Profits in the construction industry can be thin, which means taking steps to maximize profit is important. Avoiding lags in activity, choosing local suppliers, assessing materials usage and storage, and streamlining processes with technology are easy ways contractors can cut costs and save money.
Why contractors need more savings
Profit margins in the construction sector are thin, meaning every penny a contractor spends should be accounted for. If a contractor fairly critiques a company’s operations, there will likely be many areas where the company can cut back on spending.
Evaluating and upgrading areas like materials suppliers, team communications, equipment rentals, scheduling projects, and the company safety program are just a few places where contractors can find savings.
7 tips for contractors to save
1. Schedule the job to avoid lags in activity
A penny saved is a penny earned. A job that proceeds fast—or at least on schedule—will save on labor and equipment costs. Subcontractors should be scheduled so that there is no break in activity in the build, so they logically follow one another.
That said, staying on track is also a matter of subcontractors adhering to the schedule to ensure a streamlined schedule—and that job is up to the general contractor, owner, or manager.
2. Broaden your supplier list—and choose local when possible
Supply chain “issues” that have caused wild fluctuations in materials and shipping costs (sometimes from month to month) are avoidable to some degree. Local and regional suppliers may be less affected by international supply chain issues, meaning you may be able to avoid price gauging by shopping locally.
Working with more suppliers also allows a buyer to negotiate better prices and take advantage of deals due to oversupply.
Pro tip: To avoid sky-high prices, negotiate fixed prices for materials months ahead of the project to support better profits.
3. Institute a better safety program
Paying closer attention to safety is an easy way to save your company money.
Attentiveness to safety means fewer workplace incidents and accidents, less downtime, fewer fines, and on-time project completion.
If you lack the means to improve your safety program on your own, safety consultants and an enhanced construction business management platform might help.
4. Document and issue change orders to avoid scope creep
Scope creep is when a project’s requirements tend to increase over its lifecycle, and it’s an easy way to rack up extra costs. Managing scope creep boils down to controlling changes through a change control process.
Here are a few ways to manage scope creep and avoid additional costs:
- Monitoring the project’s status and baseline scope
- Comparing actual work performance measurements with the baseline scope
- Determining the cause and extent of the changes noted in your comparison
- Decide on the appropriate course of action for changes (i.e., is corrective or preventive action needed)
- Manage change requests and recommended actions
5. Assess materials usage and storage
Keeping track of material use and storage is critical to cutting back on unnecessary spending. Take inventory of your materials, how much you’re using, and what it’s costing you in time or space to store them.
6. Evaluate heavy equipment use—and use it more effectively
Expensive equipment sitting idle at a job site throws money down the toilet. Depending upon the amount of use a company may have for a piece of equipment, leasing (instead of renting) or buying it might be considered. But, a company needs to know how much it uses equipment and how effectively it does so.
7. Streamline document management with technology
End-to-end construction software offers many benefits for contractors, including centralizing email and communications and simplifying document sharing, safety protocols, financials, tracking employee hours, and every other task a contractor needs to manage.
A central platform handling all business management tasks reduces employee error and labor time.
