Feels like a non-stop hustle, doesn’t it?
Running a business – regardless of your niche/industry involves a lot of moving parts—projects, clients, and invoices coming in left and right. But when you sit down and look at the numbers, sometimes the profit just isn’t there. You’ve got the work, but the bottom line is telling a different story. So, what’s going on?
In this blog post, we’re going to dive into why many busy businesses aren’t seeing the profits they expect and what you can do about it. We’ll explore key strategies to get your construction business not only running smoothly but actually turning that hustle into healthy profits. Let’s break it down.
Being busy isn’t the same as being profitable. It’s easy to think that more jobs mean more money, but the truth is, if you’re not tracking expenses, labor, and overhead costs correctly, you might be losing money without realizing it.
Many business owners fall into the trap of saying yes to every project, thinking more work equals more profit. The problem is, without a solid understanding of your costs, some of those jobs might actually be costing you more than they’re bringing in.
Overcommitting without a clear handle on your financials can leave you spinning your wheels with little to show for it.
In the construction business, knowing your costs is everything. We’re not just talking about the materials and labor you’re paying for. You’ve got to account for overhead, equipment, utilities, taxes, insurance, and even the cost of your time.
But here’s the kicker: many business owners don’t take all these into account when pricing jobs. That means they’re underpricing projects and eating into their profit margins without even knowing it. To really understand where your money is going, you need to track every expense, right down to the screws and nails.
Job costing is one of the most effective tools to figure out if a project is actually profitable. This process breaks down every expense associated with a job—from labor to materials to overhead—so you can see what each project is costing you in real time.
Accurate job costing allows you to adjust your pricing and understand which types of jobs are most profitable for your business. It also helps with better estimating in the future, so you’re not caught off guard by unexpected costs.
Pro tip: If you’re not already using a system to track job costs, QuickBooks Online or a dedicated construction management software can help you stay on top of every dollar.
Even if you’re landing a lot of jobs and making money, poor cash flow can still choke your business. You might be billing clients and sending out invoices, but if payments are delayed or if you’re slow to invoice, that cash isn’t hitting your account when you need it most.
To stay profitable, it’s crucial to manage your cash flow effectively. Some ways to do this include:
Poor cash flow management is one of the top reasons businesses fail, so getting a handle on this can make or break your profitability.
Overhead costs are often the silent killers of profitability. While you’re focused on your projects, your overhead (rent, utilities, equipment maintenance, office staff, etc.) keeps adding up, draining your margins.
To improve profits, look for ways to reduce overhead without cutting into the essentials. Can you streamline operations, outsource certain tasks, or use technology to automate processes? Even small changes in overhead can have a big impact on your bottom line over time.
Here’s a real-life scenario: A construction company I worked with realized they were overstaffed during slower months. When they adjusted their hiring practices and started to use contract workers during peak times, they were able to reduce their overhead by 15%.
Knowing your profit margins is crucial to staying in the know. Many business owners focus solely on revenue, but that’s only half the story. Profit margin is what’s left after you’ve covered all your costs—what you actually get to keep.
Take time to review your profit margins regularly. Are certain types of projects more profitable than others? Are you pricing yourself too low compared to the competition? Understanding your margins allows you to make smarter decisions, like raising prices or focusing on higher-margin jobs.
Budgeting is more than merely cutting costs (or trimming the fat, as I’d like to call it)—it’s about allocating your resources wisely. Set up a budget that accounts for all your expenses, including overhead, materials, labor, and taxes. Then, compare your actual expenses to your budget regularly to see where you’re overspending and where you can improve.
A solid budget will help you stay on track, identify problem areas early, and adjust before small issues become big financial problems.
Running a busy construction business doesn’t automatically translate into profits. To truly thrive, you need to get a handle on your costs, cash flow, and margins. Implement strategies like job costing, tracking overhead, and tightening up your cash flow to make sure that every job you take on is boosting your bottom line.
If you’re tired of working long hours and not seeing the profits you deserve, it’s time to make a change. Want help getting your finances in order? Contact us to discuss how we can streamline your bookkeeping and give you the financial clarity you need to grow your construction business profitably.
