You are not in business for the fun of it, even though building can be immensely satisfying. So, it’s only wise to seek ways to improve your profit margin and increase your home building business over time. After all, the law of diminishing returns never made sense in business.
Rather than working harder longer, embrace ideas that are smart and logical, and institute procedures that make the business of building easier.
Here are some suggestions:
1. Eliminate Crisis Management
Technology has had a dramatic and positive effect on designing, planning, scheduling, supervising and controlling a project, both from the office and on the building site. Think of the benefits of portable tablets and smart phones on the jobsite; and thank sophisticated software for the ease with which you can generate detailed reports, schedule your employees and subcontractors, compare costs of materials, produce orders, and manage contracts, change orders and people. If you still spend too much time “putting out fires” and solving problems, practice delegating tasks to gain time and perspective, or enroll in a management class to improve your skills and reassess your company’s needs.
2. Build Adequate ‘Slip’ Into Schedules
Home builders are as subject to the vagaries of weather as farmers, but there’s little you can do about Mother Nature’s wrath. An overly tight schedule not only adds additional stress, but can increase costs dramatically. It’s true that time is money, but it’s also true that “haste makes waste.” Whether you must pay overtime or correct mistakes, it can cost money to save time! Build in extra time at the beginning: Rarely, if ever, will a customer be upset if you finish a job ahead of schedule.
3. Find What Works — For You
Your company is unique, and your gross margin will be determined by your own unique situation. Don’t make the mistake of equating gross margin with profit at year end. Don’t worry about hitting a “magic number,” but always consider reasonable ways to streamline your operation and boost the bottom line. A savings of two or three percentage points on each job can mean substantial dollars on your balance sheet at the end of the year. Keep looking for new ways to implement cost-saving ideas. Saving dollars in small increments is what leads to lean management and impressive margins. But it all takes time. Remember the story of the hare and the tortoise? Take it to heart if you’re in it for the whole race rather than just the sprint.
4. Master Accounting
No, we don’t for a moment suggest that you manage your business accounting yourself. In fact, we recommend just the opposite. Every builder ought to employ a professional with expertise in construction accounting. You need that expertise, just as you need to understand the difference between job margins, fixed operating costs, earned income and net profit. It’s vital. A knowledgeable CPA with tax expertise is an expense you cannot afford to skimp on, so make it a priority. And remember that you’re paying for expert advice, so follow that advice! You don’t need a master’s degree in accounting yourself, but you do need to know basic principles.
5. Fix Broken Processes
Unless you’re a real novice, you will instinctively know when something needs fixing. The actual fix may be difficult, but the sooner you face it, the better the result will be, whether it involves a personnel change, a procedural redirect, or passing on a job that spells trouble. Constantly analyze the way your business operates, with both formal reviews and through informal troubleshooting with your team. It’s enlightening and empowering.
6. Finally, Partner with Others to Add Benefit
We at Aterra specialize in adding value to your electrical and lighting design process. We work with lighting industry giants, builders, electrical subcontractors and clients to enhance the design and simplify the process of building modern energy-efficient, smart homes. Our expertise and benefits are proven and we have an exemplary track record, resulting in a higher satisfaction quotient and a healthier bottom line. We think it’s a smart way to build better homes.