The Profit Builder Unscripted

Consistent Profits in Contracting: What Really Works

• Vicki Suiter • Episode 56

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Ever feel like your profits swing wildly from one job to the next—even when sales are up? You’re not alone.

I recently talked with a contractor, Steve, who’s facing that exact challenge. On paper, everything looks fine. But when we dig in, the real issue shows up: without clear profit targets, every project’s results are left to chance.

In this week’s episode of The Profit Builder Unscripted, I share the key insights from that conversation—and how you can use them to start building consistent profits across all your projects.

👉 Don’t leave your success to chance. Click below to listen or watch, and learn how to create steady, reliable growth in your business.

Click to book a call:https://calendly.com/vickisuiter/discovery

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As a contractor, are you struggling to make a consistent profit in your contracting business? And do you wish you understood the formula for being able to turn a more consistent profit and have more money in your bank account? If so, make sure to listen to this episode because here we're going to talk about what are some of the fundamental things that you can do to start to make a difference in the profitability of your contracting business.

Hi, I'm Vicki Suiter, and welcome back to the Profit Builder Unscripted.

This week in a conversation with my client, new client, Steve, he was sharing with me that he was really struggling with making a consistent profit. And we were looking at the numbers and we were looking at his profitability over the last couple of years. And it was really evident that there was a lot of inconsistency in not just the revenue, but in gross profit and net profit. And I said, let's start with just talking about, because he came to me with the desire to understand how can he make a difference on his bottom line? How can he be more profitable, have more money in the bank, and really be able to grow his business? And I said, great, let's, the first thing that we did is a financial health assessment. And in that financial health assessment, we were looking at five years worth of his financial data, both the profit and loss and balance sheet.

And the first thing that I explained to him was, listen, there's only two ways to affect the bottom line profits of your business. Increase revenue or decrease expenses. Those are the only two things you can do. And the truth is there's only two things that you can do to impact either of those things. The only two things that you can do to increase revenue are either to sell more or charge more. And the only two ways to affect expenses is either to cut expenses like literally spend less money on, you know, meals and entertainment or subscriptions or reduce your rent, right, or to become more efficient on the production side of your business. That last one in being more effective and efficient in your production side of your business is in construction, one of the most difficult things to take on. And one of the things I said to him as we were looking at the numbers.

What I do is I look at, all right, what are the key numbers? So one of the key numbers is obviously revenue. Most contractors have a goal when it comes to revenue and income. And then the second thing that we look at is gross profit margin. And when I was looking at the gross profit margin, and one of the things I always say is contractors, you live and die by gross profit margin.

You absolutely have to be consistent in making a certain rate of return or gross profit margin on your projects. Now margin just by definition, it simply means a percentage. And the reason you look at it on a percentage basis is because if the numbers go up and the dollars go up, the rate of return might not be as good, right? So looking at it on a percentage basis, and I'm not going to try to do a lot of math in this because, you know, we're not looking at something in paper and it would be very difficult. But let me just say, we all understand the concept of rate of return. And rate of return is what is the gross profit margin that you're making on projects? Meaning you have, you charge a certain amount for that project and then you have cost for producing that project, right? Labor materials, equipment, subcontractors, permits, know, dump fees. 

So the revenue less those direct costs for producing the revenue is your gross profit dollars. And the percentage of those gross profit dollars is your rate of return or your gross profit margin. That gross profit margin is critical. And then the next number, so you got revenue, gross profit margin. The next number that we looked at was we were doing this financial health assessment with Steve was we looked at his net profit margin. Like how much was it costing him to run the business and then.

How much was he making on the bottom line? And the first thing I noticed was there was an inconsistency year over year. There was an inconsistency. Revenue seemed to be doing okay. Like he was making a little bit more every year. That was good. But the gross profit margin was really inconsistent. And overhead expenses as revenue started to go up were going up at a higher rate than the revenue was going up. And I said, you got a couple of problems here.

I said, so let me ask you this question. What are you charging in terms of like, do you have a goal for gross profit margin? Like what is the gross profit margin goal that you have? And he goes, I don't know. I charge what the market will bear. What I think that the client will, you know, will pay for the project. I'm like, well, first of all, that's a huge problem because if you think that all of the noise that you hear out there about quote unquote, what the market will bear. I'm gonna tell you, and this is based on experience of working with contractors all over the country in different trades, is that the numbers that people throw around about 10 and five or 15 and 10, like it is more often than not, unless you're in the commercial world and unless you're in public works, more often than not, those numbers are not true.

It's just the way they present them and they talk about them. And that when you look at your numbers and when you really understand what does it really cost me to run my business, right? And what's my goal? And if you don't have a goal for what you want to hit, then you're going to get whatever you get, which is part of what was Steve was struggling with, right? He was just, he wasn't making the profit that he wanted because he was just taking whatever was left over.

And I'm going to ask you, if you're listening to this, can you relate to that? Like, I see that so often and that should not be the case. You work way too hard, way too hard. And you're way smarter than you give yourself credit for, by the way. Contractors are some of the smartest people I know and they rarely give themselves credit for it. And I just, what I know is that when you decide that you're gonna set some targets and goals for how much money you wanna make. A lot of people do, but they don't for how much gross profit margin they wanna make and how much net profit they wanna make. And when you can start being more intentional about those things, then you can start to increase your profitability. And I don't mean like pie in the sky, I'm gonna throw numbers on a piece of paper and it's magically gonna happen.

But when you have targets, it starts to alter our behavior in how we approach how we run our businesses, right? If I have a goal of doing 3 million or 5 million in revenue next year, then I'm going to look at, all right, what's it going to take to get 3 or 5 million? What's my average project size? How many projects do I need? What do I already have in contract? What's the difference between those two? And then I'm going to ask myself the question, all right, how am I going to get those projects?

I think that people tend to focus maybe on that part of their construction business, but what they don't pay as much attention to is, what is it costing me to run that business? And what is my rate of return on projects? What are my goals and targets for that? So I really encourage you that if you're struggling, and here's the other thing. If you're struggling to make a consistent profit, start setting some goals and getting really intentional about what what.

What are my goals? How much money do I want to make? What do I want my net profit to be? How much money do I need to be making? Because your net profit ultimately turns into what's in your bank account. And so being more intentional about setting goals for what you want to do in terms of revenue and gross profit margin and net profit, then you can start to craft a plan for how can I have that happen? How can I have it turn out?

I know this kind of a lot that I'm sharing here, but it's like, could tell I'm kind of passionate about this topic. And I just, I feel very strongly that if we can run our businesses with our eyes wide open, when we have that clarity, we have more confidence. And when we have that confidence, we take more powerful actions. And I have to tell you, like, this conversation with Steve was so awesome because what we did is we sat down and we also started to set some goals.

Goals based on historically what he, what it was clear that he was able to do. Also, we talked about how, how he was pricing and how he was communicating that pricing to prospects. We talked about net profit goals. So in that financial health assessment process we did, we really didn't just look at where has he been, but we talked about where do you want to go? What are some targets that you want to set? And then how can you impact those targets?

These are the things that doing this process for yourself can really help you get more clarity about, well, then what do I need to do in order to make that happen? But you first have to set goals because just like building a project, right? You couldn't possibly build somebody's home for them and create the beautiful things that you create unless you first know what it is that they want. That's always the first step.

The same thing is true in running your construction business. You need to have goals. You want to have goals and you want to have targets that really help you know, where am I headed? What's a win for me? What's success? And it was so great when I finished this conversation with Steve that we also talked about, all right, what are the next steps in order to help you actually achieve those goals? What needs to happen from there?

So I highly encourage you that you spend a little bit of time and think about this for yourself. Think about what are the goals and maybe even run a profit and loss statement on an accrual basis, by the way, which has more to do with your profitability than just cash flow, but run it on an accrual basis out of your books and look at, all right, what have I done for the last five years? And then what do I want to set for targets? If you're interested in learning more about my financial health assessment, feel free to reach out to me. I put a link down below where you can schedule a no obligation phone call with me and I'll tell you a little bit more about it. We'll find out a little bit more about your business. But I'm happy to go through this process with you too. It's super powerful and it's a great way for you to be able to start to get that clarity so that you have more confidence, so that you can take more powerful actions.

Because it's in that clarity and in that confidence that you're gonna be able to know, all right, what can I be intentional about in moving forward to create the profits and the business that you really want? All right, thank you. If you found this topic to be helpful, I'd love to hear your comments below or please share it and make sure to subscribe to the channel.

And this is the kind of content this and about teams and building great construction businesses is really what this podcast is all about. And ⁓ I would love to hear your feedback if you have some thoughts. So feel free to drop a note below. Thanks again for being here and I look forward to seeing you next time on the Profit Builder Unscripted.


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Vicki Suiter

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