Net Profits - Four Major Levers

Increasing net profits for contractors comes down to four major levers that can be pulled.

D. Brown Management Profile Picture
D. Brown Management
April 17, 2018 2 minute read
Share
Leadership Tools: Four Basic Profit Levers. Like operating a backhoe; use all four levers simultaneously.
  1. Increase quality revenue up to the point where it stretches your operational capacity.  Not revenue for the sake of revenue but revenue in alignment with your market strategy and capabilities.  Not stretching to the point of breaking but just enough to allow you to grow. 
  2. Increase the “Sold Margin” on projects by finding the customers that will pay the most for the capabilities that you have and by building capabilities that the market places a higher value upon like advanced preconstruction services. 
  3. Decrease the cost of building project through investments in talent, training, process streamlining, tools and technology.  
  4. Decrease the cost of overhead and indirects in both absolute dollars by looking at every cost and asking how it truly adds value to the customer.  Be careful not to “over-cut” and create a hollow organization that will impact future growth.  

All are interrelated and seem simple on the surface. 

A 3rd party perspective can be helpful for assessment and planning purposes

006 - Job Descriptions for Construction Contractors
Clear job roles are vital for career and business success. Each growth stage raises the stakes. Describing a role is simple, integrating roles is complex. Get 3+ hours of examples and 50+ resources to build on prior modules and keep you growing.
Related Article
A Broader Definition of a Change on a Construction Project
The first step for contractors improving their management of changes on a project is simply earlier identification. This starts with a better definition of what a change really is, and then setting standards within your company around that definition.
Related Article
Early Identification is a Process - Effectively Using Checklists
Few things will improve customer satisfaction, profitability, cash flow, risk, and team stress more than early identification of change orders. This is a process and a trainable skill. Checklists are some of the most valuable tools in that process.
Related Article