• Robert Patin

The most Common Financial Missteps in Construction Jobs

Over the years, we have worked with many different construction companies and contractors to help them in their financial management. During that time, we have seen businesses engage in many practices that make it a lot more likely they will run into financial problems.

Here are a few of the most common mistakes we see construction companies and contractors make with their money, and how you can avoid or prevent those mistakes:

Not factoring in costs of non-productive time when giving estimates

The labor rate is an important factor in any estimate you provide to a client. If you get it wrong, there will be negative effects for you to deal with, the biggest of which being that you won’t have enough money to cover the costs of labor incurred on the project.

To be able to pay your employees even when they are not producing you work, you must include the costs of non-productive time in the billable hours they are working. Otherwise you simply will not have enough to pay your team.

Not carefully considering the costs of a job when providing an estimate

Whenever you submit an estimate for a job to a potential client, you should be thorough in your approach to pricing that job. You must know the true cost of the entire job, including costs of materials, labor and overhead. This means you should have a clearly defined markup that will allow you to cover all these costs, beyond just what’s happening at the job site itself.

Know your minimum markup so you know exactly how low you can afford to go if the prospect attempts to negotiate on a job with you. Otherwise, you could find yourself working at a cost to your business.

It can also help to compare the costs you’ve come up with to previous jobs, so you can constantly improve your estimating process.


If the work on your project won’t be starting for some time, your estimates will need to factor in the actual costs you’ll incur at the time you actually do the work. A failure to do so will result in decreased net profitability. If the extra costs for the job exceed your anticipated profit, you’ll end up using your own money to finish the job for the client - something you most certainly will want to avoid. Pay attention to industry cost trends and consider that the costs of construction materials may rise throughout the year.

Not using estimating software

You’d be amazed at how many completely preventable financial errors are made due to, say, entering the wrong unit cost or amount of materials into a calculation, or simply not accounting for all the details of the job. Double and triple check all your calculations and your written estimates before submitting them to a prospect.

By avoiding these mistakes, your construction company will have a much easier time maintaining balanced finances and hitting its financial goals in the foreseeable future.

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