40 Ways to Increase Your Profit

The shelves are full of business books offering advice for improving your bottom line, but to our mind, no one knows the remodeling business better than remodelers, themselves. That’s why we turned to our readers for their suggestions for how contractors can improve their profits without simply raising the prices they charge their clients.

About 100 readers responded to our online survey, providing their margin-boosting ideas. The responses we received tended to focus on ways remodelers can improve their businesses in five distinct ways: financial management, operations management, marketing management, project management and employee management.

We’ve collected the best 40 of these ideas below. We’ve combined and refined some of these thoughts, but our readers were the source of all of them.

"By locking subcontractors into a fixed price, you transfer some of the project risk off of your books.”

Financial management

1. Educate yourself.
“Far too few take the time to learn basic business skills,” said one respondent. Another believes that owners should understand financial concepts to the level of a junior accountant, with the ability to read and interpret profit-and-loss statements, balance sheets and job costs on a monthly basis.

2. Know where your money is going.
“Know what your true cost of doing business is,” urges one respondent. Specifically, another participant suggests developing a history of all your costs, and then looking at those figures as percentages so you can develop realistic profit margins. When costs go outside those margins, you’ll know why.

3. Re-examine ‘fixed’ costs.
By following the first two suggestions, you can gain a better idea of the impact insurance, healthcare and other overhead expenses are having — and what to look for when renewals come around. All these costs may be tax deductible, but, as one respondent notes, “so many let deductible costs get out of hand, thinking that the tax benefits will magically pull them out of bad cash flow.”

4. Base estimates on real costs
— not ballpark figures and back-of-a-napkin addition. Spend a little extra time going over your take-offs and double-check your numbers, and don’t forget the costs and time involved with deliveries, set-up and take-down.

5. Learn from your mistakes.
One respondent conducts “job autopsies” to look for production slippage and to compare estimates to actual costs. With this knowledge, you’ll be able to create more realistic — and profitable — proposals for future clients.

6. Pay your bills on time.
This one seems like a no-brainer, but it’s easy to let cash-flow worries make you late on your payments. However, as one reader notes, not only will meeting those due dates eliminate potential fees and rate hikes, but it also could gain you discounts from some supply houses.

7. Get off the credit treadmill.
One respondent has moved from business credit cards to business debit cards. If you have the cash capability, this move helps ensure your company isn’t living beyond its means.

8. Negotiate with suppliers.
Check to see if early-payment discounts are available, and be sure to check prices from other sources. Also, investigate group purchases with other contractors, to take advantage of possible volume discounts.

Operations Management

9. Reduce waste.
Develop a warehouse space to store leftover products at a project’s completion. Maintain an inventory so you know what you have, and check things in and out as they’re stocked and used. Also, don’t throw away nails or materials over 16 in. — having these on hand when you need them can save time and money.

10. Use less gas.
Bundle jobsite visits and reduce the number of material runs by making sure trucks are stocked. One respondent is putting the maximum number of passengers into company vehicles and only filling tanks when the price of gas is low — otherwise, they only buy the gas they’ll need for that day.