Ways to Protect Construction Profit Margins | 247PRO


As a builder or remodeler, profit margins are the key to success. When discrepancies between projected and actual profits arise without reason - it's time for action. Throughout the lifespan of any project, unexpected costs will appear, which may seem insignificant individually but will add up over time and eventually make your company suffer. 

At first, these little things don't seem like a big deal. But as you work through the full course of a project or year, there are consequences for your business's bottom line. So how do you conquer silent and invisible costs ruining your business? Here are four ways to get ahead of unexpected construction profit margin killers. Let's discuss the possible ways below!

Minimize Rework

You usually absorb most of the costs when mistakes are made on your end. Though repairs typically cost 4-6% of what you make - you should avoid them as much as possible. Preventing these mishaps can be done by working to maintain good communication within your teams and with trade partners. Ensure that all your employees are on the same page and have the most up-to-date information so they don't make costly mistakes while working. You can also limit rework by establishing clear-cut timelines for your clients. Make sure they understand when decisions need to be made and stay organized with everything they have asked you about - or risk slowing down the process while waiting for you. Reducing misunderstandings will keep your timeline going smoothly and make them happy too!

Limit Lost Productivity

Your teammates are your revenue producers. As such, you want to make sure they're doing everything they can to keep the project on track. How often do things go wrong when you're out shopping for materials at a big-box store? As much as we want to believe that one trip for last-minute supplies doesn't hurt, it does affect the bottom line if there are several projects going on at once. Having an accurate estimate helps reduce trips away from the job site and can make sure you're prepared enough for each day of work. 

Minimize Material Losses

As you start working on your project, the original timeline may change. Whether there are changes in the availability of trade partners or you need other employees from another project, schedule disruptions are inevitable and have a domino effect. A consequence of this is when materials arrive before they were originally scheduled. It is usually best to have deliveries come when expected, but it can be costly when the truck arrives before anyone has the time to prepare for it. Unannounced appliance drops at a building site will often result in stolen goods. The best way to protect your company from unwanted delays or mishaps at the workplace is by utilizing a scheduling system that prevents early and unplanned deliveries of materials. Incorporating all pertinent material orders and delivery dates into your schedule will keep other team members and trade partners informed if any problems occur while ensuring progress towards completing the task. If you are using construction software, set up dependent schedule events that would allow one occurrence of trouble not leading to disaster because they would only affect part of the project instead of everything being scrapped.

Adjust the Overhead prices in the Bid!

This could be one of the easiest ways to improve your profit margin. Contractors who blindly guess their overhead costs are set up for failure from the beginning. A recent Journal of Building Engineering study found that 44% of 2700 projects surveyed lost money after accounting for expenses. This is unacceptable and should not occur - especially considering there is no way you can accurately predict these expenditures (rent, taxes, utility bills, etc.). 

Know Your Financial Options!

New opportunities come with new expenses. You don't want to be caught without money before the job starts, but first, research funding sources before you sign any contracts or agree to anything. Look at your budget and see what works best for you financially; find lenders who will give flexible payment plans. Construction company profits are notoriously slim compared to other industries, and experts believe they will continue to fall. Contractors who want to stay afloat during this difficult period would do well to know how much money they need to earn from each project - and get it at all costs.

Use of Estimating Software for Accurate Estimates!

Estimating software is extremely crucial when it comes to creating estimates. Having an estimating software like 247PRO at your disposal can help you adjust all your overhead costs, creating accurate and reliable estimates without compromising on your profit margins. Want to learn more about the importance of estimating software? Join our upcoming webinar and avoids all the cost creeps. 


Following these guidelines will help ensure projects maintain the profitability expected by management. It is important to remember that any change in profit impacts the ability of an organization to survive off-project profits alone. So, always remember these guidelines and use easy-to-use estimating software to make your work easier while increasing your profits.