So you’ve got your business established and you’re winning enough bids to get by. You’re at a baseline that lets you pay the bills and your employees and maybe have a little left over for a Christmas bonus or a new company truck at the end of the year.
If you’re ready to take your business to the next level in terms of profits and pricing, you need to have a handle on a few basics first. Make sure you:
– Know market rates in your area
– Have a handle on material costs
– Are realistic about your crew’s skills and speed
– Understand your overhead costs
If you’re just starting out, find information on how to set your prices, how to move from residential to commercial work, and how to choose the right tools.
The #1 Secret to Raising Prices and Profits
Once you’ve got the basics down, your primary goal should be to do your job exceptionally, on time, under budget, in a completely professional manner.
We know, we know – this isn’t a real pricing strategy. But bear with us and think about it:
– How many contractors do you know, or have you heard about, who do subpar work?
– How many don’t show up onsite on time, or take far longer than planned to complete a job?
– How many blow past budgeted costs and end up in the hole at the end of a project?
The number 1 thing you can do as a contractor looking to make more money is to make a good impression on GCs by developing a positive reputation in the industry.
GCs want to work with subs who are reliable and trustworthy, and who will represent their brand in a good light to owners. The solution is simple: be that sub.
7 Tips to Give You a Competitive Edge
When you’re sure your work is top-notch, it’s time to put plans in place to make sure it stays that way and get GCs to notice.
Try a mix of these strategies to see what gives you the best results.
1. Weed out any bad apples in your crew and reward the best workers.
To ensure you continue to perform at the top of your trade, your employees need to be the best. Make sure your field leadership is trustworthy and will be your eyes and ears onsite. Create and communicate clear policies around acceptable workplace conduct and do not tolerate unprofessional behavior – you never know when the GC might appear onsite and observe it.
On the flip side of this, when employees perform consistently and demonstrate their competence and skill, reward them! Bonuses and pay raises are best when you can swing it, but even treating them to lunch, sending them home early, and offering verbal praise can go a long way to creating a loyal, dedicated crew you can trust to get the job done. Find some ideas on how to attract and retain the best workers.
2. Aim to diversify your workforce.
Many large GCs have made commitments to diversity and inclusion, and they expect the same from subcontractors who do work for them. If you’re going after jobs with those bigger firms, having a clear statement on your website or in your boilerplate legal documents can give you an advantage over other subs. Make an effort to hire women and people from underrepresented groups as much as possible.
If your company is woman or minority owned, be sure to look into any available grants or lower-interest business loans offered by your state or municipality. While these won’t directly impact profits, they can help lower costs and reduce risk.
3. Educate yourself on industry news and trends so you can provide valuable expertise.
Follow construction industry blogs and news sites like Construction Dive, ENR, and Construction Business Owner to make sure you’re up-to-date. Dig in to trade-specific publications for more detailed and relevant content. You can also take advantage of trade organizations and knowledge-sharing among members.
Don’t forget to tap your suppliers for this insight as well. It’s in their best interest to keep you informed about the latest in new materials, so take advantage of any insight they can offer.
4. Develop a relationship with your supplier.
Shop around for suppliers and see which ones will not only offer you the best industry expertise but also ask about better pricing structures for your materials. Often, if a supplier knows you’ll be a good, repeat customer, they’re willing to give you a break on your purchase orders.
With access to lower-cost materials, you can either add those savings in as net gains on your estimates, or you can emphasize your ability to procure quality materials at a discounted rate to GCs, making yourself a more desirable sub.
5. Try different financing options to go after bigger, more lucrative jobs.
If you’re not in a position to obtain supplier discounts yet, and you don’t have the cash flow to pay upfront for materials needed for bigger jobs, look into material financing options. Instead of high-interest credit cards or tough-to-get bank business loans, services like Billd pay your suppliers for you and offer longer-term repayment cycles.
Using Billd gives you the freedom to bid on bigger jobs where profits can be higher without affecting your cash flow. A process like this takes away the stress of risk and gives you the confidence you need to increase your markup.
6. Invest in marketing your company.
Marketing can take many forms, and it doesn’t mean you need to hire a full-time marketing expert. There are a lot of things you can do yourself with the help of a competent admin assistant, or you can hire an agency on a contract basis. One essential marketing strategy is to create sales collateral you can provide to GCs – a basic sheet or brochure with information about your company and highlights of your best work.
To increase visibility in your service area, you can create a Google My Business account, maintain a website with information on your specialty, post on social media, and use digital ads. Think about producing more than just webpages: use imagery and video where possible to grab more attention.
7. Amp up your networking skills.
Most GCs would prefer to work with subs they know and trust rather than sending out bid invitations for anyone to apply. If you’re able to develop a good working relationship with a few GCs, they’re more likely to accept an increase in price every now and then in return for what they know is your best-in-class service.
Get on any potential GC’s bid list, but also plan to show up in person wherever possible and make calls. Bring your company brochure and business cards, be professional, and make a good impression. Attend trade shows and trade association gatherings, and make it a point to introduce yourself and get to know others in the industry so that your name can spread by word of mouth.
May the Best in the Business Win
Construction is an extremely competitive industry, and it’s tough to get ahead. But by using these tactics and delivering a consistently excellent service to GCs, you can make a name for yourself, become a preferred subcontractor, and increase your profits.
Need tools to help you get the job done faster and more accurately? Create a free STACK account to see how you can speed up takeoffs and increase the accuracy of your bids.