When you start your construction company, you invested in tools and equipment to build projects. Who cares what your numbers are six months after you complete your jobs. Know your numbers are accurate and timely! How much revenue at what mark-up do you need to cover your overhead and then make a profit? The total annual sales required is determined by the annual overhead and profit you want divided by the gross profit margin you can get in the market you compete in.
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Do you know your labor, crew and equipment costs? How much does it cost to have a crew on a job per day? How much does it cost to own your trucks, tools and equipment? How many hours does it take your crew to install a new furnace? 3. Know your costs!īidding work starts with knowing accurately how much it costs to actually build work. You need to balance your overhead and profit goals with your mark-up and sales to end up at year end with the profits you want on your income statement. Bidding lots of jobs won’t make your numbers work. You must know how much mark-up you need to cover your overhead and profit for the year. The following numbers you must know, track and review on an ongoing weekly and monthly basis, even if you hate numbers! 1. But the odds they hit a jackpot, win the lottery, or inherit a fortune to create profits, are better than continuing to run their businesses without focusing on numbers. It seems as if business owners hope hard work will eventually make them money. Too many shops do great work, with excellent quality, and make too little money because they don’t know their costs, and how much they need to charge to make a profit at the end of the year. Unless your goal is to be busy and broke, you must spend an equal amount of time focused on accounting, financials, and job costs. Knowing and tracking your numbers must be the number one priority for construction business owners to be successful.
Secondly, after you land a contract, it takes more hard work and time to get everything ordered, subcontracted, scheduled, installed, completed, and paid.Īll this effort to find and do work leaves little time to focus on the third and most important function required to make a profit.
And then you lament over how much to mark-up or cut your bid to beat your competition. Then it takes more effort to estimate and put together a competitive bid. Pounding the pavement to find good projects to bid is hard work. Most construction company owners and managers spend most of their working hours on two of the three required operational functions is takes to make a profit and grow their companies.
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