As the Housing Market Booms, Contractors Look for Ways to Cut Project Costs

2015 was a great year for construction contractors across the nation. Despite mortgage lenders tightening their belts and increasing their eligibility requirements to the point where credit-worthy people are being skipped over, the number of residential homes built this year has actually increased, indicating a new housing boom. According to a July 2015 report by the United States Census Bureau, the number of new housing permits issued this July was up 7.5% compared to July 2014. This boom has been driven by rising population growth.

With 1,275,000 permits issued across the country, contractors are as busy as ever trying to get these buildings constructed for homeowners. Yet while you are trying to outbid your competitors and meet construction deadlines, project costs can quickly balloon out of control. Keeping these costs low is crucial, and the following suggestions can help your company operate more efficiently.

Identify Miscellaneous Costs

Miscellaneous construction costs are usually one of the top factors that cause construction projects to go over their established budgets. When building new homes in a community, those little tweaks to the plans can have significant trickle-down effects to every part of the build and all the work that each sub-contractor has to perform. Identify where the miscellaneous costs are coming from, prepare for the required overages, and eliminate needless spending to significantly lower construction costs. Don’t forget to periodically evaluate your suppliers and what they are charging; those costs can drive up your own construction costs to the point where customers are walking away from your bid.

Reduce Waste

Demolition waste and removal is a cost headache that contractors don’t want to deal with when they could be building new homes. Also, more homeowners are looking into green construction practices and building materials, as they evaluate contractors closely to see what green techniques they are using. Contractors can be green while reducing project costs by reusing waste during the construction phase, according to Green Space. One suggestion is to reuse the construction waste. For example: reuse the waste to build temporary roads for equipment instead of buying road construction materials that will have to be disposed of later when the project is completed.

Build What The Customers Want — And Nothing More

Maybe you should add the crown molding, upgrade the vanity mirror, or add elegant hinges to the custom walk-in closet door. While you believe that these little changes and upgrades at no extra cost will please the homeowner and acquire more referrals to your business, you have to take a good, hard look at how much you are spending for these unasked-for upgrades. It may not seem like much per project, but when you go back and evaluate every project that you have done for the year and add up the small extra costs, the numbers can rise significantly. Also, these additional finishing touches are often forgotten in the customer’s mind once the house is complete.

Simplify The Designs

The more complicated the design, the greater the construction costs will be. All those angles, turrets, side walls, and pillars look pretty on the blueprints, but can take up your time to make into reality, especially if the customer isn’t looking for those things in a home. Evaluate the current housing market, conduct surveys on what customers are interested in, and use the gathered information to build the desired homes. You will be able to keep your costs down and attract the right buyers who can afford houses in that community.

Streamline Administrative Processes

Back office tasks such as sending out bids, building relationships with suppliers, evaluating sub-contractors, and filing contracts can take up your time. This problem leads to an increase in your administrative costs that can have an impact on every project that you take on. Streamlining the administrative process can make your construction business more efficient, leading you to find more customers. From adopting contractor bidding software to using invoicing tools available for your smartphone right at the construction site, you can adopt the best methods that can help keep your business moving forward.

Even when you aren’t looking to upgrade your business technology, simply looking at your administrative processes and seeing what is taking up too much of your time can have an impact on your business costs. Reorganizing your schedule, identifying productive tasks, and engaging in better time management when you are in the office can allow you to spend more time in acquiring new business.