Most contractors stay busy year-round. I mean, there’s always a demand for skilled labor, be it renovations, repairs, or new builds. So, they’re rarely sitting around waiting for work. As a contractor, you’re probably familiar with the stress of working hard, managing your crew, and securing new clients, but still seeing little growth in your profit margins.
If you’re working long hours and your bank account still looks tight, the problem isn’t effort. It’s your profit margins.
And it’s time to fix that.
In 2025, the key to a successful contracting business is focusing on more than just revenue – it’s about maximizing your profit margins.
Want to make more money this year?
In this blog post, we talk about the five fixes every contractor should consider.
If your profit margins are shrinking despite working more, it could be due to hidden cost leaks.
These are the small, often unnoticed expenses that add up over time and chip away at your profits.
Here are some common areas where contractors leak money:
To plug these leaks, conduct a monthly expense review. Flag any expenditure over $500 and ask yourself: “Is this actually helping me generate more profits?” If not, eliminate it.
I even had a contractor who saved $28,000 just by eliminating wasteful software and using materials more efficiently.
Mind-blowing, right?
These leaks can really take away your profits, so, be sure to check on these from time to time.
Supplier costs take up a big chunk of your budget; but that doesn’t mean you’re stuck with them.
A lot of contractors fall into the habit of sticking with the same suppliers year after year. It feels easier, familiar, and maybe even loyal.
Here’s the thing though: just because you’ve been with a supplier for a while doesn’t mean you’re getting the best possible deal.
Prices change. Markets shift. And suppliers aren’t always quick to offer better rates unless you ask – or unless you start shopping around.
If you haven’t renegotiated or explored other options lately, there’s a good chance you’re leaving money on the table.
Instead of accepting rising prices, try negotiating better terms. Here’s how:
These adjustments can have a substantial impact on your profit margins. For example, a drywall contractor increased their margins by 3.5% (roughly $35,000) by renegotiating three supplier contracts.
In a competitive market, it’s common for contractors to take on almost any job that comes their way.
The thinking is simple – more work means more income.
But that approach can backfire, and it’s not always true.
Not all jobs are equally profitable. Some may seem like a win upfront but come with hidden costs – extra labor, time-consuming clients, delays, or materials that eat into your margin. Others may pay less but demand more, stretching your resources without much return.
When you say yes to every project, you risk spending time on work that barely covers your costs; or worse, ends up costing you money.
Being more selective and strategic with the jobs you take can make a bigger difference to your bottom line than simply staying busy.
Here’s how to streamline your service mix:
The key is to focus on services that provide the most value to both you and your clients.
When it comes to pricing, most contractors make a mistake by sticking with a flat rate for every job.
However, pricing psychology shows that offering tiered pricing can increase your profits without increasing your workload.
Try implementing a gold, silver, and bronze pricing structure:
This pricing structure gives your clients the feeling of control and increases the likelihood they’ll choose the middle or higher-tier option. Contractors who adopted this pricing strategy have seen an average increase in job margins from 18% to 29%.
Also, make sure you understand the difference between markup and margin.
They. Are. Not. The. Same.
A 30% markup doesn’t give you a 30% profit margin.
When you’re pricing your services, don’t just look at how much you’re marking things up. Focus on what you’re actually making after costs.
Your profit margins should guide your pricing, not just the markup percentage.
Time is money, especially in construction.
The more time you waste on administrative tasks, the less time you have to focus on the work that generates profit.
When you embrace technology and automation, you can save valuable hours and keep your profit margins intact.
Here’s how technology can help:
For example, one electrical contractor recovered 10 hours per month by automating change order tracking, which saved $18,000 annually in billable time.
You don’t need to work harder. You need to get smarter with your numbers.
Track daily costs. Charge properly for labor. Bill for every change. Tighten up timelines. Watch your margins – not just your revenue.
The right systems can help you earn more without adding more work.
If you’re serious about boosting your profit margins, start implementing these strategies today. The more efficient you are, the more money stays in your pocket.
If you’re ready to stop guessing and start keeping more of what you earn, let’s talk.
Together, we can optimize your business for long-term success.
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