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5 ways to increase your commercial construction profit margin

commercial construction profit margin

Why are you in the commercial construction business?

  • Are you making a profit?
  • Are you hitting your profit target goals?
  • How do you know if you are?

According to a recent survey of 2,500 construction business owners and managers, it was found that less than 40% of all companies had specific written net profit margins.

Chances are there are problems affecting your profit margins.

Can you answer these questions? Are you having trouble with:

  • Poor takeoffs
  • Estimating issues
  • Problems with workflow processes

Likewise, do you know what’s going wrong in your company?

If you’re worried about your profits, here are the 5 ways to increase your commercial construction profit margin. They’re not as daunting as you might think.

1. Automate your bid processes

With automation, your bid processes are an improvement over your manual ones. As a result, your teams aren’t frantically looking for scattered estimates, data, or drawings. It’s tough to work in a climate where everyone is trying to find these because they’re located across different platforms, devices, files, and individuals.

As an all-in-one estimating solution, automation frees up your estimators from dealing with error-prone manual estimates and takeoffs, which prove costly to the commercial construction profit margin.

Automated digital estimation software provides your company with a number of benefits:

  • Consistency - Projects have the same procedures, formulas, and estimates all the time.
  • Accuracy - Keeps track of labor costs, equipment costs, stored materials, and material costs.
  • Database - Costs and prices are in one place and updated as required. Data is reliable and consistent.
  • Improved project management - Enables better organization and optimizes time management and workflow.
  • Saves time - Using automated processes gets work done faster.
  • More bid wins - Puts more estimates into the marketplace.

All of these are lucrative for your profit margins.

Head to the cloud

You know you should go with an alternative from all of those manual, often paper-based processes. But you’re faced with a few dilemmas. Do these ring true?

  • There’s a fear of new technology. Maybe the current way of doing things is okay?
  • Any new software might come with a steep learning curve, and you and your estimators don’t have the time to learn a new technology.
  • There’s also the issue of a complete buy-in because a new solution is expensive.

So what can you do?

2. Use a cloud-based digital estimating construction software

When you use cloud-based digital estimating construction software, all estimation data stays in one place because they’re available 24/7. Anyone can access information at any time and any place whether individuals are in the office or out on the job-site. Everyone is always on the same page, working with the same information, all of which is available in real-time. There’s no longer the profit margin zapping from your current system of spreadsheets and paper-based processes, all of which cause errors.

3. Use digital takeoffs

Having a solid takeoff is one of the most important things in an estimate. According to Delta University, the use of automation tools is highly recommended.

Regular manual takeoffs often take 2-3 weeks to complete prior to review. Estimators can have 50% faster digital takeoffs and eliminate costly manual takeoffs. In fact, takeoffs that once took weeks are often reduced to days or, in some instances, in a few hours.

Estimators need to accurately calculate the amounts of things like equipment, concrete, wood, roofing materials, wiring, plumbing supplies, and even the smallest things like hinges, screws, and nails.

Estimation software gives you significant improvement over your current manual takeoffs. You see project plans automatically, so when It’s paperless, so there’s no need to work with paper blueprints. Estimators can use one set of drawings across their teams, so everyone is on the same page with one set of drawings.

4. Create accurate estimates

Not sure why you keep losing bids?

One of the first places to look is your estimating process. If you’re still using spreadsheets, you have more problems than you can shake a stick at.

It’s a well-known fact that human error is something that you can’t afford when it comes to well-produced estimates. Spreadsheets are error-prone. All it takes is one incorrectly entered cell or formula, and the entire estimating process can fail, especially when you have multiple people working in one spreadsheet.

You lose money because of miscalculations from these unreliable spreadsheets.

Poorly estimated estimates can spell disaster for profits and your reputation. For example, a project in the State of California to build a veterans home was estimated to cost $118 million. However, the project’s final cost was more than $230 million.

The problem: a severely inaccurate estimate due to incorrect data.

In going to digital software, you automatically eliminate those spreadsheet errors. The estimate data is also accessible by anyone, any time, any place. So anyone in the office and on the job-site can view estimates in real-time. Plus your estimators aren’t chasing data that’s scattered all over different platforms and individual files.

What are some benefits of creating accurate estimates?

  • Create rapid, competitive, accurate estimates.
  • Store all estimate information in one database.
  • Eliminate errors.
  • Search by estimate code, description, estimate, or type of work.
  • Complete data storage.
  • Improved data integration.

Increased bid wins turn into increased profit margin.

5. Establish automated workflows

Over recent years, workflow management has transformed from pencil, paper, and spreadsheets to digital software that automates this process. Digital workflows:

  • Eliminate bottlenecks.
  • Improve how people collaborate to get things done.
  • Enable the projects to smoothly flow from one stage to the next.
  • Make individuals accountable for their work in projects.

This can be thought of like the Gantt chart: record the jobs being done, who’s responsible, and the time taken, only in digital form.

In moving away from paper, digital workflows eliminate the time-consuming work with numerous forms and other documents that waste capital.

Juggling for success

Today’s commercial construction companies have digital software like ProEst to help transform the way they do business with their projects. Rather than fighting a losing battle with the juggling act, you can improve your estimating processes and move away from manual ways of doing business. Estimating software saves you time, money, and improves your profit margin.

If you would like to learn about increasing your commercial construction profit margin, feel free to reach out to ProEst and schedule a free 1-on-1 demo with one of our specialists today!