Building More: Know Before You Grow

Words: Corey Adams 

1. Expense lowering. OK, no big surprise here, but it is worth stating. The quickest way to gain higher profit margins without any additional work is to lower expenses. Sometimes this is just auditing your yearly insurance premiums, refinancing your line of credit to a lower interest rate, or a host of other overhead expenses. You can always look at it from a production side as well. Updated tools and equipment can lower your labor expense. Yes, there is an upfront cost, but if the item saves multiple field hours a project, buy it. 
2. Rate Pushing. I have discussed this in the past, but it is always worth repeating. Rate pushing is the process of having fluctuating rates based on your current backlog. As we get busier, our rates go up. As we catch up, our rates go down. This does two things for our company. First, it controls our backlog to a manageable point. More importantly, it is a running test on the market’s willingness to pay. That means we are always testing the market to see if our rates are too low, too high, or right on. 
3. Audit your services. Do you know what types of projects you are making the highest profit margins on? New Residential, commercial, restoration, etc.? Figure out what services you offer that drive the best profits, then advertise them specifically. You will find that removing a low-profit service and focusing on a high-profit one will grow your bank account without adding extra work. All you are doing is prioritizing what work you want and replacing the low-profit services in your schedule.