Commercial contractors seeking to grow their business need to increase profits to continuously match the business’s growth. However, making a company more profitable – especially a contracting firm – is far easier said than done. Since so many contractors find themselves struggling to maximize profits, we’ve put together five no-hassle methods for contractors to reduce costs and increase revenue.
Take a Value Engineering Approach
Value engineering is a complex concept with a very simple premise: maximizing value. “Value,” in this case, refers to the ratio of functionality to cost. In the world of contracting and construction, that can mean substituting processes or materials with less costly alternatives but still maintaining quality and function, or it can mean using better materials while keeping the cost the same as before. When value increases, so do profits – costs are lower, or the end product is higher quality and therefore earns more revenue.
To be clear, value engineering does not mean cutting corners to cut costs. If quality is sacrificed to lower the price, the value ultimately stays the same. And this works the other way around too. Improving quality with more expensive materials does not improve the value. Value engineering demands that cost, safety, functionality, design quality, aesthetics, and other factors are either improved or maintained. This is far different from cost-cutting when quality usually suffers.
Although value engineering is ideally considered at the beginning of project planning, it can be useful at many stages in a build. One mark of an excellent commercial building supply distributor is their ability and willingness to help with value engineering. An experienced supply distributor can help contractors look for alternative solutions, such as less expensive alternative materials that do not sacrifice quality or aesthetic value.
Work as a Partner With Building Supply Distributors
In the contracting industry, the wrong distributor can – without exaggeration – ruin a business. Delays in supplies, failure to make deliveries in time, providing incorrect products, and other errors on the part of the distributor can eviscerate the profit margins of even the best jobs. Many in the construction industry have horror stories of waiting at a job site for a delivery while the crew waits idly. Hours or even days can go by without progress when deliveries don’t show up. As such, it is crucial to find a reliable distributor that delivers the right product at the right time.
It is also critical to find an experienced and professional distributor staffed with knowledgeable experts. They should have a deep inventory with a wide range of materials available for immediate delivery, and more importantly, they should know their products like the back of their hand. If their staff cannot provide specs, details, or any information on using the product to minimize costs, that is a huge red flag. What matters is a partnership, and uninformed distributors will not be good partners that help to maximize profits.
Speaking of partnerships, make sure to look for commercial building distributors that have relationships with top brands. Distributors that carry leading products and are partnered with their brands get preferential treatment. If they need to, skilled distributors can make things happen to get contractors what they need when they need it. Look for distributors that have close relationships with brands like Clark Dietrich, Owens Corning, Roxul, HandiFoam, Johns Manville, GreenFiber, OSI, RectorSeal, EverKem, Rockfon, USG, National Gypsum, Georgia Pacific, Rmax, 3M, Firestop, Scorpion Brand, Loctite, Pyro-Guard, Zip-Up, and others.
Keep to a Schedule
One of the biggest costs in contracting is labor. Skilled workers such as electricians, plumbers, carpenters, and masons are usually essential for any large job. However, due to their necessity, these so-called “gray collar” tradespeople usually charge heavily for their services. As such, the only way to minimize the cost of hiring them is to retain them for as short a period as possible. But in order to do that, a tight schedule is necessary.
Scheduling can be one of the hardest parts of contracting, so maintaining communication is critical. Set up a schedule for everyone to check in and submit their work and diligently keep to it. Making sure that everyone is sailing in the right direction (and the same direction) will lay the foundation for scheduling everyone’s work properly.
Ensure Reliable Supply Delivery
As mentioned earlier, in the construction world, being late is not merely a nuisance – it can tank profits. Waiting for a delivery to a job site can be a major setback to projects (and profits). Contractors often end up having to appease irritated clients by undercharging them to make up for the delayed completion of a project. Companies send workers home and wait with bated breath for their delivery to show up. Nothing is quite as crushing to a contractor’s spirit – or wallet – as waiting for materials at a construction site for days on end.
To avoid this issue, it is necessary to find a trustworthy, honest, and communicative distributor that can address concerns quickly and efficiently. Good distributors work as hard as possible to make sure that deliveries are not delayed. More importantly, in the few instances when they are delayed, good distributors will communicate to their customers ahead of time so that the contractors can make other arrangements and adjust the work schedule based on when the materials will actually arrive. Although distributors that stick to their word can be few and far between, those who do so will happily boast about it on their website or social media, so that is the best place to begin looking.
Another quick tip is to be sure to write contingency plans into contracts so that there is no confusion regarding penalties or processes associated with delays, change order procedures, timing, penalties, restrictions on types of materials that can be used, and the process for substituting materials.
Work With a Supplier With a Range of Options for the Project
In many states, such as New York, New Jersey, Connecticut, Pennsylvania, and Delaware, construction requires a deep knowledge of rigid specifications, building codes, and material tolerances. That means it is necessary to get a distributor experienced with the local regulations, but it also means that the supplier needs to have materials that can accommodate those regulations. If a regulation says that a project has to use materials that pass the Janka hardness test (the amount of pounds-force or Newtons required to embed a 11.28 mm diameter steel ball at least halfway into the wood) with at least 1560 Newtons, and the distributor suggests that Balsa wood or European Silver Fir is right for the job because it’s what they have on stock, that’s a bad sign.
A good distributor should have a wide range of options to suit a wide range of needs for their customers, and they should know how to suit those needs with what they have on hand. If they do not meet both of those criteria, it is time to find a new distributor.
Wish You Had a Distributor as a True Partner?
Metro Interior Distributors is dedicated to helping all of our clients succeed. Our sales team is experienced, knows our brands inside and out, and wants to help you find value engineering solutions that work for your project. If you’re ready to talk, contact us today, and let’s find out what we can accomplish.