Masonry Magazine January 2001 Page. 71
• Not controlling overhead costs.
Knowing your overhead costs isn't enough. Is your office located in a location that's too expensive? Are your salaries in line with the market? Are your vehicles maintenance hogs? What about the location itself? Are you near potential activity, subs and suppliers, plan rooms, architects, etc? If not, you may be spending disproportionately high dollars on simple everyday transportation and mobilization; dollars that may outweigh that "great deal you've got going out in the country."
• Basing your pricing on competitors.
Of course, every smart business man needs to know where his competition is. But it's poor business to let that consideration solely determine your profit line-item. Arrive at your own numbers - and they will eventually work out just fine. You're smarter than you think, and I've seen far too many contractors go belly-up to give much credence to every low-ball price that's scattered around out there. The only important profit line is your profit line.
There is a curious variation on that above, and that's when a company adopts the stance of pricing above (yes, higher!) than the competition... on purpose. Of course this strategy is possible only when price is not the primary issue with the customer (which is rare) and there are normally other associated factors, all of which have to do with that contractor convincing the owner that it's indeed justifiable, based on the contractor's credentials, to pay the higher price. I call it the "Curtis-Mathis" approach to contracting (remember, "the most expensive television in America... and worth it!").
Of course, this luxury normally only comes attached to a contractor who is established, venerable, and can back up his claims. Over the years, they've proven they can provide quality service, deliver a professional product, perform punctually, handle customer complaints and warranties, and overall, are generally knowledgeable, friendly, and helpful. There really are customers who don't mind paying for these qualities and are probably getting a better "deal."
CONCLUSION
And there are likely even more considerations and more ways to boost your profit. For instance, have you thought about focusing on a niche, specialty market - such as school or medical work? Developing a reputation as a specialist can get you into more negotiated deals (generally good for profit); and the focus that comes with specializing tends to inevitably increase the efficiency of the work itself another solid profit builder. By eliminating variables - variables that often cause problems that deplete profit-the contractor can better define and hone in on-those items that produce positive cash flow and perpetuate higher profits.
But in the end, the key to controlling profit will inevitably lie within a well-conceived company strategy, firm establishment of policy, and consistent monitoring and assessment of expenses. Then, it becomes equally paramount to establish a true sense of purpose call it enthusiasm - among your employees in controlling the profit line item. This can be in the form of incentives or bonuses to your staff... or some other positive reinforcement. Threats don't work. The trick is to educate and motivate. If you're on the right track, the people around you will pick up on it. The important thing is to do something. You know your people best, and you'll soon come across a method that works best for your situation.
You could very well forego the percentage in lieu of a lump-sum amount (above and beyond costs), but for the purposes of this piece, we'll focus on the percentage method-simply because I've found it to be more common.
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MASONRY JANUARY, 2001 71