Project management means you wake up in the morning ready to motivate your team to get the job done! Or does it? People skills are still number-one in the construction industry, and they’re likely to continue to be important even with the rise of technology. One secret to improving your construction project management techniques and increasing your profit margin could be listening to your people. If you ask your team ways they think work could be more efficient or money could be saved, they’ll probably lend a variety of ideas. So, how can you decide which ideas for increasing profit through better management are worthwhile and which aren’t going to pay off?
Take a Baseline and Set Key Performance Indicators
KPIs. or “key performance indicators.” are important in any business. A KPI is a concrete, specific, and measurable factor that influences your business performance and success. While some KPIs are money-related, like revenue growth, others are oriented toward time, work productivity, and efficiency. Developing your own KPIs and using them to strengthen your construction project management can help your business increase its profits.
In order for KPIs to be meaningful and help you manage your construction projects better, you need to take a baseline. That way, you can measure the improvements your company is making during the course of a project, as well as from project to project.
As one example, you can choose project downtime as a KPI. You know that every minute your project isn’t under construction, you’re losing money. You can boost profits by decreasing the amount of downtime during projects. Analyze your three most recent projects, and be honest about how much downtime your company experienced during them. Take an average of the three, and use that as your baseline downtime KPI. Other recommended construction industry KPIs include:
- Quality and closeout evaluations
- Construction document management
- RFI frequency and response times
- Change order quantity and project impact
- Project safety and risk management
- Labor productivity
Software like ProEst can help you establish baseline measures in each of these key performance areas. You can also use ProEst’s reporting and cloud-based data storage to access documents from past and current projects.
Reduce Expenses When Possible
The construction industry is competitive, but so are other industries. If you’ve been with the same insurance company for years, have you thought to look at other companies? Another company could offer the same or even better coverage and benefits for less money. If you can save money on fixed costs like insurance, the savings can directly improve your profit margin.
Similarly, you may be spending significant amounts of money on printing. The average cost of blueprints is about $5 per print, going up to $20 and $25 for large format prints. You can eliminate this expense by using digital blueprints and use ProEst to perform digital takeoffs through the RSMeans database. You can also use digital tools to collaborate and communicate while on the job, reducing travel and fuel costs through trips to job sites or offsite meetings.
Evaluate Equipment Rental vs. Purchasing
You’ve probably heard the term “agile” used to refer to business management. Being agile means that you can reassess your business practices on an ongoing basis and take advantage of new opportunities. Just as using printed blueprints isn’t usually the most cost-effective approach, you could be spending too much on rented equipment, or you could benefit from switching from equipment that your company owns to occasional rentals, depending on the type of jobs you’re doing and the equipment you need.
Massachusetts-based Macura Excavating has saved money by purchasing equipment that the company uses on every jobsite. The company used performance indicators to decide that if equipment isn’t used at least 75% of the time on its jobs, it’s more cost-effective to rent the equipment rather than make a capital purchase. Equipment reliability is another factor. If you’re using equipment that breaks down frequently, it may be more cost-effective for your company to rent or lease than it is to purchase equipment that will increase your downtime or cause expensive repair bills.
Use Periodic Reports to Track KPIs
KPIs always include time frames and can be short term, medium term, or long term. You can use short-term KPIs to manage jobs on a weekly basis or compare monthly reports. Medium-term analysis is usually year-to-year, and you can use longer-term KPIs to see how your company’s profit is advancing over three to five years.
While some KPIs can be measured by hand, the process is time-consuming and greatly improved by technology. Programs like ProEst will speed up the process of determining your company’s KPIs, and they’ll let you track them instantly. Using periodic reports provided by ProEst or offered through its integration with industry-standard construction project management programs like ProCore can help you decide which KPIs are most important for your construction business. In the case of KPIs, numbers don’t lie. They can show you the specific steps you need to take to increase your profits.
ProEst is a cloud-based pre-construction estimating platform that helps you create accurate estimates and digital takeoffs directly from blueprints quickly, allowing you to determine the most favorable rates for your company within the estimation process. There’s no guesswork involved. ProEst makes quality assurance in commercial construction projects estimation effortless. You won’t have to engage your entire team to be sure your numbers are accurate.
If you would like to learn more about how your commercial construction company can increase its profits and reduce miscalculations during the estimation process, reach out today and schedule a 1-on-1 walkthrough with one of our specialists!