Running a construction company can be financially rewarding when done right. However, it does not mean you will not face hurdles in handling such a business, especially given that construction companies usually operate on narrow margins. A slight variance in the cost or revenue can impact your net profit. 

The rising prices of construction materials, shortage of skilled workers, and high-interest rates also contribute to the challenge faced by construction firms in maintaining or improving their margins. 

Take courage, though, because you can adopt the right tools and execute proactive measures to safeguard and improve the profits of your construction projects. Here is a guide for contractors and construction project executives. 

Biggest Problems with Improving Construction Profits

Managing profits in construction operations and projects can be difficult for executives and leaders. Take note of these common hurdles to improving profit margins. 

Poor Decision Making Due to Limited Data

Decision-making challenges in construction are often due to a lack of data regarding budget, quality, and safety. The disconnect between the construction site and the office is also a factor for project executives to decide on critical projects based on inaccurate or incomplete information. 

Making decisions based on limited data can lead to errors and budget overruns. According to a study by Autodesk, 30 percent of construction executives said that a majority of their project data is inaccurate or incomplete and typically leads to poor decision-making. 

If one looks at the industry-wide picture, making critical decisions based on poor data results in rework costing an estimated $88 billion annually. 

Substandard Business Forecasting

Market factors can impact material and labor costs, creating hurdles in business predictability and increasing the possibility of budget problems. Then, factor in the complexity of a project and the number of stakeholders present that typically lead to poor communication. Other factors like regulation changes, supply chain disruptions, or weather conditions also result in low-quality business forecasting. 

Managing business profitability is challenging when you do not have the right tools to generate accurate forecasts. The fortunate thing is that this problem is not insurmountable. The first thing you must do is acknowledge that the majority of these issues occur during the start of the construction project. 

A study by the International Journal of Innovation, Management, and Technology suggested that the cause of budget overruns in construction is frequent design changes. Thus, it is crucial to improve communication between stakeholders to align expectations in the early phases of the project. 

Implementing a Technology Strategy to Protect Profits

Adopting new technology can be a significant factor to enhance internal processes, boost revenue growth, and safeguard construction margins. But you should not only be content with being a “technology user.” You should have a solid strategy on how to use technology to protect and boost your construction profits. 

Pre-Construction

Remember that you can better manage resources and finances throughout the construction project if you have more accurate estimates. Thus, it is crucial to adopt solutions that link teams and project components during the pre-construction stage to reduce risk and issues that can impact profitability later in the project. 

A robust pre-construction strategy should make efficient the connected workflows and activities, such as design, estimations, and paperwork management. There should also be a leeway for real-time adjustments to improve builds and reduce costs. 

Convert Data into Valuable Insights

Gathering data is not sufficient to improve project predictability and profitability. It is critical to turn the information you have collected into valuable insights. Each role player in a construction team should receive data that is useful to his task. 

Adopt a system that can deliver daily reports and practical insights to help in deciding vital project considerations. 

Project Management

Project expenses can go out of hand largely due to poor project management. For example, direct and direct costs increase when rework occurs. It is possible to prevent this from happening if you use a project management solution that can connect every team member and access vital data necessary for the respective roles. 

The project management software should be user-friendly, mobile responsive, and allows for integration with existing business apps.

Cost Management

Take control of your budget and forecasts by using a customizable cost management solution. Stakeholders can stay on top of project finances when they have access to real-time information that is useful for decision-making and forecasting. Your cost management software should be synced with other project solutions to streamline data dissemination. 

Endnote

Even a minor error in the management and internal processes of a construction project can impact its cost and thereby reduce profits. Poor decision-making and forecasting due to limited or inaccurate data can cause such problems. But you can protect or improve profit margins by adopting a solid technology strategy to combat pre-construction, project management, and cost management issues.