Remodeling has always been a challenging business, made somewhat more difficult by prevailing economic conditions. While the economy appears to be improving, it’s critical to look at how to push more dollars to your bottom line.

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Net profit can’t be controlled directly; it’s what’s left over after you’ve paid job costs and overhead. That leaves three things that you can control: what you spend on projects and overhead, and what you bring in for sales.

Most remodelers find labor the most difficult thing to estimate and track, especially for fixed-price work. Typical errors include overestimating crews’ effectiveness and efficiency. Requiring your crew to maintain time cards and tracking nonproductive time (material runs, drive time, meetings, etc.) can help you get a handle on both effectiveness and efficiency. Creating production schedules, once materials are in hand, and sticking to them will help you better manage your crews’ time. Managing material procurement (how you get materials to the job site) will also help you spend less by reducing wasted time and cutting fuel costs. In other words, those midday trips to the lumberyard have to end. Right now, more than ever, preordering material before the crew begins the job makes sense.

You can increase sales two ways: by either doing the same amount of work but charging more or by keeping your current markup but doing more work. Many remodelers balk at the idea of charging more because they feel they’ll lose sales, especially now, when material prices are driving up job costs. But if you’ve tightened your belt, increased production efficiency, and are still not making the profit you deserve, your best bet is to sell at a higher price. As difficult as that may be right now, keep in mind that when demand is high, there are customers willing to pay for the same key things - quality work, exceptional service and honest communication. If that's you, there will be customers. And remember that if you increase your price without changing production or overhead costs, 100% of that increase will go to your bottom line. Look into sales training to improve your sales skills.

The additional dollars you bring in by selling more jobs at the same markup do not automatically add to your bottom line. The reason: More jobs mean more management and the potential to introduce inefficiencies as crews or subs bounce from job to job. You may need to add a production manager or another lead carpenter to make it work - a trick that is increasingly difficult in the current state of skilled labor shortages. Even if you end up producing more jobs at the same margin, but increase overhead, you may actually end up with a lower net profit.

Look at your current jobs. Think about how you can better manage each one to improve profits. Consider reducing the quantity of work but increasing the quality of work. Quality equals profitability.