0379: Five Ways To Increase Your Construction Business Profit

This Podcast Is Episode Number 0379, And It's About Five Ways To Increase Your Construction Business Profit First, we always ask our clients to decide what they want from their construction company. Do you want to get rid of the boss? Do you want to work in a more structured environment? Are you sick and tired of working for the boss's son or daughter? Do you want to make much money? Do you wish to make enough money to pay the bills and enjoy a vacation now and then? There are no wrong answers, whatever is right for you is the correct answer; however, you need a reason to do it otherwise when the going gets tough, and it will, you will either win or lose depending on your purpose. With a big enough reason, you will find a way to win.   For many small construction companies, the best way to improve profitability is to increase turnover, as there's no limit to sales, but there is a limit to how much you can reduce your costs.   Let's look at how you can focus on each of the five ways in our profit increase calculator to achieve your goal of improving profits.  

1. Increase your leads

By interacting with a higher number of people, you'll increase your chances of turning more website visitors and callers into clients – or at the very least, having them lead you to potential customers.

So what can you do to increase leads or make more people aware of your business? A few tactics you might consider using to increase your leads include:

Advertising – set a budget and increase how much your business is promoted. Direct marketing – work out your target audience and market directly to them via email. Network – attend industry events and conferences to meet potential customers. These may be moved online in the meantime. Create a website – to open online opportunities and increase your local reach. Develop new distribution channels – think about partnership and collaboration with other industry experts.

2. Convert more of your leads into clients

How many potential customers walk out of your store, leave your website, or inquire about your services without hiring your services?

Just imagine if you could convert 10% of those people into clients. How many extra sales per day would that be?

A few tactics you might consider using to convert more leads into customers include:

Arrange training for employees – on sales conversion and sales closing methods. Personally attending a sales training course. Running demonstrations – for potential customers to see what you have to offer and how they could benefit. Highlighting your services' benefits – through promotional material, your website, blog advice, social media platforms, and free trial offers. Preparing incentives – for your staff to offer to potential customers, hopefully encouraging them to purchase or hire your service.

3. Increase the number of items you sell per client

If you can entice your customers to purchase just one more service from your business each year, your sales (and hopefully your profits) will increase.

A few tactics you might think about using to increase the number of items you sell to each customer include:

Widening your service range – by asking customers what else they would be interested in hiring you for. Bundling products and services together – like adding after-sales help to certain products. Increasing capacity and capability – for example, purchasing extra equipment to increase your capacity while hiring additional staff to enhance your capability. Researching your competitors' offerings – to find product or service opportunities.

4. Increase your average sale

Can you come up with some ways of increasing the average value of each sale you make? Rather than hiking up prices, see if you can raise rates by small margins (like 1-3%) or find ways to sell higher-priced items more often.

A few tactics you might think about using to increase your average sale include:

Training your staff – so they're confident offering complimentary items and upselling more expensive goods. Increasing prices across the board – would your customers notice a small price increase? Consider informing them and trying it, as the extra money will go towards your bottom line. Advertising your higher-valued services more often. Developing a premium product or service – and encouraging your regulars to go for it.

5. Increase net profit percentage

An easy way to increase your net profit is by lowering your fixed costs (business overheads). Identify your top five expense items and track any changes before taking steps to reduce them.

A few tactics you might try to increase your net profit percentage include:

Identifying and monitoring your top five expenses in your budget reports. Finding out where you can make savings and reduce costs. Concentrating on higher-margin services or products. Looking at alternative suppliers with cheaper supplies.

The best way to do this is by incorporating LMOS Cost Codes into your accounting system for easy tracking of costs and as a foundation piece of Job Costing Reports.

In our Construction Accounting Academy, we have a class devoted entirely to teaching our LMOS system. It goes into detail how to set up LMOS in QuickBooks desktop.

Final thoughts 

Review these five ways of increasing your profits at least every year. By using simple, practical steps, you can improve your business's profitability.    You get the best contractor bookkeeping services company on your side by working with us, which means you will substantially improve your chances of success. We are not Jack-Of-All-Trades, Master-Of-None accountants or bookkeepers who take anyone who contacts us. We are construction accounting specialists, with one purpose and only one purpose; serve construction contractors in the business and those who are preparing to get into the business. Contact me today for your no-charge, one-hour consultation.

About The Author:

Sharie DeHart, QPA is the co-founder of Business Consulting And Accounting in Lynnwood, Washington. She is the leading expert in managing outsourced construction bookkeeping and accounting services companies and cash management accounting for small construction companies across the USA. She encourages Contractors and Construction Company Owners to stay current on their tax obligations and offers insights on how to manage the remaining cash flow to operate and grow their construction company sales and profits so they can put more money in the bank. Call 1-800-361-1770 or sharie@fasteasyaccounting.com