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Strategies to Increase Your Construction Business Revenue

December 21, 2021
By Elizabeth Choice

The construction industry is one of the most lucrative industries in the world. However, how to increase revenue from this business can be tricky. Here are a few ideas for increasing your revenue as you continue building into new markets and expanding your company’s reach.

The “how to get rich in construction business” is a strategy that can be used by people who want to increase their revenue. The article will give examples of how different companies have been able to do this successfully.

This post is part of our Construction Business Startup Guide, which is a collection of articles to assist you in planning, starting, and growing your construction company.

Even if you are new to the construction sector, there are a lot of techniques to boost your profit margins.

So, if you want to maximize your profits and obtain the correct number of lucrative contracts, the seven ideas in this construction profits guide should help you figure out how to manage a very successful construction company.

Table of Contents

1. Set profit goals for yourself.

It’s easy to state your main company objective is “more than last year” or “as much as possible” when you’re initially starting out.

Those, though, aren’t objectives. They’re only general guidelines that might jeopardize not just your company’s revenue, but also its long-term existence.

George Hedley, a CSP located in California, has worked in the construction sector since 1977 and is known as “The Business Builder.” One of the most common issues he’s discovered among construction firm owners? There are no explicit profit objectives or any critical quantitative targets.

Creating attainable goals

Set realistically written objectives for the following to keep your company on track for where you want it to be in your first year, next year, and 10 years:

According to Hedley, overhead should be set at a minimum of 20% annual return on fixed expenditures, which includes everything from estimating and marketing to accounting and office supplies.
The price of the job (and no, those are not the same as overhead). From labor and equipment to project management and worker’s compensation, each assignment your organization works on has its own set of expenditures.
Goals for gross profit and net profit, depending on your company’s profit margins.

Profit targets are set depending on the company’s growth as well as the payment of owners, managers, and employees. Your basic objectives are straightforward: constantly earn a profit, and strive for a gross profit margin of 15-20%.

2. Use good years to make up for bad ones.

Expect three lean years for every seven prosperous years, according to a helpful guideline. That is not a formula (as the economic slump of 2009 shown), but it may help you with budgeting and financial planning.

It’s also a good reminder to keep buffering your cash flow so you have liquid money on hand in case business slows down or financing becomes tight.

Here, we enlist the help of a seasoned pro: Denise St. Clair has been the Vice President of Jack St. Clair Inc. since 1981, where she oversees the company’s finances. If your business is having a good run, she advises you to strengthen its financial foundation—especially if, as many companies do, you have assets that are funded on credit.

“I appreciate getting things paid for,” St. Clair adds. “Never miss a payment, and pay everything off as soon as possible.” Start paying off anything you can if things are going well and you have stuff on credit, such as machinery. Begin by paying down the lowest sum and working your way up.”

St. Clair also suggests putting money aside in case of an emergency. “Take 10% of what you are paid and put it aside for when things become tough.”

3. Become a member of local trade organisations and attend events.

Making contacts is an important part of acquiring business.

No construction business is an island, with all the numerous enterprises and crafts engaged in projects of any size or scope.

Join local, regional, and national trade groups, as well as your local chamber of commerce, when you begin your construction firm. Attend their events.

A general contractor, for example, is your final client if you’re a subcontractor. That’s who you’ll sell to and network with so that general contractors get familiar with you and trust you. Accept such event invites since trade memberships provide you with a built-in mechanism to network with the other businesses you may be bidding on projects for.

Membership also keeps you informed about regulatory changes, current concerns, and changes in equipment and methods. You’ll be better able to control expenses, reduce injury and liability risks, and ensure that your workers have the proper equipment and skills if you’re up to date on the latest news and problems impacting your business. All of these factors may assist you in completing work activities more efficiently and profitably.

4. Focus on niches that are lucrative.

Keep an eye out for lucrative niches where you can spend more resources and generate more money, no matter what industry your construction company is in.

Your whole firm doesn’t have to revolve on one subject (though it may, depending on the specialty), but you may have specialized teams or a defined amount of revenue committed to a particular area.

The following are some examples of niches:

A construction company that specialized in house expansions.
A remodeler who focuses on kitchens, complete houses, or bank-owned properties.
Older structures are being restored in a period-appropriate manner.
An electrical company that focuses on commercial projects for a particular sector.
A re-plumbing specialist is a plumber who specializes in certain forms of re-plumbing and offering porta potty rental.

These are just a few suggestions to get you started. Meet with your management and other teams, evaluate work records, and research industry and regional trends and projections. What prospects do you have that may turn into high-paying employment for your construction firm?

5. Keep trash to a minimum.

It’s no secret that construction sites produce garbage. But have you considered how much of that rubbish going to the landfill might have been profit margin savings?

The state of Nebraska has been attempting to urge construction businesses to decrease trash, not just to preserve the environment, but also to save money. Construction trash, including lumber and manufactured wood products, may account for up to 35% of total garbage. That 35 percent still came out of your wallet if your company purchased those supplies.

Companies that put up strategies to reduce construction waste may save money on the project site, which translates to a healthier bottom line. Here are a few recommendations:

Optimize designs to make the most of bought resources at the dimensions provided.
Protect items from harm and theft by storing them safely.
Have supplies supplied in returnable containers wherever feasible; you won’t have to pay to dispose of them, and the provider will be able to pick up empty containers for re-use at their next drop-off.
Negotiate unused material buybacks from suppliers.
Donate usable excess materials to groups like Habitat for Humanity (donations may be tax-deductible; see your company’s tax consultant for more information).
Scraps should be saved for backup or patching purposes.
Order exactly what you need, and try to stay away from things that come with a lot of packing.
Check with state or local authorities for trash reduction, reuse, or recycling programs or incentives.

6. Your business website should have a marketing, sales, and customer care representative available 24 hours a day, seven days a week.

It operates 365 days a year, 24 hours a day, 7 days a week. It has marketing, sales, and customer service capabilities. And, believe it or not, many of your rivals may not be using this ideal employee at all. What might this be, exactly?

The website of your construction firm.

While the construction business is often based on word-of-mouth and referrals, in today’s internet environment, a website is an important sales, marketing, and customer service tool. However, many businesses do not have an internet presence.

For new business, prospective business, and returning consumers, your website may serve as a business card, brochure, and point of contact. More significantly, if your rivals aren’t online and you are, you’re boosting your exposure and raising your chances of obtaining more employment.

Make sure your company has a basic website with pages that cover the following topics:

A brief description of the firm, including its history, service areas, memberships, honours and awards, and important employee biographies (such as owners and management)
Services and specializations are available.
Information on who to contact, particularly for bids and estimates
Customer testimonials and samples of previous work (with photos and videos)
Opportunities for employment and advancement
An FAQ

7. Maintaining equipment on a regular basis reduces downtime.

Is there a cost to upkeep in terms of both money and time? Yes. Is it the same price as dealing with a broken equipment that was supposed to be operating on site? Nope.

You are operating equipment, regardless of the size or extent of your fleet. Even if it’s just your vehicle, it’s critical to your day-to-day operations. You want to keep failures and expensive repairs to a minimum in order to maximize earnings.

Regular maintenance is the most effective approach to do this.

Keep track of where your equipment is, what it’s doing, and how long it’s been on the job.
Keep track of when your equipment is operating, functioning, idle, or turned off (many pieces of modern equipment have built-in sensors and tracking for data collection)
Maintenance regimens should be followed according to supplier and manufacturer guidelines.
Keep track of operator notes and comments so you can stay on top of equipment maintenance and possible issues.
Dedicate resources to equipment maintenance on a regular basis and between projects.

The better you look after your equipment, the better it will look after your business—and that will help you look after your earnings.

Are you ready to make a profit?

This is by no means an exhaustive list of strategies to boost profitability in your construction company, but following these guidelines can help you get started.

Are you looking for further information on how to establish a construction firm or how to prepare a business plan? Please let us know!

Frequently Asked Questions

How can I improve my construction business?

A: First, you will need to decide what type of business you are in. If your business is construction-related then this question would be best answered by a professional who knows the ins and outs of that industry.