In an industry as competitive as construction – and an economy as sluggish as ours – it is important to focus on profit over revenue and efficiency over activity. Bigger and busier is not necessarily better.

“We’re so busy working that we just keep working. You have to be more strategic,” said Monroe Porter, President of PROOF Management. “You have to make the tough decisions.”

Monroe Porter
Monroe Porter

Porter was the featured speaker at the 13th Annual Contractor’s Seminar, sponsored by Barnes Dennig, Frost Brown Todd and North Side Bank. He offered a number of strategic tips for contractors to improve their bottom line, including:

  • Pay attention to the changing demographics within the country and the region, because it will impact the nature of the jobs that are available and the makeup of the workforce. For instance, as the aging population increases, so will the need for healthcare facilities.
  • Your management and cost structure must evolve with the times. In order to make the profit you desire on a job, you not only need staff with the appropriate skills and experience for the job, you need to maintain the appropriate average hourly wage – and your bid must reflect your wages, skills and desired profit.
  • Don’t waste time chasing jobs you won’t get or jobs that are not profitable. Instead, focus on the type of work your company does well, and put more time and effort into building relationships with those customers.

“Of the contractors that are busy, we find that 20-30 percent of their work represents 100 percent of their losses, and we find that to be true of $100 million contractors and $1 million contractors,” Porter said. “They’re losing money on those jobs because they’re doing jobs they don’t do well.”

He encouraged attendees to compile a list of all jobs the company performed in the past five years and compare them by margin to determine what type of work is most profitable for their particular company. That information will help determine the type of job the company should pursue in the future. Then, when pursuing new work, pursue only the work that the company has a realistic chance of winning.

“Separate the suspects from the prospects,” Porter said.

For some contractors, that will mean focusing more on restoration and service work than new construction. “The retrofit, maintenance and repair market in the U.S. is way larger than construction,” Porter said, “and it’s generally more profitable.”

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