According to the Construction Financial Management Association (CFMA), profit margins for general contractors and subcontractors range between 1.4% and 3.5% of pre-tax income. That doesn't leave much left over for actual construction project profit. The numbers come from Construction Business Owner and its long-time columnist George Hedley, who surveyed over 2,500 construction business owners to get his results. You can take many different approaches to increasing your profits, and technology is making the process easier. We've put together four ways you can improve your profit margin, which are made much easier by using cloud-based construction estimating software like ProEst.
Rework can cost you 10% or more over your estimates and bids. Cloud-based estimating software like ProEst can give you the tools and information you need to reduce the chances that rework will be necessary. One of the strongest methods you can use to cut down on construction project rework is adopting reasonable and flexible schedules for your projects. You can get a good idea of such a schedule by analyzing past projects. ProEst makes this process easy through reports that you can design, along with instant cloud-based access to past project documents.
You can also cut down on rework by collaborating more in your project design phase. ProEst supports collaboration and integrates seamlessly with ProCore. With access to documents at your fingertips, you won't have to wait for weekly meetings to collaborate and head off problems that can lead to rework before they occur.
When you're working on a project and find a conflict between what's written on paper and what you're looking at on the job, an RFI is issued. RFIs can slow your project down and add days—or worse, weeks—to your project timeframes, including progress billing delays. The "snowball" process, where you have to stop one part of a project to get or give an RFI, can impact project schedules potentially far beyond delays associated only with the work segment pertaining to the RFI itself.
You might be surprised to learn that bigger projects have fewer RFIs per $1 million of construction costs than average-sized projects. Studies show that on average, commercial construction projects have 9.9 RFIs per $1 million of construction cost. But whether your project is big or small doesn't really matter. If you can reduce the need for RFIs and speed up your construction process, this will automatically increase your profit margin.
This is where estimating software like ProEst can help. Increasing collaboration between all stakeholders before the project begins will reduce and potentially eliminate job-slowing RFIs down the line.
Every day that you can speed up a project is a day that you won't have to pay for labor. Obviously, the "push me, pull you" emphasis that your employees naturally have will always be there to a certain extent, but if you can strengthen your construction business, it will make it much more likely that your employees will work efficiently and be eager to move on to the next job.
You can increase your efficiency and shorten project time frames by using data from programs like ProEst. Analyze your jobs over time, and compare jobs that went smoothly and quickly to ones that presented more problems in order to create realistic yet efficient work schedules and shorten your project time frames.
Whether it's a misunderstanding about a change order or an unexpected change in material costs or job site conditions, you can't avoid all risks to your projects and your business, but you can at least minimize the impact of those risks.
For example, rushed work due to lagging milestone completion can lead to physical risks on the job that are simply unacceptable for your company and your employees.
If you're using reporting tools from software like ProEst, you can compare jobs and plan safer, smoother work schedules. Having accessible documents in the cloud can help reduce a great deal of confusion and eliminate lost time and money due to unforeseen job risks. Using paper-based systems almost guarantees that you could face unforeseen risks on the job, from quality control problems to injuries due to rushed work.
ProEst provides you with flexibility and cloud-based access to data and documents that will help you improve your construction project profits. Its integration with ProCore will allow you to seamlessly integrate your estimating process with your construction project management.
In the past, construction project profit margins have been slim for many companies as a result of too many unknown factors and unforeseen circumstances, like problems that can result in project slowdowns, excessive RFIs, and excessive rework. ProEst allows you to access information and make decisions ahead of time that can spell the difference between a slim profit margin and an excellent profit that will allow you to plan for the future and more profitable jobs.
ProEst is a cloud-based pre-construction estimating platform that helps you create accurate estimates and digital takeoffs directly from blueprints quickly, allowing you to determine the most favorable rates for your company within the estimation process. There’s no guesswork involved. ProEst makes quality assurance in commercial construction projects estimation effortless. You won’t have to engage your entire team to be sure your numbers are accurate.
If you would like to learn more about how your commercial construction company can increase its profits and reduce miscalculations during the estimation process, reach out today and schedule a 1-on-1 walkthrough with one of our specialists!