6 Ways to Increase Your Construction Profit Margins

Updated on October 21st, 2022

Successful construction contractors constantly find ways to improve their work, this leads to lower costs, which translates into higher profits and more cash flow. How do you improve efficiency and production? There are many hidden costs and timewasters that reduce worker efficiency, by finding and fixing these hidden costs and delays can quickly increase profits.
If you’re looking to be more efficient and productive in your job performance, here are five tips that will help you increase your profit margins and cash flow:

1. Improve workforce management efficiency

Rarely are workers engaged in productive work 100% of the time. There’s often downtime on projects waiting for other work to be completed, material handling, conflict resolution, completing paperwork, attending project meetings, and other tasks.
The first step to improving workforce management is to evaluate the current productivity of your workforce.
This includes:

  • Tracking work time
  • Downtime
  • Material handling

You have to know how effective your workers are before you make any changes. Time tracking apps make collecting this information easy and fast. There are many ways that time tracking apps can make your life easier,

  • Eliminating timesheet fraud
  • Reducing admin time
  • Automating payroll and invoicing

Next, analyze the data from your time tracking to improve the efficiency of your labor management and scheduling. For example, time tracking data may show that one crew is always waiting, you can make changes to the schedule to accommodate later deliveries or choose to expedite delivery. This may include having them work in another area until the materials are on-site or paying extra for overnight shipping.
Project teams should work together to schedule work without delays and strategize about how to deal with problems before they occur. Collaborating with other team members will improve everyone’s workforce efficiency.

2. Increase asset utilization

Construction company assets include equipment, vehicles, technology, and tools. Companies need to ensure that they are being used effectively, much like their labor force. When equipment or tools are sitting idle or are being used inefficiently, costs are higher.

  1. Start by tracking use and downtime of your equipment and tools. It’s important to start tracking using systems like GPS tracking systems, which lets you know use time, maintenance schedules, equipment location, and other metrics.
  2. Then review the data, along with the information you have on equipment lifespans and maintenance requirements, to evaluate the productivity level of each asset. You’ll want to review as much data as possible over the entire lifespan of an asset, from purchase to the end of life. With this data, you’ll be able to see when equipment or tools are not being used effectively.
  3. Based on the data and analysis you can make better decisions about adding assets and tracking their use. You can adjust the scheduling and rotation of equipment and tools to improve their efficiency. Instead

3. Reduce administrative tasks

Workers and office staff can spend a lot of time on administrative tasks that don’t add to their productivity such as chasing down paperwork, double-data entry, etc. These tasks are important since they keep your company and project running, but their return on investment is small.  Instead of time-consuming tasks, maximize that time elsewhere and harness that energy in other ways to keep building.
Using software and services to reduce administrative tasks saves money and time spent on collecting, filling out, and returning paperwork. It also saves time looking for information that can only be found in paper documents or is lost in a job box or truck.

4. Make data-driven decisions

Construction companies that make decisions based on past performance use that information to improve their efficiency and profitability. If you’re not using data to make decisions regarding your business, it’s never too late to start.

  1. First, you have to figure out what information you need to be collecting. Start with a couple of key metrics, like labor productivity and project profitability, and figure out what data you can gather that will give you insight into these metrics. For example, for labor productivity you’ll want to gather data about hours worked, amount of work completed, downtime, and schedule delays. All of these will factor into calculating your overall productivity.
  2. When you’ve decided what data you need to collect, it’s time to start collecting with software tools. The easiest way to collect data is to use a software platform that can be rolled out to all your employees to gather the data that you need. These customizable platforms will allow you to gather data directly from the field and the office quickly and easily.
  3. Then analyze and review the data to spot patterns and trends in the metrics you’re analyzing. For example, you may find that productivity is low on projects with a certain customer or type of work. You can take that information and dive deeper to discover the reasons why this is happening. Review the patterns with your employees to get their insight and have them suggest possible solutions.

You can also use your data to predict what will happen on future jobs. This is called predictive analysis. Based on your team’s performance on past projects, the software can predict what may happen on current and future projects. This allows you to be proactive in addressing potential problems before they occur. For example, you may find that when performing a certain type of work there is a higher amount of safety incidents. Predictive analysis will notify you when potential safety problems may occur due to the type of work scheduled.

5. Go digital

Paper documentation is cumbersome, it can be lost, it’s often accurate, and it’s not easily shared among team members. Workers can often spend hours trying to find a certain document if it isn’t stored in an organized fashion, costing time and money.
Digital platforms that provide document creation and storage features offer a secure way to store data where it’s easily available and can be shared with everyone. Cloud software allows everyone on the team to view project documents anywhere there’s an internet connection, reducing barriers to communication. This makes collaboration quicker and easier when everyone can see the same document at the same time.
Also, changes made to documents are recorded in real-time, so team members don’t have to worry about having the latest version. Everyone has access to all documents and can easily see when a document is changed.

6. Gather, analyze, and adjust

Due to stiff competition in the industry, profit margins are going down. Contractors must work to address their internal costs if they want to make more money. Improving efficiency and productivity, both in the field and the office, is one of the best ways to increase profits and cash flow. Start by gathering data on your current performance, analyze the data for insights, and then take action to address issues. Online software platforms, like Assignar, make data gathering and analysis quick and easy, so you can begin your path to improvement today.

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