Owning and running a construction business is not cheap, but it’s the profit that makes it such a lucrative segment. Those profits may start to feel far too slim if you are unable to manage costs and maintain code compliance. Since labor expenses and the bill of materials (BOM) will use up most of the allotted budget for any construction project, managing and micromanaging those two aspects are critical for ensuring a decent profit margin. In this post, we will focus on how construction companies can curb their cost of raw materials without cutting corners.
Decrease Producer – Buyer Gaps
Construction companies depend on manufacturers, miners, processing plants, and other suppliers to provide them with the necessary raw materials. There are several universal factors such as the material’s nature, quality, origin, availability, demand, etc. that determines its cost, but most of those factors are not under the direct control of a construction company. To save money on raw materials, construction companies should try to reduce gaps between the actual producers/manufacturers of raw materials and their own company.
Since we are discussing orders on an industrial scale here, construction companies can save some serious cash by ordering directly from North America’s largest network of metal service centers. For example, contractors can order sheet metal online at a significant discount and have the order processed and shipped immediately. It doesn’t get faster or more cost-effective than that.
Maintain a Stock
Every experienced contractor in the business knows how important it is to maintain a stock of their most commonly used raw materials. By having the mindset to stock raw materials beyond just the scope of your immediate construction project(s), you should be able to:
- Save money by taking advantage of downmarket and overstocking discounts.
- Boost revenue generation rates by taking on new projects at short notice.
- Meet client requests for expanding the project beyond its previously discussed scope.
- Having a stock of raw materials at hand means that the construction crew can get started as soon as possible.
Do Not Overstock
If you own a relatively small to medium-sized crew, it is very important to estimate the company’s needs with some reservation and market analysis. Multinational corporations can store stock for years without having to worry about breaking even any time soon. Since smaller crews do not have that luxury, it is best to avoid any chances of overstocking your inventory with raw materials. Only stock materials that your crew needs and uses on a regular basis. Also, the idea is to never be caught completely off-guard, so your stockpile does not have to be big either.
The last tip we have for new contractors is that they should avoid buying particularly expensive machinery such as excavators, wheel loaders, backhoes, bulldozers, etc. early on. Renting them as needed makes a lot more sense for smaller crews. Invest in high-quality tools and safety gear instead to both improve the quality of the work, as well as the safety of your workers.