Labor, materials, vehicles, payroll…so many expenditures that want to chew up your profit. Some of these costs are unavoidable, and as your company grows and expands, these costs can as well. It’s frustrating because we grow our contracting businesses in order to create good jobs for people, provide a valuable service to members of our community and – let’s face it – put a few more dollars in our pockets. But if our expenses increase the more we grow, how is it possible to bank some of that additional revenue?
Well, don’t be discouraged. I’ve been doing this for decades and managed to make myself a very comfortable living. Here are just four ways to keep more of that money in your pocket.
Don’t Get An Office Until You NEED To
All too often, I see newer contractors insisting that they need an office space to operate their business. And while I would never disagree that it is certainly a convenience, I would argue that it’s not a necessity. When I started my business, I got caught up in the notion that I needed to have a physical location to build credibility with my team and my customers. But at $1,000 per month minimum when you look at rent, internet, electrical, insurance and more (and that’s on the low side for sure), that’s a lot of money right out of the gate!
So for nearly two years, we operated remotely: we had our team meetings at restaurants, worked out of coffee shops and from home offices, and linked up in the field with my teams. And it worked! Sure, we had a few customers that didn’t want to work with us because we didn’t seem legitimate enough, but you’ll always lose a few. However, the money we saved allowed us to grow our business and generate more sales, ultimately leading to better cash flow and more profit.
Keep An Eye On Your Overhead And Avoid Fixed Costs When Possible
The office example above is probably the best, but there are other areas where fixed costs can add up, such as having too many office staff, company vehicles, cell phones, laptops, equipment, and more. These are recurring costs that hit you over and over again each month or quarter.
Every business setup is different. For example, using subcontractors as opposed to employees will create different sets of fixed costs. But generally speaking, if you can keep costs variable, you can manage your profit more easily and reduce your immediate costs. Some examples of this include paying commissions as a percentage of the profit, or using a price-per-square-foot model on labor.
Agree To Reasonable And Fixed Terms With Your Crews BEFORE The Job Starts
Make sure you nail down any pricing scenarios that could come up on a job before you let your roofing crew get to work. Make sure you understand up front if they charge more or less for different pitches and what those chargers are, or know how they calculate the square count when they are counting materials.
For example: you sell a job to the customer at 25 squares, which includes waste factors. Your crew goes out and they put on 25 squares at $80 per square. But they bill you for 27 squares because they count the three bundles of starter shingles and the 3 bundles of ridge cap as “squares.” Suddenly, you’re out $160 from profit.
Before anyone climbs a ladder, you have to have a thorough understanding of things like how much skylight replacement costs, which chimney flashings are used for different types of chimneys…any cost that is going to go into the job. In addition, make sure you know what the market averages are so that you aren’t getting ripped off. That way you can price your jobs to account for the actual pricing.
Monitor Your Material Usage
Roofing, and most construction projects for that matter, generally produce a significant amount of waste. This is mostly due to the fact that you have to buy material by packaged quantities and it very rarely ends up that you use every bit of it on a job. But you can save money by using that waste. If you are doing a few roofing jobs per month, roll around with those extra bundles of starter shingles and ask your crew to use them before they open new bundles. Drop off those half rolls of underlayment or ice and water shield and use them up before getting into the new rolls. If you do 5 roofs per month and save $100 per roof just by rolling materials, that’s $6,000 in profit for the year.
BONUS TIP: Bid The Job Right In The First Place!
Nothing sucks more than finishing a job and making no money. Learn how to put together effective proposals that reflect the costs of your business accurately. If you need help figuring that out or want someone who can just flat out do that for you…call us 🙂
Tips like these are going to help you keep more of the money you earn when you expand your business. But it also takes a plan that’s unique to your business, your skills and your community. Give me a call and let me show you how to grow your contracting business to seven figures – just like I did.