The Top 5 Ways to Lose (and Make) Money on a Construction Project

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Construction is a complex industry. Contractors operate on sheetrock blade-thin margins, constantly juggle unforeseen jobsite issues, and are currently facing an economic chokehold with pricing and access to resources. With so many variables at hand, the risk of financial disaster is sky high. The slightest problem on the job or in the office can be the difference between making money and losing it. 

#5 Lack of Funding

You need money to make money. If you start a project with no funding or proper payment terms in contracts, you’re guaranteed to be in the red. Projects can’t progress to the next phase without cash on hand. Materials need to be ordered ahead of time, salaries need to be paid, and deposits on equipment rentals need to be made. Lack of funding can cause a hold-up in the project, creating a domino effect with scheduling delays, increased budgets, and upset stakeholders. 

#4 Poor Scheduling

Contractors are constantly juggling the complex variables working against them with project scheduling. Weather, lead times on materials, dependency issues, cash flow, and insufficient document management will cause major production bottlenecks if they aren’t addressed from the onset of the project. Clashes and hold-ups on projects are not only costly, but they can affect your company’s reputation. 

#3 Using Manual Methods

Paper blueprints in the jobsite trailer, change orders on napkins, daily reports on a notepad in the truck – we’ve all seen these on a construction site. They are recipes for financial disaster. Not having a system for centralized data will cost you time – not only spent looking for documents but driving back to the trailer to review them. Manual methods are extremely uncollaborative, and create a domino effect of scheduling issues, budget overruns, and rework from lost documents. 

#2 Underbidding

Generally, the lowest bid is going to win the job. But engaging in a race to the bottom is a lose-lose situation for everyone involved – from your business to the industry as a whole. Intentional underbidding focuses on getting the job no matter what, but you never need a job bad enough to lose money on it. Unintentional underbidding happens because of human error with takeoffs or estimates, not covering your numbers for supply chain fluctuations and spikes in material pricing, or not planning for missing workdays due to severe weather. 

Underbidding will prevent you from scaling your business and damage your bottom line. It creates an industry-wide effect causing deflation, driving down wages, and hurting your reputation. Cheap prices also mean poor quality, and you want to provide the best service, with the best products, for the best price while still making a profit. 

#1 Working Off Old Documents

And the winner is… Building a project from an old version of a document. This easily overlooked mistake will cost you ten times more in rework during the construction phase. That can lead to a 5% hike in overall project costs, and in an industry with already low margins that could mean your profit. 

This mismanagement of data is a common practice in the industry. With documents split between paper and digital, field and office, laborers and management, the chaos of paperwork will guarantee you waste money the fastest way possible. You will also waste time, facing schedule (and cost) overruns fixing errors.  

Okay, So How Do You SAVE Money?

As easy as it is to lose money, we promise it’s easier to save! Having a foolproof business strategy that focuses on efficiency, collaboration, risk reduction, and increased profit will save you money and help you stand out against competitors.  

Better Document Management

Centralizing your data with a single source of truth is imperative for financial survival. You need a system where everyone can collaborate, share, and store critical project information that is accessible anywhere, anytime. STACK’s field collaboration and construction management tools allow you to organize documents the way it makes sense for your team. Users can only work on the current version of a document, automatically using the latest revision and avoiding wasted time and money on rework from an old document. 

STACK allows users to search, filter, and use hyperlinks in the field to access what you need faster (even without access to WiFi), and set up Kanban workflows for your office staff to track documents by their preferred categories. The reduction in administrative burdens and costs will free up your time to do just about anything more productive and profitable. 

Bid Management and Accurate Bidding

Say goodbye to cluttered inboxes and disorganized ITBs. Using a solution like STACK’s bid management tool that streamlines the often-complicated bid invitation process will save your preconstruction team from wasting time and losing opportunities. It also gives your team the insight to only take the jobs that are good for your business.  

An accurate bid sets you up to ensure you meet profit goals on a project. STACK’s lightning-fast takeoff and estimating solution will help your business bid more and bid smarter. Our platform offers major time savings, increased accuracy with measurements and pricing with our cost data integration, as well as improved efficiency and smoother workflows. 

And remember, never stop bidding. Consistency is key. You can never have enough work so be proactive, not reactive, when bidding. 

Workforce & Equipment Planner

Properly managed schedules are essential to stay on budget. Resources like workforce and equipment need to be planned and allocated for jobs in order to meet final schedules, using dependencies as needed. So many aspects of a construction job depend on other tasks being completed first that the process of planning is typically difficult and complex.  

Every scheduling challenge comes with their unique set of issues. Controlling time as much as humanly possible is essential to avoid loss of productivity and rework. With STACK’s construction management platform, planning is much simpler. You can lay all your resources out in one view to better understand where your assets are allocated and verify that you can deliver on your commitments.  

Mitigate Risk

By owning your data from the onset of a project, no matter what platform a GC requires you to use, you are protecting your business, mitigating risk, and avoiding potential legal fees. Use a platform that includes daily reports with photos, workforce and equipment planners, and document management so there is always an audit trail of your operations.

Get Better Payment Terms

Lock in better payment terms in contracts with your GCs and customers by adding language regarding material price fluctuations. Do not take responsibility for the economy if prices change after a bid is submitted and approved. Adopt solutions like billd that provide favorable financing terms to help cash flow issues, protecting your business from profit loss.

Integrated Workflows

Using a platform that seamlessly connects your processes guarantees people work off the latest documents, collaborate in real-time, and connect the office to the field with cloud-based software solutions. STACK integrates with the best-in-class solutions to streamline your workflow. Avoid risk, rework, and error by using systems with open API capabilities. Whether it’s bid management, takeoffs and estimates, or field collaboration software, their connectivity will accelerate decision-making and progress. 

STACK’s goal is to help your business become more profitable. Our focus is to provide industry-leading solutions in a comprehensive, all-in-one platform for contractors. In order to succeed, you need great resources and support. STACK is there for you step by step to help you! Book a demo today! 

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