Net Profits - Four Major Levers

Increasing net profits for contractors comes down to four major levers that can be pulled.

D. Brown Management Profile Picture
Share
Leadership Tools: Four Basic Profit Levers. Like operating a backhoe; use all four levers simultaneously.
  1. Increase quality revenue up to the point where it stretches your operational capacity.  Not revenue for the sake of revenue but revenue in alignment with your market strategy and capabilities.  Not stretching to the point of breaking but just enough to allow you to grow. 
  2. Increase the “Sold Margin” on projects by finding the customers that will pay the most for the capabilities that you have and by building capabilities that the market places a higher value upon like advanced preconstruction services
  3. Decrease the cost of building project through investments in talent, training, process streamlining, tools and technology.  
  4. Decrease the cost of overhead and indirects in both absolute dollars by looking at every cost and asking how it truly adds value to the customer.  Be careful not to “over-cut” and create a hollow organization that will impact future growth.  

All are interrelated and seem simple on the surface. 


A 3rd party perspective can be helpful for assessment and planning purposes




Can't Read the Label From Inside the Jar
By definition it is impossible for any of us to know what we don’t know. Who are the top 5 people inside your organization that help each other refine your models of projects, your company and the industry?
Competitive Advantage
A contractor’s market strategy is the most highly leveraged decision leadership can make. Getting this right then executing effectively can easily have a 2X+ positive impact on earnings over the next 5 years.
Contractor Exit Strategy 4 of 6: Merger with a Similar Contractor
Contractor Exit Strategy 4 of 6: Merging with a contractor that has a complementary market position and management team can be both a great exit strategy as well as an effective growth strategy.