” It is time to be innovative and to grow your ability to solve problems rather than throwing money at them.
Get out of the rut!
In some ways, this is a call to reduce inefficiencies in your own as well as your employee’s work habits. In other ways it’s a challenge to see if there are better, less expensive ways to get things done. It’s easy to get stuck in a rut. Yet, once you know you’re in a rut, you can take specific measures to get out of it.
Top 5 ruts to jump
Vehicle or fleet
Whether you have only one business truck or an entire fleet of vehicles there are likely ways to reduce your expenses. One major way to save money here is to be cautious and certain before signing on the dotted line for that beautiful new pickup you’ve had your eye on for a few weeks. Do you really need it right now? We can help you determine whether or not your business can really afford that shiny new toy. Also, when it comes to vehicles, there are other ways to save, for example, in this article from Construction Executive, there is a list of 5 simple changes you can make to help control fuel costs.
Office tools and supplies
Whether you need to complete an RFP (Request for Proposal) with a few of the top suppliers, or you simply need to keep an eye on the cost comparisons of a few local office supply stores along with membership stores, get out of the rut of always buying supplies from the same place. One simple method you may choose is to maintain relationships with two providers that are competitive on price. And, because the ordering process is easy online you can switch providers quickly and easily. Check out these tips and tricks from Grainger concerning managing your office supply inventory.
Construction supplies and materials
Your particular trade will often dictate your choice of suppliers. Yet, just as in the office supply providers in the above section, you will do well to maintain relationships with more than one supplier. And, you already know who the heavy hitters are in the overall construction supply industry. Are you taking advantage of all they have to offer? While it may take some of your upfront time delving into all the benefits they offer to the pros, it will pay off in both time and finances to become familiar with and take advantage of their programs. You can start by getting to know your Pro Account Representative at Home Depot and checking out Lowe’s ProServices.
Tools and equipment
Determining whether you need to purchase or lease particular tools and equipment and the cost saving factors of either choice will have an impact on your ability to save pennies now and dollars down the road. This article from Construction Marketing Association will give you information you can use in the decision-making process.
Also, when you make the determination that you will purchase tools, be cautious about quality. Invest in the best quality tools you need and can afford rather than trying to get by with cheap substitutes. Just be sure you remember the need factor.
Credit card processing fees
Shop around. One of the first places you may want to check is with your trade organization many of which have an agreement with credit card processors to provide lower rates. Be cautious, some companies will try to lock you in for a long period of time in order to receive a better rate. Also, look for rates concerning leasing the equipment. When you use QuickBooks Online you are able to take advantage of their bank transfer processing through ACH (Automated Clearing House) payments. You may choose to accept only ACH payments at no charge, or to also accept Credit Card payments (with percentage fees) based on your needs.
More ruts to consider
Be sure you’re getting the best rates for each of your insurance needs. Check around, look for providers that know and understand the construction industry. For example take the time to shop around for the best workers’ compensation prices you can find, especially if your company has a low accident rate that you can use to negotiate with carriers and agencies.
When you’re low on money, marketing is one of the last things you should cut totally out of your thoughts or your budget. Yet, by being creative and using many of the options for marketing which are no or low cost you can remain in the game getting the word out. This article from Forbes gives you four creative and useful ways to save money on marketing.
Rent or mortgage on office and shop locations
Again, creativity is your best friend. Would you benefit by moving your operation to a different (less expensive) location? If your construction business doesn’t depend on walk-in-traffic why pay more for a location which touts traffic as a rental perk?
Temporary office structures and/or sanitary utilities
Should you own or rent your on-location structures? Is there a better rate for the portable toilet from a different vendor than you normally choose?
More money saving tactics to scrutinize
Determine if selling or leasing underutilized equipment will be of benefit.
Reexam your need for company owned vehicles.
Review your entertainment costs. (This is no longer an expense which can be deducted on your tax reports.)
Look for free or low-cost training for yourself and your employees. If you belong to a trade association take advantage of what they offer.
Adopt a just-in-time philosophy of material staging in order to deter waste as well as keep the money flow in check.
Save money by outsourcing your accounting and some other office tasks.
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