There are two ways to make more money per job
- Increase Your Revenue
- Cut Costs
Most people think that working longer hours is the answer… This couldn't be further from the truth
Here are 27 Tips to make more money in your building/construction company.
All 27 tips are structured into six ‘during the job’ categories:
So, here they are… in no particular order…
#1 – Lengthen Working Hours
The aim for everyone is to work 44 hours a week minimum 7:30-5pm Monday – Thursday
finish at 4 on a Friday; 1 hour extra Monday – Thursday = 4hrs. 4hrs x5 guys = 20 hours, 20hrs x50 week = 1,000 hrs, 1,000 hrs @ $50/hr = $50k, Net result $45k. If you pay your guys an extra $20/week incentive to work the extra 4 hrs =$20 x 5guys x 50weeks =$5k/year stick to set smoko times; (E.g. ½ hour earlier, a ½ hour later). Request & ensure that everyone is ready to start on time (i.e. arrive at 7.15am for a 7.30am start).
Example with Russell Clark, the owner of Licensed Renovations, sets his guys to work 44 hours per week, regardless if staff are contractors or on wages. He sets down expectations of the work hours. E.g. 7:30 – 5:00 with set smoko times. See TPB’s ‘Rules of the Game’ on the Membership Site.
Download fully alterable checklists from the TPB Members Website
#2 Time Control of Labour
Let everyone on site know the labour allocation for each task. (E.g. FORECAST -framing 70 hours, int. 100hrs, Ext clad. 80hrs). And Align the labour allocation with individual ability – who does what? Skill level vs. charge-out rate; Keep daily site logs; Encourage efficiency by introducing incentives to save labour time (E.g. $20 @ Toolbox meeting for any great ideas implemented). Encourage punctuality (don’t let the team down), and check productivity by breaking the job down by stage in real time/ back costing in real time.
Use online project management software, or you can download a Daily Site Log from TPB’s Membership Site.
Forecast his hours for the job (or get him to forecast his own) – for any time saved at the end of a job, he gets 20%of the labour saved (see later on in-depth).
Get workers to check workmanship by filling out your company’s quality control checklist
#3 – Quality Control of Labour
Get the right guy for the right job the correct task for pay rate and Introduce incentives for apprentices to not make mistakes (e.g. tool purchases/allowance). Hire allocate labour to match the skill level required (e.g. apprentices/labourers/hammer hands-on demos and Jumbo bins. Make sure the onsite foreman is intimate with the job and knows the scope (take him through the plans and contract before starting); Daily task lists plan everyone’s day based on experience, minimum 2 days in advance and also timetable & GANTT chart visible to everyone.
“IF YOU THINK IT’S EXPENSIVE TO HIRE A PROFESSIONAL, WAIT UNTIL YOU HIRE AN AMATEUR”
#4 – Free Use of slave Labour
To be found through ‘work experience’ E.g. university students (studying construction/architecture/design) Through the ‘Gateway program’ (work placement through BCITO) bcito.org.nz/schools-and-providers/gateway-programmed and can help with easy tasks such as cleaning the site, setting up, purchasing materials, coffee run, even if just in the office (marketing/admin.) Be aware of health & safety issues if on-site & make sure the appropriate systems are in place.
Keep everyone on-track and on-time by using cloud-based Project Management software
#5 – Use Project Management Software
Define your KPI’s, know your numbers and respond accordingly. E.g. if framing runs over by 20+ hours, address this in a toolbox meeting – ask your guys how to get the hours back and enable All staff and subbies (and even clients) to have access to your PM software so they can feel ‘in the know’ & can see how everyone’s part is ‘part of the whole’. This Creates much higher motivation & buy-in during the build. (E.g. Buildertrend, Co-Construct, RaveBuild or Microsoft Project.
Check the TPB members exclusive Facebook group for top tips from clients and TPB Gurus
#6 – Order Efficiently
Order with profit in mind accurately, detailed and complete to save unnecessary trips to suppliers; Track the materials going into the job, and order in bulk to save on transport check invoices for variances in materials – get the Foreman to check the dockets to ensure that what was ordered is actually on site; Price checking with merchants – every 90 days send plans to Place makers/ITM/Carters etc. to price check a job (e.g. for a 150sqm project) and Check your ‘Terms of Credit’. Use your credit card to get an extra 30-50 days credit; Negotiate free delivery for orders over $1,500 and don’t order on the 31st of the month, the order at the beginning of the month e.g. 1st – 15th to maximize.
Order materials as early as possible to avoid delays E.g. scaffolding costs can blow out if windows, cladding, roofing, etc. are delayed.
#7 – Reuse Excess Material
Use left-overs from the last job and use the remaining material on other jobs. Encourage changing the ‘rubbish culture’ mentality on site (incentives for saving materials e.g. the money made from scrap metal goes towards the social club/fishing trip). If you can’t reuse, return the unused materials to get a refund (where the possible free return of excess product) and be mindful in the first place to make sure your orders are correct – spend the time to double check! Allocate someone to check the Jumbo Bin each day for extra: Timber for nogs, Recyclable things, scrap metal etc.
#8 – Protect your Material
Lock up on site or use site security and use a cover over materials. Check your insurance to ensure you are protected for theft from vehicles (and your team’s vehicles). Replacement value rather than ‘market value, and plan where to store your materials – minimize re-handling because it cost you every time you move it!
Explain the deal up-front – Use a Variation Checklist & tag out items
#9 – Charge for Variations
Charge an administration fee for variations ($200). Minimum flat fee for all variations e.g. $500 Include extra time for gear hire e.g. scaffolding, Jumbo Bin etc. Use a detailed checklist, invoice straight away to improve your cash flow as opposed to the end of the job. ‘Tag out’ certain items in your initial quote which can be identified in variations later e.g. Rock excavation, Asbestos, Lack of detail on plans.
Tell your clients up-front that you charge for variations. This should be clearly explained (in person), It is also important to detail this on a ‘how we work with you’ website page and in your ‘WOW’ information pack
“IT’S BETTER TO HANG OUT WITH PEOPLE BETTER THAN YOU PICK OUT ASSOCIATES WHOSE BEHAVIOR IS BETTER THAN YOURS AND YOU WILL DRIFT IN THAT DIRECTION”
#10 – Charge Sub-Trades for Rubbish
Make sure all your subbies take their own rubbish off the site or they will be charged and encourage everyone including subbies to fill bins with extra items that could be recycled for free (e.g. Gib board). Often clients will use the skip bin for their own rubbish (e.g. furniture/whiteware/fittings boxes) organize a way of charging them for this e.g. split the costs 50/50.
Find alterable subcontractor’s agreements on the TPB membership site
#11 – Fixed Price for Subbies
Be clear on the scope of works they will do. Set an agreed number of trips per job and use a contract. Shop around (minimum every 90 days), Negotiate a better rate and then add 15-20% markup.
“IF YOU REALLY WANT TO DO SOMETHING, YOU WILL FIND A WAY. IF YOU DON’T YOU WILL FIND AN EXCUSE” -JIM ROHN
#12 – Charge A Project Management Fee on All Jobs
This could be…
For a $200 – $250k job:
2.5 hours per day @ $65 over 11 weeks (55 days) = $8,937.50 x 3 jobs = $26,812.50 Add expenses. Your PM costs $80k + car, phone etc. + margins on top…5% incl. admin, phone etc.
SPEED OF IMPLEMENTATION IS THE COMMONALITY BETWEEN THE MOST SUCCESSFUL PEOPLE.
THEY TRANSFER THEIR IDEAS TO ACTION AS QUICKLY AS POSSIBLE.
THE DIFFERENCE IN YOUR LIFE IS GOING TO BE MADE BY THE ACTIONS THAT YOU TAKE…
#13 – Capture as Much Detail Upfront
Work closely with your QS in the beginning. Double check all quantities and keep reviewing the quoting process every 4-5 jobs. Check…
- Site Entry/access set-up,
- Health & Safety,
- Forecast vs. actual labour times per stage,
– Your guys & their speed/expertise on each stage
Note hours on each stage and set a min. Gross Margin % per job (E.g. – min. 20% if converting < 50% – min. 22%-24% if converting > 50%).
Charge for quotes by versioning templates on the TPB Members Site
#14 – Charge for Quotes
Stop doing free quotes!
Charge for your QS’s time – make him a valued team member in your business … Do this especially if YOU are the QS;
This works well for insurance companies, especially if doing earthquake repair work in Christchurch (E.g. $1,200 – $2,000 per quote).
There is a process for being able to position yourself to do this –
- Improving your marketing
- Your website
- Your information packs
- Your paperwork
TPB Members: Watch the ‘Sales 1-Dayer’ on the membership site and download all the docs to learn more.
Charging for quotes qualifies and engages your prospective clients – it weeds out the tyre-kickers and saves you time
Break the job down: Stage-by-stage
#15 – Back-Cost
In real time i.e. labour, materials, subbies… Have the guys & site foreman fill in your daily site logs break it down by stage – Forecast vs. Actual and make changes accordingly. E.g.
- Guys are good mates & talk too much? – Split them up
- Grumpy foreman? – More remedial work needed by apprentices & hammer-hand – Chat with him – 360 deg. Peer review
- Are Guys not skilled in certain areas? – Train them in the areas they are not good at
- A difference in numbers was simply under forecasted for that stage (e.g. Joists 20hrs vs 35hrs) – Allow for more hours next time, Add Safety margin of 20%
#16 – Negotiate Supplier Prices
Hunt around to ensure the best price
e.g. price a 150sqm house, do every 90 days;
- Buy in bulk e.g. nails, timber
- Negotiate free delivery to the site over $1,500;
- Make use of all promotion specials
- Get suppliers to tender; or
- Show a supplier another supplier’s quote and get them to compete on that price.
Consider paying with credit card to get Airpoints/ Flybuys which can be used for both family/client/ employee gifts.
#17 – Cut Accurately
- Keep an accurate cutting list on-site;
- Quality control: measure x2, cut x1; and
- Order properly!
Download fully alterable checklists from the TPB Members Website
#18 – Good Management of Sub-Trades
Get the right guys for the job (ensures the specialists are there when needed). Be crystal clear on trade times on-site (Project Management Software provides a great visual of this). Get subbies involved in your project management software. Scheduling to minimize downtime incentives for reaching time targets (e.g. Friday lunch shout). Set a targets/time-frames for each task and use handover checklists for your subbies.
Get to know your subbies and treat them well. Invite them to use your 1% referral program. They can be part of your sales team!
WHAT YOU LACK IN TALENT CAN BE MADE UP WITH DESIRE, HUSTLE AND GIVING 100% ALL TIME
#19 – Control Orders and Cost
In-house purchase order systems. Foreman always checks the delivery docket with exactly what was delivered to site. Make sure to get faulty products credited check prices charged vs what was quoted and be careful when the client supplies items…
what is the true cost of that to you? Who loads and unloads? Who does quality control? Who measures? Make sure a client supply arrangement is not costing you money.
If you are using regular suppliers, you can get your clients to pay upfront for better discounts
Frontload your contracts so that you are cashflow positive as you progress through the job.
Great ways to charge suppliers for advertising
#20 – Charge Suppliers for Advertising
In your ‘WOW information book’
(Lofroth Builders charged 5 advertisers $500 each to advertise in their information book)
On your website
On-site (containers, fences)
One TPB Client uses this tactic for site uniforms: 1/2 paid for by his guys 1/2 paid for by his suppliers = costs him nothing! $160 x 8 guys = $1,280 saved
#21 – Educate Your Guys on Variations
Have a systemized process for capturing variations. Maintain a checklist on each job with everything e.g. insurance, materials, labour, scaffolding, jumbo bins. Consider who presents the variation – it's a sales process, Double check the variation with the QS/management.
Typically, the Builder or Foreman becomes friends with the client…he will feel awkward presenting a variation, and will often charge too low… Cut this out of the process!
#22 – Get Smart on travel
Maximize staff per vehicle to reduce running costs. Encourage guys to pick up from home/ carpool. Choose to work closer to your base, market locally (this saves fuel and time) and charge your clients for travel costs e.g. per km.
COMMITMENT IS DOING THE THING YOU SAID YOU WOULD DO, LONG AFTER THE MOOD YOU SAID IT IN HAS LEFT YOU
#23 – Average Out Everyone at Same Rate
This works when you:
Keep culture aimed at high-end jobs (and clients);
Dress your guys all in a professional uniform including your apprentices;
Encourage a professional manner at all times (use TPB’s ‘Rules of the Game’ document)
See the below examples for a gain of up to $80k to your bottom line
EXAMPLE ONE: If you charged out… – 1x Foreman @ $60/hour – 1x Carpenter @ $50/hour – 2x apprentices @ $ 35/hour – $180 x8hr x5 days = $7,200 a week – $7,200 x50 weeks = $360k a year.
EXAMPLE TWO: If you charged all out @ same rate ($55/hour): – $55 x4guys x8hr x5days = $8,800 a week – $8,800 x50 weeks = $440k a year
HE KNOWS IS NOT COURAGEOUS ENOUGH TO TAKE RISKS WILL ACCOMPLISH NOTHING IN LIFE
#24 – Have the Right Tools
Get the Foreman to let your guys know what they are doing at least 2 days in advance so they can prepare to have the right tools for the job. Make sure that each staff has a ‘minimum’ tool kit on-site at all times:
toolbelt, handsaw, hammer, ruler, nail pullers, ear muffs, set square, pencils, tape measure, nips/pullers, nail punch, craft knife & blades, steel cap boots, safety glasses.
No smoking during working time, no cellphones during work hours and tool allowance for apprentices or you can help to fund their tools.
#25 – Foreman Gets 20% of Labour Saved
AN EXAMPLE: (Fixed price contract)
– 3 Guys charged out at $6K per week (@ $50/hour x 40hrs)
– Foreman + you forecast the job @ 12 weeks, BUT the team does the job in 11 weeks…
– 1 week saved = $6K
– Foreman gets 20% =$1,200
– You get an extra $4,800
– Plus, the team now has an extra week’s capacity, they can slot in another week’s job.
With a 50% GP Margin for a new job ($6k – $3k = $3k GP) …$3,000 + $4,800 (1 week saved) = $7,800 Original job $4,800 + $3,000 = $7,800…
From that, we project a happy foreman & a productive team!
#26 – Charge a Margin on Materials
Charge a margin on Cost of Goods Sold (COGS) – 15% minimum; or
20% Markup = 16.7% GP Margin
15% Markup = 13.0% GP Margin
Ensure you know the difference between mark-up and margin, and its impact on how much work you have to do to hit your profit goals. If you already charge a margin, increase the percentage. – 10% is not enough!
#27 – Increase Fees on Variation
The higher mark-up on materials and capture everything involved
- Heritage listing checking
- Jumbo Bins
Increased labour rate ($50/hour to $65/hour) this may involve more of your Foreman’s time Increased administration fee (specify the rate in the contract)