3 Ways For Construction Businesses To Cut Costs

Editors Note

This is an article about operational efficiencies in a construction business.

On a startup blog.

I can understand your confusion as to why that is…

Truth be told, there are a lot of efficiencies that traditional businesses use, that startups take for granted. These are things that can help maximize your margins, protect your bottom line, and ultimately save your business in the long run.

Yes, this is about construction. But the lessons here are applicable to all startups.

One of the main reasons that construction companies run into trouble is that their overheads are too high. It takes a lot of investment to set up a construction company and you need to spend a lot of money on materials and equipment before you can start seeing any kind of a return. If you let your costs get out of control, you could easily end up running out of money and folding completely. But as long as you can find ways to manage your costs and cut spending where possible, you can survive long enough to start making a profit. These are some of the best ways for construction companies to cut their spending.

Ask For A Deposit

The difficulty with construction is that you’re going to get paid for the job once you’ve finished, which means that you need to cover all of the costs of materials and equipment before you get started. But if you ask customers for a deposit to cover a lot of those costs, it’s a lot easier to manage. Some people don’t like the idea of paying a deposit but if it’s a big job, you just need to explain that you need the money for some of the materials upfront so you can manage your cash flow properly. It’s important that you give the customer a breakdown of the costs so they know exactly what they’re paying for and they should be fine.

Financing Options

If you’re paying for all of your machinery upfront, you’re going to run out of cash quickly. But if you can find plant machinery finance options, it makes the costs a lot more manageable. If you’re doing larger jobs and you need expensive equipment for them, paying for it with a loan and then repaying that over time is the best way to do it. You’ll be able to start earning some money from that equipment before you need to pay for it all.

Managing Staff Costs

You’re going to need to hire specialists like electricians and plumbers for certain jobs if you can’t do those things for yourself, but you’ve got to be careful about managing staff costs. You can save yourself a lot of money if you hire multiskilled workers that can do a lot of different jobs around the site. The way that you manage your staff has a big impact as well. If you’re not motivating your team properly, the job is going to take a lot longer and that means you’ll be paying people for longer than you need to. But if you can ensure that your staff members are productive on site, you won’t have to pay them for as many days.

Often, it’s a good idea to hire people for a certain period of time and make that clear from the beginning. For example, if you bring an electrician in to do the wiring for an extension, make it clear that you need the work completed in a month and that’s what you’ll be paying them for.

If you can make these simple changes in your business to cut costs, you’ll have a much higher chance of surviving long enough to make a profit.

This is a contributed post.