How to make more money as a general contractor

A reliable team, excellent work, happy clients and high profit margins … a pretty ideal job situation for a general contractor.

Getting to this place on a project requires strong management skills, hard work and business expertise. Learn from the best on how to make more money as a general contractor and why so many businesses use a construction management software like Buildertrend to remain profitable.

How do construction companies make money?

There are many avenues for making money in construction. Ultimately, your profit margins hinge on the complexity of your project as well your ability to stay on time and within budget. Here are some revenue streams that’ll increase your profitability as a general contractor.

Project contracts

A standard way to make money in construction is by winning contracts, starting projects and earning payment when milestones are completed.

Bidding and estimating

By submitting proposals and sending estimates, you’re one step closer to gaining new clients and generating revenue. Spending time to generate accurate estimates will ultimately save you money. Sometimes the estimate may even show that the job isn’t profitable and that it’s a good time to walk.

Change orders and variations

Construction companies earn additional revenue when a change order takes place and the scope of the project shifts to include upgraded materials and additional labor.

Subcontracting

Most construction companies charge a fee for their services in managing subcontractors; contractors withhold a portion of the subcontracted cost to cover this fee. Some areas may include plumbing, HVAC and electrical work. 

Value engineering and cost savings

This means looking for options to save on costs without sacrificing quality. Consider value engineering when looking at design, materials and work methods.

Maintenance and facility management

Some construction companies offer a service for future maintenance and repairs for homeowners. This would be an ongoing contract for the client and a consistent revenue stream for your business.

Real estate development

Some companies seek additional revenue from buying land, developing it and then selling or leasing the properties. This could involve condos or a subdivision, and money can be made from property sale and leasing income.

Consulting and design services

Another option is to provide your expertise in the designing and planning of your clients’ homes. You’d charge the client a fee for your consulting and/or design services. These services include any expertise you can offer to help the project succeed that goes beyond the actual construction.

Construction trends that offer greater profit margins

Being in the know on industry trends and learning how to capitalize on them can help contractors increase profit margins. Consider these trends and how they might help you grow your construction business.

Green and sustainable construction

A lasting interest in sustainability means this first trend is here to stay. Contractors can offer clients sustainable materials such as solar panels, eco-friendly insulation materials and water-saving fixtures. You’ll make money on the installation, and the homeowners will save money down the road on energy costs.

Prefabrication and modular construction

With prefabrication and modular construction, contractors make building materials off-site and then assemble everything on-site. Some companies assemble bathroom or kitchen modules they transport straight to the building site. This trend helps the material measurements be exact, which saves on waste and labor.

Renovation and retrofitting

A current trend involves homeowners wanting to renovate their existing space rather than buying a new home. Renovating could include modernizing, building an addition and improving energy efficiency. There’s an opportunity here to provide your design services on layout and functionality. 

Smart buildings and home automation

The smart home trend includes automated security, lighting, heating and entertainment. Contractors can provide customized smart solutions in most areas of the client’s home. These offerings will make you attractive in the market as well as increase revenue.

Data-driven decision-making and analytics

By using a construction management software, contractors can examine personalized data to make informed decisions. Track your project profitability and find areas where you may need to be more efficient. Making decisions based on your own data analysis leads to profitability.

Infrastructure development

This can include roads, bridges, public utilities, housing communities and parks. Because of the nature of these projects, the profit margins are typically high. If you have expertise in this area, it may be a way to make more money and diversify your portfolio.

9 tips to make more money by improving construction processes

Here are the top 10 tips contractors should follow to improve their construction processes and raise their earnings.

1. Invest time in thorough project planning

Spend time clearly defining project goals and timelines. It’s worth your effort to complete a thorough site assessment and consider potential risk areas before starting construction – as there are many financial mistakes to avoid.

2. Embrace construction management technology

Improve overhead cost and profit margins with construction management technology. It’s the top way to increase your efficiency in all areas including managing documents, estimating and communicating.

3. Establish clear lines of communication

It’s best for all project stakeholders to have one platform for communication. Establish clear documentation and a single place for contact, and you’ll avoid errors, delays and misunderstandings.

4. Implement lean construction principles

If you reduce waste and improve efficiency, then you’ll maximize the value of your project. Timely material delivery, or trying out prefabricated or modular construction, will lead to cost savings. Check out more financial management tips.

5. Provide training and development for employees

Well-trained employees enhance your team’s skill set and are more efficient. Grow your skills and produce higher-quality work by investing in employee training.  

6. Enhance safety protocols and implement training programs

Make safety a top priority. A safe work environment reduces the risk of injuries and the costs and insurance premiums that go along with those accidents. Complete safety checks, provide personal protective equipment and set strict safety guidelines that everyone follows.

7. Evaluate and optimize subcontractor relationships

Subcontractors are invaluable to a project’s success. Contractors should build strong relationships with subs by paying them on time, and also by setting clear expectations, communicating well and negotiating competitive rates to maximize profits.

8. Implement quality control measures

High-quality work keeps clients happy, reduces rework and improves your business’s reputation in the community. Addressing issues early in the project can help you avoid client relationship breakdowns. 

9. Continuously learn and adapt

Have a regular practice of keeping up with the latest and greatest in the industry. Industry trends are a good opportunity to show clients your expertise and are also an area for profitability. Stay ahead of the competition and get more tips on the best methods for how to run a construction business by learning and adapting in an ever-evolving industry.

3 companies that use technology to make more money

Many construction companies use technology to increase their earnings. Here are three Buildertrend customers that credit construction management software for their huge successes.

Procuring $10 million in work

With the help of Buildertrend, Hasler Homes is able to procure $10 million in work per year. Greg Hasler, owner and head contractor, and his team build custom homes and large-scale renovations in British Columbia. Greg used to keep track of everything manually, but when they shifted to larger projects, it became obvious they needed a construction management program to organize everything in one place so they could focus on what they do best.

Building $20 million in homes

In the beginning, Cardinal Crest Homes founders Joe Christensen and Adam Shaeffer did everything from the design and architecture to project management tasks. By adopting the financial featuresand selections tool, they successfully built 18 to 20 homes per year in the Kansas City, Mo., area, averaging at about $1 million per home.

160,000 Instagram followers

Nick Schiffer, owner of NS Builders out of Boston, and host of “The Modern Craftsman” podcast, monetizes his expertise by turning it into content that other builders crave. Nick is always striving for ways to improve, and he found tech to be the answer for his business. Now, he boasts 160,000 Instagram followers and 96,000 YouTube subscribers. 

Make your construction business more profitable and efficient with Buildertrend

Increase your profits with construction management software.

Buildertrend has all the financial tools to help you save money and manage projects. Track cash flow, eliminate overages with the budget tool, send and receive payments, simplify your bidding process and use many more features straight from the app.

Schedule a demo today to see how Buildertrend can upgrade your financial management.

Making money in construction FAQs

Get answers to the most common questions about making money in construction.