How to Improve your Construction Firms Profitability

Every economist will tell you that the key to making more money than you make today is to increase your productivity. So, just how the heck do you do that? The answer is simple, improve how you do business. For small construction firms, the major deficiency that I see in their processes is how they do bids.

Most small firms don’t know what it costs them to bid a job. Absolutely no clue! Some of them can ball park what the last one cost, but they could not even hazard a guess on what their annual cost is. So, if everybody is bad does it make a difference? The answer is yes, if you want to make more money than the rest of the industry.

Just picture what an advantage you would have, not only knowing what it costs to bid, but having the cheapest bid system around. You could bid more often than your competitors for the same amount of money. You could also know when it’s profitable to bid and when it’s not. Just think about what this advantage could do for your bottom line over the life time of your business.

Once you begin to realize how important your bid process is to your firm, the next question is how do you make it more productive. The answer to this will never be a cookie cutter approach of downloading some software package from the web and begin pounding away. The problem is that many factors come into developing a better process that must be customized to your business and its strengths and weaknesses. Here are a few of the things to think about when it comes to getting started on improving your process.

1. This project will never be complete. Nature never remains static and your business is part of nature and always changing. Therefore, you should adopt a mindset that your bid process will always need more improvements and you need tools built into that process to monitor how it is doing.

2. It is the entire process and how it works together that determines its productivity. Bidding does involve a lot of accounting and software will be a major part of the process. But a lot of other factors are also included such as how experienced are the field people at inspecting the site and how efficiently are they scheduled for those visits.

3. Every business process has an error rate and fixing errors are far more costly than getting it right the first time. Your bid process should be able to monitor this error rate and its costs.

4. Your business and its bid process are unique to every other business. Given the cost of bidding and the potential benefit of getting it right, this is probably great time to consider outside help to get a customized approach to making bids more affordable.