5 Steps Toward Making Your General Contracting Business More Profitable

March 23, 2020

5 Steps Toward Making Your General Contracting Business More Profitable

As a business owner, boosting your profitability is a daunting goal. Maybe you’re thinking about it because you’ve found yourself in a kind of profit rut or maybe you haven’t had much luck standardizing your margins whatsoever. Regardless of why you’re thinking about it, there’s no silver bullet when it comes to making your business permanently more profitable. But there are steps you can take to set yourself up for success. Let’s break them down.

Engage in proper job costing:

Job costing, if you’re not already familiar, is the process of calculating the total cost of a specific project for your business. In order to effectively job cost, you’ll need to take a look at each step of the construction process, from blueprinting all the way through build out.

That’ll involve taking into account the cost of materials, the cost of your time (and overhead) and, perhaps the most crucial, the cost of labor. Each of these things should be looked at comprehensively. Calculating your labor cost, for example, isn’t as simple as multiplying an hourly wage by the number of subcontractors on the job. It’s important to take into account parallel costs like taxes, insurance, overtime, and workers’ compensation (not doing so is a common but harmful mistake). You’ll also want to take into consideration any specific cues from the homeowner: what kind of materials do they have a preference for? How flexible or inflexible is their budget?

Knowing your costs helps you hone your profit margin, and having the facts and numbers in front of you ensures you won’t be shorting yourself by presenting a homeowner with a lower-than-necessary estimate of your rate.

Bid better:

Your ability to bid well is deeply connected to the accuracy of the data you’ve got on hand. While placing bids on as many jobs as you can might yield more work, don’t just cross your fingers, dole out a number and then run it. If you’re unable to undergo thorough job costing before you place your bid, work with what you know: the cost of materials, the cost of labor, your overhead. Ultimately, the goal here is to bid with a very real sense of your costs so you can widen your profitability margin.

Estimating software, like CoConstruct or Esticom, is another resource for general contractors looking to place informed bids. Those systems allow contractors either to access existing data or record their own data around the cost of project building blocks like material and labor.

Set goals:

So you’ve set out to make your construction business more profitable. That’s an important first step, and an important first goal to set. But it’s a wide-reaching one. Consider setting a series of smaller goals that will help you take steps toward increasing your business’s profit margin.

You might begin with the numbers: once you know them, work with them. If you don’t know them, consider job costing an appropriate additional goal. You might aim to encourage more efficiency on the job sight, or aim to network with potential clients a little bit more each week, and so forth.

Once you have an understanding of comprehensive job costs, you might set a larger goal to bid with a 4 or 5 percent profitability margin—whatever represents an increase for your company.


Don’t shy away from spending money in order to make money. That doesn’t mean stockpiling credit card debt, but you should invest in your company in order for it to perform at a higher capacity, or to enable yourself to do more qualitative work. That means not skimping on the tools in your belt, both literally and metaphorically.

Start with equipment; that might mean physical tools, like saws and belts, but it also extends over into relevant software systems and apps that you know will help you boost business or your profitability margin. Apps like Punch List, for example, are excellent investments for general contractors working on home remodels: for under $50 per project, you can collaborate with homeowners on renovation details like project stages, budget, and progress. The app also provides a direct message function, encouraging instant communication, which means faster approval for your work. Homeowners can also fulfill invoices in the app, meaning you’re paid faster than ever for your work.

Accept digital payments:

Today, digital payments are a mainstream form of payment in almost every industry: they’re quick, secure, and generally easy to conduct, especially with the help of technology.

A quick search for construction management software will conjure up a number of solid systems. Punch List, though, is the only app-based construction management software that’s creating a digital payment system catered specifically to general contractors.

Digital invoices are generated automatically following owner approval of project work. Homeowners can pay their contractors within the app immediately. That means you’ll have access to cash flow for your business faster than you’ve likely ever had. No more delay in payment; no more taking out loans or dipping into your own resources to cover the cost of materials or labor. It’s a pretty sure fire way to widen those profitability margins.

The most important step you can take toward making your business more profitable is to know what you’re working with now. It’ll be difficult to improve if you’re not sure what kind of launching pad you’ve got to work with.

That means start with the numbers, and build with them: know your costs, and use them to better your bids, set your goals, and invest what you can. And there’s no better way to get a firm grasp on your profit margin than with digital payments. Punch List, for example, can help ensure you’re getting paid faster than ever before, freeing up that money to continue growing your business and widening those margins.