3 Steps to Minimizing Profit Loss as a Subcontractor

As a subcontractor, you have very specialized skills within construction. But you’re probably in business for more than just sharing your talents: you likely want to earn some money, too. So, do you? Can you answer that question with any certainty? It can be complicated to tease out your profits from your project data. But understanding and growing your profits is the key to long-term success – yes, even for a specialized business like a subcontractor. Project planning software can help you come up with the information you need to get there, and it’s not just for large general contracting firms, either. Subcontractors can learn a lot from the general contractors they work with – general contractors complete many of the same tasks as their more specialized colleagues, but they often operate on a grander scale. So, what makes subcontractors different? Why is it so critical for subcontractors to safeguard their profits? And what can they do to improve their long-term viability in a competitive market?

What Makes a Subcontractor Different from a General Contractor?

As a subcontractor, your company’s expertise is in specialized construction tasks. Whether you’re electrical pros, drywall experts, or take care of all things framing, you’re chosen because you have the skills required to do the job right. But what makes your business fundamentally different from that of a general contractor? Whereas general contractors oversee the entire project, including bidding, oversight, and scheduling, subcontractors bid directly to the general contractor and come in to do the physical labor on a job. That means general contractors handle the bulk of business transactions on a job, and subcontractors do the work. Subcontractors often have smaller businesses, tighter margins, and pay for materials and labor hours long before they get paid. Therefore, the risk level is very high for subcontractors, who have less influence over projects. That’s why subcontractors need to protect their businesses by buffering their margins as much as possible.

How a Subcontractor Can Use Project Planning Software to Protect Profits

So, what can a subcontractor do to protect that slice of the pie? They can’t do much if the larger project is off schedule. Supply delivery is still a bit dicey following the pandemic, but there are still ways to improve performance to protect the bottom line. The following are three of the main ways subcontractors can protect their profits. Some may go further, even helping to maintain efficiency and protect your company’s reputation.

Bid Accurately

It may seem obvious that you should bid accurately on a job to make money on it – but how do you go about creating an accurate bid? Bidding involves figuring out:

• What materials you’ll need for a project,
• How many people you’ll need, and
• How long it will take you to complete.

Do you have those numbers available? Do you know how to find them? Do you understand the intricacies of the project and how they’ll affect these three factors? If the answer is no, you’re not alone. The information needed to bid accurately is found in your historical data: how long have similar past projects taken you? Anything you learned in those past projects can be applied to this project to guide your bid. In other words, bidding takes detailed records of past projects and a deep analysis of what happened on them and how you could have done better. These are big asks, especially for subcontractors, who may have fewer administrative staff to help figure it all out. However, there are tools out there that can help you along the way. This is where project planning software technology comes in: you input information and get answers, helping you move forward with the confidence of experience behind you. Accurately bidding will do two things to protect your profits. First, you won’t have to inflate bids out of fear. You’ll know how much money the job takes to complete and can then bid competitively, giving your company a fair chance at winning the project. Second, you won’t underbid jobs. Instead, since you have accurate numbers in hand, you’ll be bidding high enough to earn actual profits, confident you can pay your bills.

Get on Top of Your Budget

As a subcontractor, you pay for most supplies out-of-pocket, which will later be covered by projects invoices. If you don’t have a firm grasp on your exact costs, you lose the opportunity to be reimbursed for those expenses. Account for each worker’s hours and track all expenses thoroughly throughout a project. Expenses like permits, equipment rentals, fuel, and labor costs can vary over time and between geographical locations. So, it’s essential to keep track of those costs that may have differed from your bid. Administrative costs are also part of your budget. Any administrative help you need, devices for your team, or software services for the project should be counted within your budget for reimbursement. Costs directly related to any project shouldn’t come out of your profits. Make sure you’re budgeting for all your costs and keeping tabs on how your expenses line up.

Improve Productivity

Nothing eats away at profits like lost productivity - from lost opportunity costs when you go over-schedule on a project to paying workers for spending time on unhelpful projects. Strong project management skills can go a long way in improving your team’s efficiency. Proper materials management ensures supplies turn up when they’re needed. Not too early to clog the site, and not too late so that teams are waiting for their arrival. Good communication could avoid turning up on sites that aren’t ready for you. A focus on safety training and proper protective equipment can avoid accidents. Spotting conflicts in the schedule ahead of time can give you enough time to mitigate their effects. Productivity means efficiently using your time and resources to get a job done well and on time. Improving productivity means:

• Putting workers exactly where they need to be according to skillset and availability
• Avoiding downtime through a thorough understanding of a project’s current state and overarching schedule
• Giving your teams the tools, expertise, and information needed to do a job correctly the first time

Why is productivity important for profits? Highly efficient teams can complete work in less time, banking the extra days allotted for a project as profits. They can also move on to another project, with new opportunities to earn revenue.

A Profit Motive

Your primary job as a subcontractor is to deliver quality work on time and bolster your reputation, so your company can live to see another workday. Becoming more efficient and keeping close tabs on a schedule may seem like slippery concepts and hard to pin down in the real world. Luckily, Prophix can help. Prophix helps make information about your projects more easily accessible, so you can see a single version of the truth. Log in to one place to see your past and current project data. Compile your results to see where inefficiencies lie and use this information to bid better. No matter a subcontractor’s specialty, all businesses need profits to survive. Because subcontractors tend to have smaller companies and tighter margins, it’s extra important for them to mind their money.