Setting up your own construction business can be very lucrative but the overheads are very high and a lot of businesses struggle to get off the ground. If you can’t manage costs effectively, you won’t be able to afford to pay for all of the equipment and materials that you need to complete jobs and the business is likely to go under.
There are a lot of costs that you simply can’t avoid in construction so regardless of how good you are with your money, you’re always going to have high overheads. However, a lot of construction companies, particularly ones that are just starting out, waste a lot of money unnecessarily and that’s when they find themselves in a bad position. If you can avoid that waste, you stand a far better chance of surviving and thriving. These are the most common ways that construction companies waste money that you should be aware of.
When you’re pricing up a job and giving a customer a quote, it’s so important that you do it accurately. A good quote should outline all of the materials costs and labor costs, accounting for any potential problems along the way. But so many new businesses end up making mistakes and it can cost them a lot of money. If you suddenly realize that the job is going to cost a lot more than you originally thought it would to complete, you can’t exactly turn around to the customer and start asking for more money. You agreed on a price and you’ll have to complete the job for that price. That means that all of the extra money is going to have to come out of your profits so if you make a mistake with the quote, you’ll be making hardly any money on the job at all. If you get it very wrong, you might even end up losing money on jobs and that’s when you’re going to be in real trouble.
The important thing is that you don’t rush it. Don’t go to look at the job and feel that you need to come back with a price right away. If you tell a customer that you need some time to consider the work and look into the material costs, that won’t put them off. In fact, they’ll be more comfortable with a company that is being thorough than they will with a company that just throws a price out there straight away because it seems unprofessional. As long as you are thorough with your quote and you make sure that it’s accurate, you should be ok. Don’t try to overprice jobs because customers may compare it with their own independent estimation. It’s also important that you don’t underprice jobs just to get customers to start with. You should try to be competitive and you can knock prices down a little, but don’t offer to do the job for half the price that everybody else will because you just won’t be making any money.
If you’re doing larger jobs and you need some heavy machinery, that will require a big investment. But a lot of construction companies waste money here as well, often by going for brand new machines all of the time. At this stage, you can’t afford to do that and you’ll be far better off buying second hand. You can still get good quality machines second hand and you’ll save yourself a lot of money. Fuel costs are a big problem as well because they fluctuate a lot and you’ll be wasting money if you buy fuel when prices are high. If you want to save money on your fuel, you need to buy a storage system from a petrol tank supplier and start buying in bulk. If you keep an eye on prices and wait until they’re low, you can save yourself so much money if you buy in bulk and store it. That way, you won’t be spending lots of money on fuel when the prices skyrocket again.
Buying machines at all might not be the best option when you’re first starting out. It may be more cost effective to just hire them out instead. If you’re doing mainly residential jobs and you don’t use heavy machinery that often, buying them is a waste. Hiring them isn’t that cost effective if you use them on every single job but if you only use them now and again, it’s easier and cheaper. You don’t have to worry about any of the maintenance costs either so you’ll save money there too.
Injuries On Site
The construction industry is a dangerous one and health and safety is a big deal, but if you’re not following proper procedure, you going to cost yourself a lot of money. If somebody is injured on site and it is found to be a result of you not following health and safety procedures properly, you’re likely to get a big fine. If you have the right insurance, that will hopefully cover the costs but in some cases, it won’t, and you’ll have to pay out of your own pocket.
An injury that puts somebody out of action is also going to slow progress on the job. There is a chance that you’ll be forced to close the site for a while and you’ll be a man down so the job will take longer than you initially planned for it to. But you won’t be getting paid any more money and you’ll have to pay subcontractors for longer so you’re not likely to make that much profit on the job after an injury.
Even though it sometimes seems a bit excessive, you need to make sure that you’re looking after your employees properly and always follow health and safety rules to the letter. It’s also important that you check that people are properly trained and certified before you hire them because some people may exaggerate their qualifications to get the job.
If you’re going to make your construction company a success, it’s important that you avoid these common areas of waste.
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