Construction & Trades Operations Playbook: Contractors, Builders, Trade Businesses
The operational infrastructure that takes construction companies from chaos to profitability. Project management, crew scheduling, job costing, estimating.
The Construction & Trades Operations Playbook: From $2M to $10M Without the Chaos
You run a construction company, contracting business, or trades operation. You're billing $3M annually across 15-30 active jobs.
You're also:
- Jobs running over budget with no warning
- Materials showing up late or not at all
- Crews sitting idle waiting for work
- Change orders not documented or billed
- Job costing is "we'll see when it's done"
- Estimating is guesswork based on "feels right"
- Paying for materials twice because invoices are lost
- Working weekends to catch up on paperwork
Sound familiar?
Last year, we worked with a general contractor doing $4.2M in revenue across commercial and residential projects. 23% of jobs over budget, average project delay of 3 weeks, zero visibility into real-time profitability, owner working 70-hour weeks.
Eighteen months later: $7.8M revenue, 94% of jobs on budget, average delay under 5 days, real-time job costing dashboard, owner at 50 hours/week.
Here's the operational playbook that got them there.
The Construction Operations Problem
Why Construction is Operationally Complex
Construction and trades businesses face unique operational challenges:
- Every job is a project (unique scope, location, timeline, team)
- Job costing is critical (you don't know if you made money until it's done)
- Materials management is chaos (ordering, delivery, tracking, storage)
- Crew scheduling is 3D chess (skills, availability, location, sequence)
- Change orders are constant (and often not billed)
- Cash flow is unpredictable (payment terms, retainage, lien rights)
- Weather and delays happen (but clients still expect on-time delivery)
The Typical Construction Chaos
Here's what I see at most construction companies:
Monday Morning:
- Job 1 crew shows up, materials aren't there
- Job 2 inspector didn't show, crew sent home
- Job 3 needs electrician, he's on Job 5
- Change order from last week not documented
- Supplier calling about unpaid invoice (already paid)
Tuesday:
- Estimating new job with no historical cost data
- Bid due tomorrow, staying late to finish
- Customer calls asking about Job 4 timeline (no idea)
- Crew overtime because Monday delays cascaded
Wednesday:
- Job 6 went over budget (by how much? unclear)
- Materials delivered to wrong job site
- Subcontractor no-show
- Payment from completed job still not received (45 days)
Thursday:
- Realize Job 7 needed permit (starting late now)
- Tool stolen from job site (no tracking system)
- Crew member injured (paperwork nightmare)
- Three jobs need owner on-site (can't be everywhere)
Friday:
- Invoicing for completed jobs (if time permits)
- Payroll crisis (hours not submitted)
- Weekend spent catching up on paperwork
- Next week's schedule unclear
The symptoms:
- Jobs over budget (don't know until too late)
- Profit margins <10% (or unknown)
- Cash flow stress
- Schedule delays constant
- Change orders not captured
- Materials waste >10%
- Crew utilization <70%
- Can't scale past owner's capacity
The Construction Operating System
Component 1: The Job Costing System
The problem: You don't know if a job is profitable until it's done (or worse, you never really know). By then it's too late to fix.
The fix: Real-time job costing with budget vs. actual tracking.
The Job Budget Template:
Job: [Address/Name]
Client: [Client Name]
Contract Amount: $XXX,XXX
Budget Date: [Date]
Start Date: [Date]
Completion Date: [Date]
COST BREAKDOWN:
1. LABOR
Carpenters: XXX hours @ $XX/hr = $X,XXX
Laborers: XXX hours @ $XX/hr = $X,XXX
Foreman: XXX hours @ $XX/hr = $X,XXX
Total Labor: $XX,XXX (XX% of budget)
2. MATERIALS
Lumber: $X,XXX
Concrete: $X,XXX
Drywall: $X,XXX
Fixtures: $X,XXX
Other: $X,XXX
Total Materials: $XX,XXX (XX% of budget)
3. SUBCONTRACTORS
Electrical: $X,XXX
Plumbing: $X,XXX
HVAC: $X,XXX
Other: $X,XXX
Total Subs: $XX,XXX (XX% of budget)
4. EQUIPMENT
Rental: $X,XXX
Fuel: $X,XXX
Total Equipment: $X,XXX (XX% of budget)
5. OTHER
Permits: $X,XXX
Dumpster: $X,XXX
Insurance: $X,XXX
Total Other: $X,XXX (XX% of budget)
TOTAL COSTS: $XXX,XXX
CONTRACT AMOUNT: $XXX,XXX
GROSS PROFIT: $XX,XXX (XX% margin)
Target margin: 20-30% for healthy construction business
The Job Tracking Dashboard:
Job Name | Budget | Actual | Remaining | % Complete | % Budget Used | Status
---------|--------|--------|-----------|------------|---------------|--------
123 Main | $50K | $38K | $12K | 80% | 76% | 🟢 On track
456 Oak | $80K | $75K | $5K | 85% | 94% | 🟡 At risk
789 Elm | $35K | $40K | -$5K | 90% | 114% | 🔴 Over budget
Status Rules:
🟢 Green: % Budget Used < % Complete
🟡 Yellow: % Budget Used = % Complete (±5%)
🔴 Red: % Budget Used > % Complete
Weekly Review:
- All red jobs: Immediate analysis
- What went wrong?
- Change order opportunities?
- How to minimize damage?
- All yellow jobs: Proactive monitoring
- Watch for issues
- Tighten controls
- Plan contingencies
- Green jobs: Learn from them
- What went right?
- Can we replicate?
- Update estimating
The Job Cost Tracking Process:
Daily:
□ Crew leads submit time sheets (paper or app)
□ Materials receipts collected
□ Equipment hours logged
□ Photos of progress
Weekly:
□ Time sheets entered into system
□ Materials invoices entered
□ Subcontractor invoices entered
□ Update % complete estimate
□ Review budget vs actual
□ Flag variances
Monthly:
□ Full job cost report
□ Profitability analysis
□ Forecast to completion
□ Client billing (if progress billing)
□ Update project schedule
Construction Job Costing Software:
Entry Level ($50-200/month):
- Buildertrend
- CoConstruct
- Jobber (for smaller trades)
- Housecall Pro
Mid-Tier ($200-500/month):
- Procore
- BuilderTrend (higher tier)
- Foundation
- Knowify
Enterprise ($500+/month):
- Procore (full version)
- Sage 300 Construction
- Foundation Software
- Vista by Viewpoint
Pick based on:
- Number of concurrent jobs
- Team size
- Integration needs
- Complexity of projects
Component 2: The Estimating System
The problem: Estimates are guesswork. You win low-margin jobs and lose good ones. No historical data. Each estimator does it differently.
The fix: Systematized estimating with historical data and standard approaches.
The Estimating Process:
Step 1: SITE VISIT (always)
□ Take measurements
□ Take photos/videos
□ Note existing conditions
□ Identify challenges
□ Note access constraints
□ Check utilities
□ Meet client if possible
Don't estimate from plans alone. Go to the site.
Step 2: SCOPE DEFINITION
□ Exactly what's included
□ Exactly what's excluded
□ Assumptions (e.g., "assuming existing foundation is sound")
□ Client responsibilities (e.g., "permits obtained by owner")
□ Phasing (if applicable)
Step 3: QUANTITY TAKEOFF
□ Measure everything that needs measuring
□ Use takeoff software (PlanSwift, Bluebeam)
□ Or manual with spreadsheet
□ Add 10-15% waste factor for materials
□ Check work (most errors happen here)
Step 4: COST BUILDUP
Labor:
- Hours per task (from historical data)
- Crew composition
- Hourly rates (loaded with burden)
- Productivity factors (weather, site conditions)
Materials:
- Current pricing (call suppliers)
- Delivery costs
- Storage if needed
- Waste factor
Subcontractors:
- Get 2-3 quotes
- Use best price (or most reliable)
- Add contingency if subcontractor might flake
Equipment:
- Rental costs
- Fuel
- Transportation
Overhead:
- Fixed % of direct costs (typically 10-15%)
- Or calculated per job
Profit:
- Target margin: 15-25% (varies by job type)
- Competitive jobs: 10-15%
- Negotiated work: 20-30%
- T&M work: 30-40%
Step 5: REVIEW AND ADJUST
□ Sanity check ($ per square foot reasonable?)
□ Compare to similar past jobs
□ Identify risks
□ Add contingency for unknowns (5-10%)
□ Final price decision
Step 6: PROPOSAL
□ Clear scope
□ Breakdown (if client wants it)
□ Payment terms
□ Timeline
□ Exclusions
□ Change order process
□ Expiration date (pricing valid 30 days)
The Historical Cost Database:
Track actual costs per job:
Example: Kitchen Remodel (Full Gut)
Average size: 200 sq ft
Average cost: $45K
Cost per sq ft: $225
Breakdown:
Labor: $15K (33%)
Materials: $18K (40%)
Subs: $10K (22%)
Other: $2K (5%)
Timeline: 6-8 weeks
Crew: 2 carpenters, 1 laborer
Common issues:
- Plumbing surprises (add 10% contingency)
- Structural issues (in 30% of jobs)
- Client changes mind on fixtures (get selections upfront)
Use this data to estimate next similar job more accurately.
Build database by:
- Job type (residential remodel, commercial buildout, etc.)
- Size range
- Complexity level
- Location (urban vs suburban, different costs)
The Estimating Quality Control:
Before submitting bid:
□ Site visit completed
□ Scope is clear and written
□ Quantities double-checked
□ Pricing is current (not 6 months old)
□ Similar past jobs reviewed
□ Profitability acceptable (>15% margin)
□ Risks identified and priced
□ Timeline is realistic
□ Payment terms acceptable
Red flags that kill bids:
- Customer wants impossible timeline
- Scope is vague ("finish basement, make it nice")
- Customer questioning every line item
- Payment terms terrible (net 90, 10% retainage)
- Site has major access issues
- Job requires skills/licenses you don't have
Sometimes the best bid is no bid.
Component 3: The Crew Scheduling and Management System
The problem: Crews sitting idle. Wrong people on wrong jobs. Overtime because of poor planning. Skills mismatched to tasks.
The fix: Strategic crew scheduling with skills tracking and workload balancing.
The Crew Skills Matrix:
Name | Framing | Finish | Drywall | Paint | Tile | Cert/License
-----|---------|--------|---------|-------|------|-------------
Mike | Expert | Good | Basic | - | - | Lead Carpenter
John | Good | Expert | Good | Basic | Good | -
Steve| Basic | Basic | Expert | Expert | - | -
Tom | - | - | - | - | Expert | Tile License
Pete | Good | Good | Good | Good | - | -
Use this to:
- Match skills to job requirements
- Identify training needs
- Plan crew composition
- Avoid overreliance on one person
The 2-Week Crew Schedule:
Week of [Date]:
CREW 1 (Mike lead, John, Steve):
Mon-Tue: Job #123 - Framing
Wed-Fri: Job #456 - Finish carpentry
CREW 2 (Pete lead, 2 laborers):
Mon-Wed: Job #789 - Demo and prep
Thu-Fri: Job #456 - Assist Crew 1
CREW 3 (Tom + helper):
Mon-Fri: Job #234 - Tile work
AVAILABLE:
None (fully scheduled)
UPCOMING NEEDS:
Week of [Date+7]:
- Job #567 starts (need full crew)
- Job #123 needs finish crew
- Job #890 estimate/site visit
Schedule built from:
1. Active jobs and their phases
2. Job start dates
3. Crew skills required
4. Job locations (minimize travel)
5. Weather forecast (outdoor work)
The Daily Crew Coordination:
Day Before:
- Text crews with next day assignment
- Location
- Start time
- Special tools/materials needed
- Any site access issues
Example Text:
"Tomorrow: 123 Main St, 7 AM. Finishing drywall in 2nd floor. Bring stilts and fine sandpaper. Park on Oak Street (no parking on Main). See you there."
End of Day:
- Crew lead texts completion status
- Photos of progress
- Any issues or needs for tomorrow
- Hours worked (for payroll)
Example:
"123 Main: Drywall done, ready for paint. Need paint delivered tomorrow. Mike 9hrs, John 8hrs, Steve 8hrs."
Weekly Crew Meeting:
- Review last week
- Preview next 2 weeks
- Safety topic
- Address concerns
- Celebrate wins
The Crew Utilization Tracking:
Target: 85-90% billable time
Track per crew member:
Available hours: 40/week
Billable hours: XX
Shop/indirect time: XX
Idle time: XX
PTO/sick: XX
Utilization % = Billable ÷ Available
Low utilization (<75%)?
- Not enough work (sales problem)
- Poor scheduling (scheduling problem)
- Rework (quality problem)
- Weather delays (plan indoor backup work)
High utilization (>95%)?
- Burnout risk
- No time for training
- Schedule too tight
- Need to hire
Component 4: The Materials Management System
The problem: Materials show up late. Wrong materials ordered. Stuff gets stolen. Can't find materials on job sites. Waste is huge.
The fix: Systematic materials planning, ordering, tracking, and inventory.
The Materials Planning Process:
When job is sold:
□ Create materials list from estimate
□ Review with crew lead (anything missing?)
□ Determine delivery schedule (phase by phase)
□ Get pricing from suppliers (confirm estimate)
□ Identify long-lead items (order early)
2 Weeks Before Phase:
□ Order materials for that phase
□ Schedule delivery date
□ Confirm job site access
□ Arrange storage if needed
3 Days Before Delivery:
□ Confirm delivery date/time
□ Notify crew lead
□ Verify site is ready to receive
Day of Delivery:
□ Crew or PM checks delivery
□ Verify quantity and quality
□ Note any damage
□ Sign delivery receipt
□ Photo of delivery
□ Put materials in secure location
During Job:
□ Track materials usage
□ Order additional as needed
□ Return unused materials for credit
□ Document any waste
The Materials Tracking System:
For each job, track:
Ordered | Delivered | Used | Returned | Wasted | Notes
--------|-----------|------|----------|--------|-------
100 2x4 | 100 | 95 | 3 | 2 | Cut wrong
20 sheets | 20 | 18 | 2 | 0 | Good
10 gal paint | 10 | 9 | 1 | 0 | Good
Use this data to:
- Improve future estimates
- Identify waste patterns
- Track material costs vs budget
- Verify deliveries
- Process returns
The Tool and Equipment Management:
Problem: Tools disappear, stolen, or left on job sites
Solution: Tool tracking system
Company Tools Inventory:
Each tool:
- ID number (engrave or label)
- Description
- Purchase date
- Value
- Assigned to (person or truck)
- Location
Tool Checkout:
When tool goes to job:
□ Who took it
□ Which job
□ Date
□ Expected return date
Regular audits:
Weekly truck inventory check
Monthly full tool inventory
Missing tools: Charge to responsible person (policy)
High-value items:
Lock them up at job site
Bring back to shop daily
GPS trackers for expensive equipment
Insurance for major tools
The Materials Vendor Management:
Primary Vendors:
- Negotiate accounts with terms (net 30)
- Get contractor pricing
- Establish relationships
- Order consolidation (better pricing)
Vendor Scorecard:
Track monthly:
- On-time delivery %
- Pricing competitiveness
- Quality issues
- Invoice accuracy
- Returns process ease
Problems with vendor?
- Discuss with rep
- Switch if not resolved
- Always have backup vendors
Strategies:
- Order in bulk for better pricing (if storage available)
- Consolidate orders (one delivery vs. three)
- Take advantage of seasonal sales
- Build relationships (they'll help in emergencies)
Component 5: The Change Order Management System
The problem: Client asks for changes. You do the work. Never document it. Never bill it. Profit disappears.
The fix: Every change is documented, priced, and approved before work starts.
The Change Order Process:
When Client Requests Change:
Step 1: DOCUMENT REQUEST
□ What exactly do they want changed?
□ Why? (helps with pricing discussion)
□ When do they want it?
□ Document in writing (email or form)
Step 2: ASSESS IMPACT
□ Additional labor hours required
□ Additional materials needed
□ Schedule impact (delays other work?)
□ Permits or inspections needed?
□ Subcontractor impact?
Step 3: PRICE THE CHANGE
Labor: XX hours @ $XX/hr = $XXX
Materials: $XXX
Subs: $XXX
Markup: XX% = $XXX
Total: $X,XXX
Time impact: +X days
Be generous with pricing:
- Changes disrupt workflow (inefficiency)
- May delay other jobs
- You're doing client a favor
- Markup should be 30-40% minimum
Step 4: PRESENT TO CLIENT
"Happy to make that change. Here's what it will involve:
Cost: $X,XXX
Timeline impact: +X days to completion
We can start as soon as you approve.
Would you like to proceed?"
Step 5: GET WRITTEN APPROVAL
□ Client signs change order form
□ Or email confirmation
□ Or text (in writing)
NEVER PROCEED WITHOUT APPROVAL.
Step 6: UPDATE JOB BUDGET
□ Add change order to contract amount
□ Add costs to budget
□ Update schedule
□ Notify crew
□ Update job costing system
Step 7: BILL IT
□ Include in next progress billing
□ Or final invoice
□ Reference change order # on invoice
□ Attach signed change order
The Change Order Form Template:
CHANGE ORDER #[Number]
Job: [Address/Name]
Client: [Client Name]
Date: [Date]
DESCRIPTION OF CHANGE:
[Detailed description of what's changing and why]
COST IMPACT:
Original Contract: $XX,XXX
This Change: +$X,XXX
New Contract Total: $XX,XXX
SCHEDULE IMPACT:
Original Completion: [Date]
Additional Days: +X days
New Completion: [Date]
CLIENT APPROVAL:
□ I approve this change order and understand the cost and schedule impact.
Signature: _________________ Date: _______
FOR OFFICE USE:
Approved by: _________
Job Budget Updated: ☐
Schedule Updated: ☐
The "No Free Work" Policy:
Train your crew:
If client asks for ANYTHING not in scope:
1. Don't say yes
2. Don't say no
3. Say: "Let me check with the office"
Then:
- Document request
- Price it
- Get approval
- Do the work
Common "small" changes that aren't:
- "Can you just move that outlet?"
- "While you're here, can you fix this?"
- "I want to upgrade the fixtures"
- "Can we change the tile pattern?"
Small to client = $500-2,000 to you
Either bill it or politely decline:
"I'd love to help, but that's outside our current scope. Let me send you a change order quote and you can decide."
Component 6: The Cash Flow and Billing System
The problem: Payment terms kill you. Retainage ties up cash. Lien rights are confusing. Invoices go out late. Collections are inconsistent.
The fix: Strategic payment terms, progress billing, and systematic collections.
The Payment Terms Strategy:
Residential Jobs:
Deposit: 30-50% upfront (covers materials)
Progress: 25% at framing, 25% at drywall
Final: Balance on completion (before final inspection)
Commercial Jobs:
Deposit: 10-20% on contract signing
Progress: Monthly billing based on % complete
Retainage: Typically 5-10% held until final
Final: 30-60 days after completion
T&M (Time and Materials):
Weekly or bi-weekly billing
Payment due net 15
For long-term clients only
Small Jobs (<$10K):
50% deposit
50% on completion
Or 100% upfront for very small jobs
Never:
- Net 90 terms (kills cash flow)
- >10% retainage
- Payment on final inspection (you have no leverage)
- Work for free hoping to get paid
The Progress Billing System:
For larger jobs (>$50K):
Monthly billing based on % complete
How to calculate % complete:
- Survey crew leads
- Review work completed vs work remaining
- Use budget line items
- Be conservative (don't overbill)
Progress Invoice:
Original Contract: $100,000
Previous Billing: $60,000
Work This Period: $25,000 (framing and electrical complete)
Total Billed to Date: $85,000
Retainage (5%): -$5,000
Amount Due This Invoice: $23,750
Payment Terms: Due upon receipt or Net 15
Include:
- Detailed description of work completed
- Photos
- Change orders (if any)
- Updated schedule
- Next phase preview
The Collections Process:
Invoice Sent:
Day 0: Invoice delivered (email + mail)
Day 7: Payment not received
→ Friendly reminder email
"Just checking in on invoice #XXX. Let me know if you have any questions."
Day 15: Payment not received
→ Phone call
"Hi, I'm calling about invoice #XXX sent on [date]. When can we expect payment?"
Day 30: Payment not received
→ Firm email/letter
"Invoice #XXX is now 30 days past due. Payment is required within 7 days to avoid work stoppage."
Day 37: Payment not received
→ STOP WORK
→ Formal demand letter
→ File preliminary lien notice (if applicable)
Day 60: Payment not received
→ File mechanic's lien
→ Consider legal action
→ Collection agency (for smaller amounts)
Prevention is better than collection:
- Get deposits
- Don't get too far ahead of payments
- Build relationships (harder to stiff people you like)
- Do great work (easier to pay for great work)
The Lien Rights Protection:
Know your state's lien laws:
- Preliminary notice requirements
- Lien filing deadlines
- Lien amounts allowed
- Lien enforcement process
Best practices:
□ File preliminary notice on every job (if required)
□ Track deadlines carefully
□ Keep detailed records (invoices, delivery receipts, photos)
□ File lien if payment not received
□ Follow up with lien enforcement if needed
Preliminary Notice Example:
Sent within XX days of starting work (varies by state)
To: Property owner, lender, general contractor
States: Your right to lien if not paid
Required in many states to preserve lien rights
This is cheap insurance. File it every time.
The Implementation Timeline
Month 1: Job Costing and Estimating
Week 1-2:
- Implement job costing system
- Create job budget templates
- Set up tracking process
- Document current jobs' budgets
Week 3-4:
- Build estimating templates
- Start historical cost database
- Standardize estimating process
- Train team on job costing
Month 2: Scheduling and Materials
Week 1-2:
- Create crew skills matrix
- Implement 2-week scheduling system
- Set up crew coordination process
- Build materials planning templates
Week 3-4:
- Launch materials tracking
- Implement tool management
- Set up vendor scorecards
- Train crew leads
Month 3: Change Orders and Cash Flow
Week 1-2:
- Create change order process and forms
- Train team on "no free work"
- Implement change order tracking
- Review payment terms
Week 3-4:
- Set up progress billing system
- Implement collections process
- File preliminary notices
- Review all processes and refine
Results You Should Expect
Financial Impact
| Metric |
Before |
After (6-12 months) |
| Jobs on budget |
60-70% |
90%+ |
| Gross margin |
12-18% |
22-30% |
| Materials waste |
12-15% |
<8% |
| Change orders captured |
40-50% |
90%+ |
| AR >60 days |
30-40% |
<10% |
Operational Impact
| Metric |
Before |
After |
| Job profitability visibility |
End of job |
Real-time |
| Estimating accuracy |
±30% |
±10% |
| Crew utilization |
65-75% |
85-90% |
| Schedule delays |
Frequent |
Rare |
Growth Impact
| Metric |
Before |
After |
| Revenue growth |
10-15%/year |
40-60%/year |
| Owner hours/week |
65-75 |
45-55 |
| Able to manage jobs |
10-15 concurrent |
25-30 concurrent |
| Win rate on bids |
20-30% |
35-45% |
Common Construction Operations Mistakes
Mistake 1: No Job Costing Until Job is Done
By then you've lost money and can't fix it. Track costs weekly. Catch overruns early.
Mistake 2: Doing Change Work Without Approval
Client asks for change, you do it, then bill them, they refuse to pay. Get approval BEFORE doing the work. Every time.
Mistake 3: Poor Payment Terms
Net 90 with 10% retainage means you finance the job for 4-5 months. Your cash flow dies. Negotiate better terms or walk.
Mistake 4: Estimating Without Site Visits
Plans don't show everything. Existing conditions surprise you. Always visit the site before bidding.
Mistake 5: Not Tracking Materials
Materials are 30-40% of costs. Not tracking them means 30-40% of your costs are invisible. Track everything.
Mistake 6: Crew Scheduling Day-to-Day
Planning daily leads to downtime, inefficiency, and chaos. Plan 2 weeks ahead. Adjust as needed.
Your Monday Morning Action Plan
This week:
- Monday: Set up job budgets for all active jobs
- Tuesday: Create estimating template and historical cost database
- Wednesday: Build crew skills matrix and 2-week schedule
- Thursday: Implement change order process and forms
- Friday: Review payment terms and collections process
First month goal: Job costing live + estimating standardized + crew schedule visible.
First quarter goal: 85% jobs on budget + change orders captured + crew utilization >80%.
Frequently Asked Questions
How do construction companies track job profitability in real time?
Track job profitability through weekly updates: crew leads submit daily time sheets, materials invoices are entered, subcontractor costs logged, and % complete estimated. Compare budget vs actual and calculate: if 80% complete but 90% of budget used, you're over budget. Use construction management software (Procore, Buildertrend) or detailed spreadsheets with status indicators (green/yellow/red).
What's a good profit margin for construction and contracting businesses?
Target gross margins of 20-30% (revenue minus direct job costs). Net margins after overhead typically run 8-15%. Residential remodeling can hit 25-30% gross, commercial work often 15-20% gross. Below 15% gross margin means you're underpricing or poorly managing costs. Track by job type—some work is naturally more profitable than others.
How should contractors handle change orders to maximize profitability?
Document every change request in writing before starting work. Price it with 30-40% markup (changes disrupt workflow). Get written approval (signature, email, or text). Update job budget immediately. Bill change orders on the next invoice. Never do "small favors"—they add up to thousands. Track change orders captured vs total changes to measure effectiveness.
What payment terms should construction companies use to maintain cash flow?
For residential: 30-50% deposit, progress payments at milestones (25% at framing, 25% at drywall), balance on completion. For commercial: 10-20% deposit, monthly progress billing, maximum 10% retainage, net 15-30 terms. Avoid net 90 terms and >10% retainage—they kill cash flow. Stop work if payment is 30+ days late. File preliminary lien notices to protect rights.
How do you improve estimating accuracy in construction from ±30% to ±10%?
Build historical cost database tracking actual costs per job by type, size, and complexity. Always do site visits before bidding. Use detailed quantity takeoffs, not guesswork. Get current supplier pricing. Add appropriate waste factors (10-15% materials). Include contingency for unknowns (5-10%). Review completed jobs to compare estimate vs actual and refine. Standardize estimating process—don't wing it.
What's the best way to schedule construction crews for maximum efficiency?
Create 2-week rolling schedules based on job phases, crew skills matrix, and locations. Target 85-90% billable utilization. Match skills to tasks (don't send finish carpenters to do demo). Plan backup indoor work for weather delays. Communicate schedule day before via text. Track crew utilization weekly and rebalance workloads. Plan crew transitions to minimize downtime between jobs.
Construction Operations Are Your Profit
Two construction companies bidding the same $100K job:
- Company A: Estimated margin 20%, actual margin 8%, late delivery, change orders unbilled
- Company B: Estimated margin 22%, actual margin 24%, on-time delivery, all changes captured
Company B makes 3x the profit on the same work. Why? Operations.
Your craftsmanship gets you hired. Operations get you paid, keep you profitable, and make growth possible.
Fix the operations. Build the business.
For more on building operational infrastructure, see our guides on project management, workflow optimization, and scaling operations.
Need help building operational infrastructure for your construction or trades business? Cedar Operations specializes in construction operations. Let's discuss your needs →
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