The construction industry has forever faced the twin challenges of staggering economic growth and high competition. This poses an intense pressure on the construction firms to improve their productivity and performance continuously. They also remain hard-pressed to improve customer satisfaction, in an age where too many firms chase a limited number of customers. Many construction companies still strive to increase their profits but are afraid to think out of the conventional ways or embrace new technologies to increase business revenue. To avoid stagnation, to keep the growth bar high, here are a few strategies to leverage practically to reach greater profits and enjoy long term growth.
1. Revamp pricing and bidding strategy
Construction companies often stick to the same pricing model for years together. With time, the economy is changing dynamically and customers are adopting different ways to pay. While your firm might be big or small; staying with conventional ‘cash only’ kind of payment modes might not interest the new- age customers. Customers are seeking new ways to pay digitally and providing them with the same can give an extra edge to your business.
In an attempt to earn more revenue, construction companies bid everywhere and anywhere. This sometimes means bidding for projects that already have a lot of competition. As a construction company, you can gradually develop a niche skill that your workers can execute the best. Instead of grabbing projects from various fields, find your specialty, and focus on winning those types of projects.
2. Set realistic profit targets
Keeping business on track year after year requires realistic targets written for the following aspects:
- Overhead: overhead target should be set at a minimum of 20 percent annual return on your fixed costs.
- Job costs: this is specific for each job your firm is working on; viz labor, equipment, project management and worker’s compensation.
- Sales goals: are based on your company’s profit margins and goals for gross profit and net profit.
3. Focus on profitable niches
Certain profitable niches would yield better profits than other niches. As a construction business, keep an eye on what sectors can devote more resources and make more money.
You need not centre around one thing; although, dedicated teams can be set to bring a percentage of business, that you want to be devoted to a specific area.
You could focus on niches like:
- Specializing in constructing building additions.
- A home remodeling expert in the kitchen, kids rooms makeovers.
4. Reduce Waste
A lot of waste is generated on construction sites. This waste going to the landfills could be going to your profit margins. Set up programs to minimize construction waste so that you can save and increase revenue. You can do so by:
- Optimizing designs to utilize the purchased materials at maximum capacity.
- Keep back scraps for being used as patch pieces.
- Order only what is required and cut down on materials that use excessive packaging.
- Check with government professionals for programs or incentives for waste reduction, reuse, or recycling.
5. Dedicated customer service, marketing and sales team
A construction building itself is a piece of publicity and marketing 24*7. However, in today’s internet world, an online presence is essential for your sales, marketing and maintaining customer satisfaction. Surprisingly, many firms do not have an online presence; and you can start doing so to give an extra edge to your revenue.
Here is how you can start going online:
- Build a website that serves as the point of contact for your business. More importantly, if your competitors aren’t online and you are, then you are increasing your visibility and your chances of landing more jobs.
- Make sure to have basic pages like company bio, service areas, memberships, accolades and awards, and short profiles of key personnel (such as owners and management), services, testimonials etc.
- Keep brochures, business cards handy whenever you are out for a meeting. Nothing sells better than good pictures of your construction building!
6. Focus on repeat business
Repeat customers are like half baked cakes! This is an obvious strategy for generating revenue without much effort but many companies fail to implement. Build relationships with your best customers to encourage repeat business and help you grow your brand stronger in the market. This is a good strategy instead of trying to bid for every project. This way, you also save a lot of cost that is otherwise invested in preparing for a new bid.
7. Use construction scheduling software
The digital era has made working efficient so that we spend less time on mundane tasks and focus on things that need more attention. Construction scheduling software is designed to automate and manage the entire routine of operations at a construction firm. It has a centralized management feature that comes complete with streamlined dashboards to ensure greater transparency and facilitate a better way to execute key processes with ease.
These software provide access to useful metrics so that managers can seamlessly get insights on a real-time basis. This way they save time on manual tasks and use the same for closely tracking and improving their vital performance metrics.
8. Improve operational visibility
Just working, and working efficiently are two very different aspects of the construction business. Rather than improving what is already done, companies should focus on improving their efficiency. Efficiency of the workers, processes etc. This can be achieved by obtaining greater operational visibility.
Key stakeholders, business managers and other decision-makers should be a part of the company daily so that they can take actions on time. Sometimes, managers might not be able to take actions that can be in favor of increasing revenue. For example, actions pertaining to preventing cost-escalation owing to delays, improving customer satisfaction, boosting employee productivity, etc.
Such transparency can be maintained by embracing the latest technology, mobile apps, software that allow real-time visibility and ease of communication between teams and higher professionals.
9. Avoid offering freebies
There is a difference between maintaining strong customer service and delivering things free of cost. Once a project is finalized, customers ask for a lot of modifications or additions and to maintain the ‘good company’ reputation, many companies end up doing it for free. This strategy does more damage to your company than you think.
While promising free of cost services, you cannot quantify the work, labor cost, equipment required, parts and supplies needed etc; and you might lose a lot more than you think. To increase revenue, start being transparent with your customers by discussing how much extra work will each work cost.
10. Choose 3rd party carefully
Construction involves working with subcontractors and suppliers at all stages. Almost all companies tend to partner with the cheapest or most convenient contractor. While this is a good idea to save revenue, it might land you to greater troubles if the quality of work is compromised. A better approach is to build relationships with subcontractors or suppliers who have delivered quality work on time in the past. You can also make this clear to your customers so that they trust your work.
Increasing revenue is one of the most important aspects of owning and running a construction firm. Increasing revenue is the only aspect that determines your success as a company. While finding ways to increase the revenue can be difficult, these strategies can be practically used for increasing revenue by many folds. Use the right strategy and the right technology at the right time to stay at an edge always and grow the construction business well.