Whether you trust your ledgers to a family member, dedicated employee, or outsourced professional, your decisions have the biggest impact on the profitability of your construction business. If you want to make more money without taking on more jobs, think beyond material and labor costs. Here are 3 financial stats contractors can use to make every job more profitable.
Find your business' net worth by subtracting all of your outstanding loans, debts, and other liabilities from the total value of your assets. This number represents the true value of your business. It's useful to know your business' net worth when you apply for loans or during other financial negotiations. It also helps you develop strategies for growing your company.
Are you sure you're making enough on that job? Calculate your profit margin to ensure you accept only the most lucrative opportunities. If you're regularly taking jobs with net profits of 2.5 percent or less, brainstorm some ways to bring those numbers up. Use your sales skills to bump up your net profit with add-on services that don't require any extra investment in materials or work with another contractor to offer more comprehensive services while sharing costs.
Make sure you always have the cash you need for fees, material purchases, and paychecks by keeping track of your cash accounts. Use spreadsheets to track these items on a weekly basis and keep a handle on your liquid assets:
- Overhead costs
- Equipment costs
- Cash in bank
- Cash-in-hand (petty cash)
- Bank deposits
- Checking and savings accounts
Keep your cash reserves comfortably full to ensure you can pull through when work is scarce or payments are slow.
You don't have to be a financial wizard to keep your construction business in the black. Follow these financial statistics to make more money while growing and protecting your business.