With economic conditions being as tumultuous as they are, the construction industry has been hit especially hard, to no fault of the contractors who work in it. Unfortunately, unlike the large corporations, no one is going to step in and bail you out of your situation. Qualified Remodeler Magazine conducted a survey amongst their readers to drum-up 40 ways to increase your profits.

Here are some of the suggestions they came up with, along with a few of our own.

1. Know where your money is going, the small stuff really adds-up. If you budget more efficiently, you can potentially cut costs and allow yourself more of a profit.
2. Try your hand at reducing the price of some of the insurance policies you have to carry. Shop around and try to negotiate better prices.
3. Contractors are suffering, but so are suppliers. When they send their sales people out to charm you, see if they are willing to negotiate lower prices.
4. Try to reduce waste by recycling materials and using those small pieces you might normally throw away.
5. Do more of the project yourself instead of subcontracting the work.
6. Workers’ compensation rates vary based upon the work being completed. Consider doing the more expensive jobs yourself, or consider hiring a less expensive subcontractor.
7. Target what projects net you the most profit, and pursue those over others if possible.
8. Discretely look for other jobs while on site, you never know how one job can lead to another.
9. Offer an incentive to your customers for repeat or referral business.
10. Treat your employees well. It costs money to rehire and retrain new employees.

A smart business plan is the key to surviving this economic crisis; take a few minutes when you get the chance to reevaluate your operation and look for ways to adapt to the current conditions.

I recently read this blog about soliciting bids in the midst of our current “housing bubble.” The article advised homeowners against low-balling when examining contractors’ bids for their work. It reminded me of where I was working when the housing boom finally started to go flat. At the time I was working in southern Oregon. It was a hotbed for new construction during the boom as retirees and newlyweds flooded the area, known worldwide for its landscape and moderate climate.

The town also flooded with contractors. Anyone with a hammer and a pick-up truck was in the business. But when things started to collapse (last I heard the number of homes on the market was up roughly 1000 percent), many contractors were left holding their hammers. That’s when the undercutting started. Bids dropped like Wile E. Coyote off a cliff.

Suddenly we were losing work, right out from under our noses, because everyone was trying to cut costs. For a time, quality of work gave way to quantity of work, often awarded to the lowest bidder. Not surprising, this only complicated things. Just a few months later we found ourselves being hired to finish work left incomplete by low-balling contractors who were either fired or just disappeared.

The moral of the story here is that underhanded bidding is not only unfair but unhealthy as well. Unhealthy for business, unhealthy for everyone involved. Even in a time of recession, the traditional rules of bidding still apply and contracts are not won, nor is work retained, simply through low bids. Read the rest of this entry »