4 Tips that Can Save Your Contracting Business

These simple tips could greatly improve your chances for business success.

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We all know we are in a whole new world, from marketing to employees to competition and pricing—not to mention how things have changed during the pandemic. But despite all of the changes, the basics of running a business still hold true: Sell a service—and make a profit.

Seems simple, right?

Well, yes and no. I could go on and on with tips and tricks I’ve learned over the years that can help fine-tune any operation. But if you don’t follow the most-important tips, any other tweaks, secrets and insights won’t help you very much. Focusing your efforts on these four areas will lay the groundwork for your success.

1. Job Costing

In a nutshell, you need to know your costs. Sounds obvious and simple, but it might surprise you that most people don't, and those that do will always have an advantage in bidding and, ultimately, success. 

Remember, the name of the game is profit, and if you don’t know what it costs to complete a job, there’s no way you can know how much profit that job generated. So, you want to take the time to analyze your operation and look at every single cost you might incur.

Some might be annual costs, some might be monthly. Some are direct costs, and some are indirect. Typically, job costing is broken down into Labor, Materials, and Overhead. These can be broken down even further, but again, the important thing is accounting for everything. (I even suggest to fellow owners that they charge themselves a repair-and-replacement fee for every piece of equipment they own!)

Once you have identified all of your costs, you can generate a monthly total, weekly total, or even daily total of what it costs to operate your business. This is very important as it will help you in creating your estimates. Just think: If you don't know what the day is going to cost, how can you provide an accurate estimate for the work you’re going to do?  You run the big risk of losing money—and it’s a very real risk that happens to many people daily.

Job costing typically has a few primary goals:

  • Understand profit or loss of each job. Job costing looks at each element involved in a specific project so you can properly track profitability.
  • Uncover inefficiencies and excess costs. These can then be trimmed or adjusted to improve profitability.
  • Fine-tune estimating. By successfully analyzing costs you can estimate more accurately. That means you can better price jobs in the future.
  • The purpose of job costing is to ascertain the profit or loss made on each job -- hopefully never a loss!

2. Be Lean and Mean! 

Anyone that knows me, knows my favorite phrase is “be lean and mean!” Work to keep your costs manageable and in check, while maintaining a healthy, growing company. Be cautious of one of the silent killers, uncontrolled growth. Like many contractors, I once suffered from this and survived—but not everybody does.

Why don’t some survive? First, they don’t know their costs, so their estimating is always off, often to the point of losing money on each job (or even losing jobs by estimating too high). But due to the dollar value of most asphalt or striping jobs, and the number of jobs done each week, cash flows in regularly so people often don’t realize they’re losing money until it’s too late.

Money comes in – but eventually goes out. Just because your bank account has tens of thousands of dollars doesn’t mean it’s all yours. In fact, if you have lost money, it’s possible none of it is yours to keep.

What happens is people use this illusion of “money in the bank” to grow rapidly (and in an uncontrolled way). They’ll be out spending like no other -- new trucks, new tanks, new stripers etc. – and now they have compounded the problem by adding to their overhead with new iron that they really couldn't afford.   

3. Scheduling 

This is so critical. Many of us work in seasonal regions, so the number of days we have to work each year is limited. In my market we have about 100 working days a season.  So, if I don’t schedule properly, figuring out how to make the most of each day, I’ll never achieve my goals or get to where I want to be. There are many really great scheduling programs, but we stick with Google Calendar, which enables us to drag-and-drop to adjust our schedule on the fly.

The more organized you are, the more money you will make, hands down. Proper scheduling also allows you to work leaner and meaner because you can better allocate resources. And a nice side benefit is you won’t burn your crews out. All too often owners will overschedule, trying to cram work in. Doing so creates burnout, which reduces productivity.  

4. Productivity

With proper scheduling and organization comes productivity. Every business experiences things that are out of its control, such as weather or mechanical breakdowns. The key is that when you are working, you are very focused and driven to achieve your goals.

By following the previous three steps, you are setting yourself up to be as productive as possible. You have job costed and estimated properly, you have watched your costs to stay lean and mean, and you have scheduled appropriately to make the most of each day without burning out your crews (or yourself). By planning and thinking about the details, productivity will generally fall into place. 

Who would have thought, four simple tips could greatly improve your chances for success? It did for me, and I would encourage you to do it for yourself and reap the rewards.