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




Purchasing Impact on Construction Contractors
Productivity depends on having the right materials at the right time and for the right price. The impact of a contractor's purchasing systems, both good and bad, is compounded by supply chain problems.
Building a Systems Development Team - Learn More and Closing
Why is understanding the theory of constraints important to my business (and my systems development team)?
Ownership Transition Timelines
While it is possible for ownership transition timelines to be accelerated, that largely depends on the current condition of the company, including the management team and current owner.