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9 Tips To Maximize Your Home Builder Profit Margin

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Check Out These 9 Tips To Increase Your Construction Profit Margin And Stay Ahead Of The Competition.

As we head into 2022, the homebuilding industry continues to lead the nation’s economic recovery from the unprecedented global pandemic. 

Now more than ever, you want to keep your business alive and thriving into the future by ensuring you’re making a profit and reaching your goals. 

However, there are many factors that could sideline your progress, including poor money management, no marketing strategy, inactive quotes, and inaccurate estimates. CLB Network wants to help you avoid these factors and in this blog post, we’ve outlined nine tips to help you maximize profit and increase profit margin in residential construction. Read on to learn more.

Tip #1: Hire a Strong Business Analyst & Accountant that Specializes in Residential Construction Financial Performance and Accounting

Although this might be common advice, an accountant is an essential part of your company. They ensure that there are no errors that could impact your profit, and eventually, your business. Many business owners spend more money than they think they do, and end up further behind on their goals. To make sure this doesn’t happen to you, CLB Network’s finance experts are here to focus on the data line by line and highlight any issues or irregularities so you can address them immediately. 

Tip #2: Hourly Rate Review

How do construction companies make money? To move your business beyond the breakeven point, it all comes down to the hourly rate. Reviewing your hourly rate is vital to ensure you’re making a profit, and there are lots of factors to consider in this process. Don’t forget about staff vacations, sick leave, holidays, and natural downtime throughout the year. These factors could mean that there might only be 45 work weeks in the year. First, look at the overheads and costs, then work out the hourly rates. This review process will help your company enhance the profitability of your business.

Tip #3: Establish your Break-Even and Profit Acceleration Point

Every business owner should know when they’re making money and when they’re not. You need to keep track of how much you’re making each day, week, and month to ensure you’re on track to becoming one of the most profitable home builders in your area. These numbers are essential for making business decisions. CLB’s team of financial experts are here to help you run a highly profitable business. Click here to use our free audit to measure the financial health of your company. 

Tip #4: Chart your Moves with Sound Forecasting

Forecasting your income and expenses can be challenging, especially if you’re not an expert with numbers. Luckily, the CLB financial team will help you with that. We know that forecasting is essential to helping you comfortably plan for the future and guarantee that your cash flow remains on point. 

Tip #5: Marketing your Business

Marketing is a vital part of every business, and the time to market your business is now. Marketing is an essential part of profit maximization, so you should spend at least 5-10% of your revenue on it. Not only does marketing bring in more work, it also matches your company with best-fit clients and the projects of your dreams. CLB’s marketing strategies are designed to elevate your business, help you dominate your market, and increase your pipeline.

Tip #6: Use the “Quote for Profit” Formula

As a luxury builder with a defined brand and company, you shouldn’t be giving away free quotes. That’s no way to make money in construction. A vital aspect of the “quote for profit” formula is authority. You need to show your clients why they should spend money on you. The best ways to do this are to showcase photos of your work, use testimonials from your previous clients demonstrating your credibility and the quality of the work you deliver, and add all awards and articles to your credentials portfolio. These strategies will help potential clients see you as an authority figure in your market and understand why you are right for the job.

Tip #7: Follow Up on your Quotes

Did you know that money isn’t always the main reason a customer decides who to award the project to? Oftentimes, they choose the builder who can provide a professional-looking quote quickly and accurately. Don’t spend a whole week on a quote and then have to redo everything because the customer has changes in mind. Instead, follow-up on the quotes you send out. This will show customers that they’re a priority to you and in turn, they’ll prioritize your company over your competitors. 

Tip #8: Improve your Estimate Accuracy

Even the slightest error on an estimate could cause big problems and even cost you a job. To make money in construction and to maximize profitability, make sure your estimates are as accurate as possible. Remove the guesswork by investing in estimating software with reusable templates to complete precise take-offs and cross-check your numbers.

Tip #9: Implement a Project Management System

A disorganized business system is a significant problem for many homebuilders, and is part of the reason why they don’t know their numbers. Even with the sharpest memory, it’s impossible to keep track of everything. CLB has an expert finance and accounting team, will implement the best processes and systems tracking, and review and communicate what you need to know about your numbers so you can focus on the activity you’re most passionate about: building.

As the economy continues to recover and the homebuilding industry leads the way, you need to know how to maximize your profit and keep your business thriving. CLB Network’s team of experts will help you build a strategy to increase your residential construction profit margin. Contact us today to speak to a finance expert, and download our latest case study to read more about our nine tips for maximizing your profits in residential construction.

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9 Tips To Maximize Your Profits In Residential Construction

Want to make more money in construction? Check out these nine tips to help you maximize your profits and stay ahead of the competition!

The Certified Luxury Builders Network leads luxury builders to greatness. Since 2016 CLB Network and builders across the nation with annual sales ranging from $5M - $50M have worked together to deliver a 5-Star experience and become market-leaders. Working with one great company at a time, CLB gives builders the tools, training, and support to achieve success in Quality, Profit, and Pipeline freeing leadership to work on—not in—their business.

We're here to help builders. Experience and expertise is just a click away. Contact us today to see how your business measures up to our builders' benchmark, learn what "GREAT" looks like, and see how CLB can take your business to the next level.

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