How to Make Money in Construction: 10 Tips to Boost Profits

1. Optimize your bidding and estimating process

To make money in construction, the first step is to accurately estimate your upcoming projects. Whether you’re pricing out a kitchen remodel or a full home renovation, accurate bids help you win jobs and ensure you’ll turn a profit on every project.

Improve the accuracy of your estimates

Create accurate estimates that take into account all of your expenses for the job—including materials, labor, overhead, and markup.

Start with a detailed scope of work for the project. What will you need to purchase for each phase of the job, from site preparation to the finishing details?

Next, perform a material takeoff by thoroughly reviewing any construction drawings and job specifications. Once you know exactly what materials you’ll need on the job, get quotes from suppliers to make sure you’re accounting for accurate costs.

For larger or long-term projects, factor in fluctuating material prices and potential delays. Include a contingency fund in your estimate to account for any potential issues or changes. Contingencies are typically around 5-10% of the project cost.

Lastly, don’t forget to review past projects. Did you consistently underestimate labor on bathroom remodels? Or overestimate the amount of drywall for new builds? By analyzing where you’ve miscalculated before, you’ll become better at predicting future costs.

Know your overhead costs

Don’t get caught up in the excitement of winning a bid and then forget to properly calculate your overhead. It’s not just about covering the job cost (material cost and labor cost)—your overhead expenses are indirect costs that include things like:

• Cell phone bills
• Gas
• Insurance
• Rent
• Repairs and maintenance
• Software
• Utility costs
• Vehicle leases

2. Enhance your project planning and management

Whether you’re managing a kitchen remodel or a full commercial build, planning will keep projects on time and on budget.

Take the time to map out every stage of the project. For example, let’s say you’re doing a bathroom renovation. Not only do you need to schedule the plumbing and electrical work, but you need to coordinate when materials like tiles and fixtures arrive too.

Identify roadblocks before they happen to save you time and money.

Communicate

One of the biggest reasons projects get delayed or go over budget is poor communication. Establishing communication channels with your team and subcontractors will ensure everyone is on the same page. This will also build trust with clients, which can lead to repeat business.

When everyone knows exactly what’s happening, you minimize any misunderstandings and keep projects moving forward.

Implement lean construction principles

Lean principles help you maximize value for the client while reducing waste. This means improving workflow, eliminating unnecessary steps, and ensuring the efficient use of materials and labor.

If you’re working on a new home build, for example, coordinating material deliveries to arrive in time for each phase of the project can help reduce storage costs. Streamline your operations and cut out the waste. You’ll finish jobs faster and increase profitability to make money in construction efficiently.

3. Boost operational efficiency

Running a construction business is all about getting the job done on time and within budget. Your operations need to be as efficient as possible, and two ways to do this are material management and better scheduling.

Manage your materials

Proper material management can make or break your projects’ timelines and budgets. Over-ordering, under-ordering, and letting your materials sit around unused can all lead to delays and wasted resources.

Assume you’re doing a home remodel. By ordering the right amount of lumber and drywall ahead of time, you’ll prevent delays that could happen if you run out of materials in the middle of the job.

Establish strong relationships with your suppliers. By working closely with them, you can coordinate deliveries to arrive exactly when needed, which minimizes downtime and cuts down on waste.

Improve productivity with better scheduling

Better scheduling reduces downtime, helps you stay on track, and lets you take on more jobs without adding stress. Consider the following:

• Use scheduling software: Invest in scheduling software to keep track of tasks, assign jobs to crews, and monitor progress in real-time. Features like automated notifications keep the team informed of any last-minute changes.
• Standardize your scheduling process: Develop a streamlined system for managing your daily schedules. This means clearly logging project details, tracking deadlines, and making sure all the necessary materials and workers are lined up for the job. A well-organized system prevents double bookings and helps you meet project deadlines.
• Reduce travel time: Minimize unnecessary downtime, such as long gaps between tasks. You can use Jobber’s route optimization feature to help you group jobs by location, saving both time and costs in fuel.

4. Set up progressive billing

Strong financial management is essential to keeping your construction business running smoothly. It’s not just about making good money in construction but also balancing your cash flow.

You need to have enough money coming in to cover expenses like materials, labor, and equipment. One way to improve cash flow is by setting up progressive billing. Instead of waiting until the end of a project to invoice the client, progressive billing breaks the total contract amount into installments that are billed out as the work progresses. This allows you to receive payments at specified milestones or intervals throughout the project to help keep cash flowing.

For example, if you’re working on a home renovation, break the project into parts—like framing, electrical, and finishing—and invoice after each phase. You get paid while the work is still in progress.

5. Find your niche market

Finding a niche is one of the best ways to position your business to make a lot of money in construction.

Specializing can set you apart from competitors and allow you to charge higher rates for your expertise. For example, if you’re known for being the best at historical home restorations, you’ll attract clients willing to pay a premium for that.

Think about what sets your team apart. Consider areas where demand is growing, such as modular construction or smart home technology.

Offer maintenance and management services

Once a project is done, the work doesn’t have to stop there. Offering maintenance and facility management services to your clients can be an excellent way to generate recurring revenue.

Let’s say you complete a commercial building project. You could offer a regular maintenance package to ensure everything runs smoothly, from HVAC systems to plumbing. This gives you the opportunity to stay involved with the client, building a relationship that could lead to more projects down the road.

6. Strengthen your workforce

A strong team will be the backbone of your construction business. By investing in your workers and building relationships with reliable subcontractors, your projects will stay on schedule and meet your quality standards.

Try these tips:

• Keep your crew up to date on the latest construction techniques and technologies.
• Offer training for safety equipment, new tools, and management software to boost productivity.
• Focus on developing new skills, such as project management or advanced equipment operation, for long-term success.
• Work with subcontractors who consistently deliver quality work on time and within budget.
• Be transparent with subcontractors about expectations to avoid any misunderstandings.
• Strengthen relationships with subcontractors by treating them as valued team members.

READ MORE: Subcontractors vs. employees—A complete overview

7. Build trust with clients

Take the time to understand what really matters to your client. Let’s say you’re discussing a basement renovation. Do they want a space to entertain guests or to rent to tenants? A complete bathroom makeover? Do they have foundation or moisture issues?

Find out what’s most important to your prospect and where the real value is for them. This will help you establish trust and your professional authority and set clear expectations for the project and your services.

8. Take a consultative approach

The well-established power of the consultative sales process can be a game changer for tradespeople competing in a market where, all too often, professional sales savvy is lacking.

Follow these tips to make money in construction and close sales faster:

• Target intelligently. Smart salespeople concentrate on prospects with a high probability of closing who offer a good return on investment. That means don’t work with just anybody. Work with clients who are serious about their renovation.
• Show up on time. If you say you’ll be there at 10 a.m. on Monday for a 30-minute appointment to discuss the options, do it without fail.
• Deliver proposals promptly. Anyone can write down a quote. Provide customers with a detailed quote, delivered when you say it will be delivered.
• Follow up. During the initial meeting, let the customer know you’ll follow up with them once they’ve reviewed the proposal. Then, schedule a call or visit to answer any questions they have.
• Add value from the first contact. Offer your prospect something they desire from the very first contact. This can be things like immediately getting back to them, delivering material samples, or recommending paint colors tailored to their project vision.
• Explore the possibilities. Rather than assume you know what your prospect wants, take the time to explore different options until you find one they can get excited about. This is the beauty of the consultative process. Doing this lays the groundwork for a sale because you know exactly what your client wants.
• Collaborate. Invite your customer to participate in creating the ideal solution. When your clients feel like they’re a part of a project, they’ll be happier with the outcomes you create.
• Provide confirmation. Confirm every decision as you go. By the time you reach the end of the sales process, most objections will have been overcome because the customer’s buying criteria have already been met.
• Stay in touch. Once the sale is done, stay in touch with the customer. Talk to them about delivery dates and invite them to track the progress of their project in client hub. You’ll make the customer feel good about their purchase and deepen your relationship with them.

9. Expand your business network

Expanding your network in the community can boost the visibility of your construction business and get you more referrals.

• Join industry associations: Get access to resources, training, and events where you can meet potential clients, partners, and suppliers. Stay informed about industry trends and gain insights from other professionals. Find job opportunities at networking events, such as partnerships and subcontracting work.
• Build relationships with suppliers and contractors: Get better deals on materials and reliable deliveries. Partner with other contractors to share resources and advice on challenging projects.
• Collaborate on larger projects: Team up on bigger jobs to gain experience and boost your visibility in the industry. Work on high-profile or complex projects to showcase your skills to a broader audience.

READ MORE: How to make money as a general contractor

10. Take advantage of construction management software

Some contractors still rely on pen-and-paper methods to estimate job costs, but construction management software can make the bidding process faster and more accurate.

For example, Jobber can help you input data like material costs, labor rates, and subcontractor fees. Then, it automatically generates a detailed bid. Track changes as the construction project progresses, so if a client asks for additional work like installing new flooring or upgrading fixtures, you can quickly adjust the estimate.

Software not only saves you time but also helps prevent scope creep, where costs can spiral out of control.

Ryaan Tuttle of Best Handyman Boston goes full throttle on his tech game: