It can be overwhelming at times when you start a contracting business. There are so many things to think about operationally, aside from winning consistent business and getting clients. The latter is arguably the most crucial aspect to consider because this is where your income will come from and how you will be able to pay your staff. 

As such, you have to make sure that you are making sufficient money when you carry out your contracting jobs rather than just breaking even or, worse, losing income due to mishaps or delays. As with any venture, it’s absolutely essential to learn accounting basics like understanding what a profit margin is and how to calculate it correctly for your business, whether you are in construction or any other industry. 

Here are other steps you can do to ensure that you generate a profit from your contracting jobs:

• 1. Invest in proper invoicing tools

A professional invoicing process is crucial for any business, particularly for contractors. After all, you have to send an invoice first in order to get paid. It’s basically a sales agreement between two parties. It should show the amounts owed by the client as well as the payment terms and due date. (1)

An invoice is especially useful if your client is another company (as opposed to a private homeowner if you provide a service in peoples homes) since more people will need to approve the release of funds in an organization. Due to this, having a document that outlines the products and services rendered can help hasten the process.

A template and manually calculating the client’s payables and other expenses won’t cut it, though. It’s best to invest in invoicing tools to automate your invoicing process and make it more efficient. Plus, a software program can minimize errors that can negatively affect how much you’ll earn for each contracting job.

You can find dedicated invoicing tools or look for software that integrates various operational tasks into one program. A great example of the latter is this construction management software from Jobber that serves as an all-in-one invoicing, estimating, scheduling and communication tool.

• 2. Quote accurately

Aside from invoices, you also have to make sure that your quotes are accurate. This way, you have an idea of how much you’ll be paid even before the project starts. Your quotations should include the costs of materials, labour and overheads. Make sure to price these appropriately so that you don’t lose money and are quoting the job at an acceptable profit margin to you.  

Estimates will also depend on a variety of factors, such as market conditions, the current prices of resources and competitor rates. Consider all these when creating a base price template for your services. (2)

Before sending a quote for a contracting job, here are some things to remember:

• Clarify the areas involved – There are times when the client only wants some portions of their space to be renovated. Thus, you have to clarify which areas you’ll be working on and price accordingly.

• Check the site in person – You should also take a look at the actual site to determine its access points and whether you’ll need to provide additional services, such as moving furniture or removing existing plastering. 

• Ask who’ll purchase the materials – Be clear on who’ll be the one to purchase the materials to avoid additional costs at the start of the project. (2) 

• 3. Master the art of spreading out costs

Even if you have the cash to roll for materials and equipment, you might want to spread out the costs and opt to finance these expenses. Suppliers allow their customers to pay through credit lines, credit cards or other financing options, such as business loans.

Of course, there will be finance and interest charges. Nonetheless, it’s a minimal price to pay for ensuring that you have cash-on-hand for daily operations and emergencies. Plus, you can even write off these costs as business expenses. (3)

• 4. Accept multiple payment options

Making payment simple and convenient for your clients can go a long way in ensuring that you get paid promptly and accurately. These days, people are going cashless, so you’ll have to keep up with the times. Allow electronic payments like bank and e-wallet transfers. You may also want to apply for credit card payments but be mindful of the processing and interest rates.

• 5. Take care of your crew

Lastly, more than your equipment, make sure you’re taking care of your most important resource—your crew. Your employees are the ones who do the grunt work and complete the projects. Therefore, you should treat them well to boost their morale and, in turn, their productivity. Buy them lunch occasionally or give them thoughtful benefits, such as insurance and paid time off. (4)

Takeaway

Making money as a contractor entails being meticulous about quotations and invoices. You can invest in tools to automate these processes and reduce calculation errors. Consider how you pay for business-related expenses as well and see how you can spread out the costs.

Additionally, open up multiple payment options for your clients for their convenience so you’ll get paid promptly. Don’t forget to take care of your crew as well to keep them efficient and productive as they work on your clients’ projects.  

References

1. “What Is the Purpose of an Invoice? | Invoicing Tips for Small Business”, Source: https://www.freshbooks.com/hub/invoicing/how-do-invoices-work 
2. “How to price a job as a contractor: how to quote for a job when self-employed”, Source: https://www.simplybusiness.co.uk/knowledge/articles/2017/08/how-to-price-a-job-as-a-contractor-quoting-a-job-when-self-employed/ 
3. “10 Ways to Improve Cash Flow in Construction”, Source: https://www.investopedia.com/articles/professionals/061215/10-ways-improve-cash-flow-construction.asp 
4. “5 Ways to Make More Money on Your Next Construction Job”, Source: https://www.iqpowertools.com/blog/make-more-money-on-your-next-construction-job