Written By
Jon Mailer
CEO & Founder – PROTRADE United
Author of ‘Not Just a Tradie’
Written By
Jon Mailer
CEO & Founder – PROTRADE United
Author of ‘Not Just a Tradie’
Picture this: your business is running smoothly, but then a couple of unexpected slow months hit. Suddenly, you’re struggling to cover overheads and keep the lights on. This is the harsh reality of operating with less than a 15% pre-tax profit. Let’s explore how proper pricing can safeguard your financial future.
PROTRADE United client MV Tiling and Stones with Jon Mailer
PROTRADE United client MV Tiling and Stones with Jon Mailer
A project is either profitable by design or un-profitable by default. You may also consider creating a team game around gross margin. Reward your team on project/quarter completion if gross profit targets are exceeded. For example, a % of extra Gross Profit made goes toward a quarterly team activity or financial incentives, depending on your team structure.
The below suggestions take focus and discipline to implement, yet the payoff is worth it. You will never meet a financially successful construction company that doesn’t have some or all the following suggestions in place, yet every struggling business will be missing some or all of these. You get to choose!
Gross Profit can be ‘lost or gained’ in three main areas:
An example. A construction business has a historical Gross Profit margin of 25%. If the business completes projects worth $1,000,000, then a 3% cost creep or gain is $30,000. An 5% cost creep or gain is $50,000. Which way would you prefer it to go?
The difference between a 5% cost creep and 5% gain is $100,000. A massive difference over a year!
| Labour: Your Team | ✓ |
|---|---|
| Ensure everyone arrives 15 minutes prior to scheduled start time to prepare for the day. | |
| Stick to smoko/break times. | |
| No mobile phones and smoking on site (except breaks). | |
| Run a 5–10minute stand up daily huddle to discuss priorities, labour allocation, timelines and potential hold ups for the day. | |
| Everyone knows the labour allocation for each task. | |
| Align labour allocation with skill set. | |
| Provide Q&A tick list or each major task. | |
| Keep daily logs of labour used on site. | |
| Encourage efficiency by rewarding ideas that are implemented. | |
| Back cost every job for labour used versus budgeted labour. | |
| Ensure the on-site foreman is aware of allocated labour and where the project is at with actual labour every day. |
|
| Store materials and equipment on-site effectively to minimise double handling. | |
| Split up employees that talk too much. | |
| Upskill your team in areas they are not proficient at. | |
| Ensure that all employees always have the right tools on site. Create a minimum toolkit required. |
A 30-minute efficiency gain/loss over 12-months is remarkable. Let’s say you have a team of four ‘on-site’. If you are paying them a wage on average of $50 per hour, then this converts to a hard cost of about $70 per hour, once entitlements, etc., are factored in.
The impact:
| Materials | ✓ |
|---|---|
| Order accurate amounts to save reactive trips to suppliers. | |
| Order materials as early as possible to avoid potential delays. | |
| Check invoices for variances and mistakes as materials arrive on site to ensure what was ordered arrives. | |
| Check pricing with suppliers every 90 days. | |
| Negotiate free delivery where possible. | |
| Buy in bulk where possible. | |
| Have suppliers tender or have them price match competitors. | |
| Use leftover materials from previous jobs. | |
| Check the skip bin daily for re-usable and recycling items and consider donating. | |
| Install security cameras to deter potential theft. | |
| Ensure the site is locked up daily. | |
| Make sure faulty materials are credited. |
Written By
Jon Mailer
CEO & Founder – PROTRADE United
Author of ‘Not Just a Tradie’
Australia and New Zealand’s #1 Business Coaching and Advisory Organisation, dedicated to the Trades and Construction Industry. With over 20 years of practical experience, we have a proven track record of helping more than 3900 business owners gain greater clarity, consistency and choice.
Australia and New Zealand’s #1 Business Coaching and Advisory Organisation, dedicated to the Trades and Construction Industry. With over 20 years of practical experience, we have a proven track record of helping more than 3900 business owners gain greater clarity, consistency and choice.
Material hold ups can cascade and impact labour efficiency, the builders and sub-contractors, especially when reactive trips to suppliers are required to keep jobs flowing. Theft of materials is unfortunately increasing, so ensure you are adequately insured and protect what is stored on-site.
| Pricing & Cashflow | ✓ |
|---|---|
| Review your own quoting and estimating process. Back cost all jobs and learn from each project. | |
| Charge for quotes to qualify your clients and be remunerated for your expertise. | |
| Charge for the use of specialist equipment (if you own the equipment in the business). | |
| Charge for variations. Either an administration fee or an additional mark-up on top. | |
| Charge sub-contractors a flat fee daily for rubbish unless they take their own rubbish off site every day. | |
| Ensure you have a works contract in place for subcontractors. | |
| Add a mark-up to all subcontractor pricing. | |
| Charge a project management fee for all jobs. | |
| Add safety margin of 20% extra for labour. | |
| Front load contracts where possible to ensure positive cash flow throughout the job. | |
| Charge clients for additional travel costs if the project is a certain distance away from your home base. |
Managing cash flow is a combination of implementing the best structure and processes as well as valuing yourself to charge what you are worth and request for payment when it is due.
For more assistance, please reach out to the team at PROTRADE United.
Material hold ups can cascade and impact labour efficiency, the builders and sub-contractors, especially when reactive trips to suppliers are required to keep jobs flowing. Theft of materials is unfortunately increasing, so ensure you are adequately insured and protect what is stored on-site.
| Pricing & Cashflow | ✓ |
|---|---|
| Review your own quoting and estimating process. Back cost all jobs and learn from each project. | |
| Charge for quotes to qualify your clients and be remunerated for your expertise. | |
| Charge for the use of specialist equipment (if you own the equipment in the business). | |
| Charge for variations. Either an administration fee or an additional mark-up on top. | |
| Charge sub-contractors a flat fee daily for rubbish unless they take their own rubbish off site every day. | |
| Ensure you have a works contract in place for subcontractors. | |
| Add a mark-up to all subcontractor pricing. | |
| Charge a project management fee for all jobs. | |
| Add safety margin of 20% extra for labour. | |
| Front load contracts where possible to ensure positive cash flow throughout the job. | |
| Charge clients for additional travel costs if the project is a certain distance away from your home base. |
Managing cash flow is a combination of implementing the best structure and processes as well as valuing yourself to charge what you are worth and request for payment when it is due.
For more assistance, please reach out to the team at PROTRADE United.
Use a powerful diagnostic business tool, to understand the current reality
Uncover the obstacles that may be holding you back from more profits, time and freedom
Craft a realistic action plan to produce results in the next 6-12 months
Gain recommendations specifically designed for trades and construction businesses operating in Australia & New Zealand
