Across the United States, contractors report “hitting the wall” of minimal cash in the bank and project prospects. It is time for survival. Look no further than construction employment stagnation. Business expansion has not included the contracting community. 

The basic rule “don’t run out of cash” takes on a whole new urgency. As you fight this battle, we offer 35 ways to cut expenses. Since there is no silver bullet in construction and it is a 3% net profit industry, doing the little things will add up to the big things – staying profitable, cash flow positive and most importantly, in business. 

1. “What gets measured gets managed”. As a start, measure your waste, planning, forecasting of critical resources and compliance to processes. Place special focus on labor since it is our largest overall cost and has a ripple effect to all other expenses.
2. Pay employees mileage for use of their vehicles, whiling keeping “gray” travel minimized and disciplined.
3. Use trailers instead of vans or pickups. At the extreme, livestock or horse trailers have a utility.
4. Send Form 1099 to bad debtors. This may not force collection, but you will feel better. In addition, the IRS will know the debtor received a benefit (construction service) that is ultimately taxable. It may prompt a phone call and a beneficial conversation from the offending party.
5. Be ruthless when it comes to collections, even if that means sitting in someone’s office to collect money. Old retention collected can mean new life.
6. Ask your service providers to analyze their billing to you. Better yet, ask a competitor of theirs to analyze your billing.
7. Consider leasing out your supervisors to an owner or other construction service buyer. Many of them have no interest in long term employees. They typically want expertise for one project or phase of a project. Depending on the client, I have seen respectable margins over the cost of the staff member. Of course, this does not preclude the employee from continuing with selected duties for you.
8. More lawyers than ever. You may want to review your current fee and expense arrangement with your attorney.
9. Trust the field, but verify. Find ways to supervise the field more directly and lessen needed staff. With today’s technology, there are ways to accomplish this.
10. Focus on output, not activity – billable / collectible output is best.
11. Slow down to do it right – slow is steady and steady is fast.
12. Covert more paperwork to electronic forms.
13. Redesign forms. Template and fill in boiler plate parts.
14. Train field managers to recognize and solve problems – train their eyes to see.
15. Don’t cut people first, cut tasks and re-engineer. What does the client value and pay for? What method is most efficient to install work regardless of its elegance?
16. Don’t expect a quick fix. Keep yourself in business to fight another day. It won’t be glamorous again for a while. However, the longer you are in business, the greater the chance that luck will find you.
17. Remember why you love this business. You may have to be a part-time project manager, estimator etc. even though you own and lead the business.
18. Ask “what do we need to stop doing” to all your employees. This is a long discussion and prompts beneficial thinking. You will learn something.
19. Ask for cash price. Maybe even upfront payment price. We are in a cash flow sensitive industry. Payroll is due on Friday. It is a great economy if you have cash. Deep discounts are available for those who can pay. In one sector, we have seen a 9% discount for payment at time of delivery.
20. Consistent early payment of invoices means you can demand more service (i.e. same day quotes, timely credits, prompt pickup of returned material, etc.). This is a greater gain than the small amount of interest lost.
21. Make certain what supplier pricing column you are in. 1 or 10 is best (for 10 column pricing matrixes) depending on the supplier. Know where, why and negotiate.
22. No color printers, only color presentations via a projector.
23. Keep copier lid down so as not to waste toner on edges of copies.
24. Use scanner-to-email to lessen printing, postage and handling on your end of the equation.
25. All personnel have to be open to work on project sites and yard settings, it may come to that.
26. Withhold renewals until the last possible second. An unsigned renewal or new contract engenders doubt in the mind of the vendor. It is a leverage point for a one-time concession.
27. Know what drives your economic model, cash-to-cash cycle and motivates clients.
28. Eliminate business and personal combinations (start with top management). No sacred cows, bulls or calves.
29. Get serious about a preventive maintenance plan (use job site checklists; evaluate total cost, including repair costs).
30. Investigate lease-purchase and upgrade options. Beta testing of new construction or office equipment can be a windfall.
31. Employ a part-time mechanic. Someone is always looking for this kind of work on a half-week basis.
32. Place working shareholders in the right salary range. Don’t let them be paid above the market for the job they perform. This makes the trip from gross profit to net profit shorter and more efficient. It keeps the shareholder focused on producing profit (for dividends).
33. Counter (walk-in) purchases at the supplier are usually not the lowest price. This should be addressed. There is no delivery cost, minimal counting errors and product mis-ordering. It is more efficient for the supplier in several ways and thus, you should receive a lower price.
34. Negotiate everything. It is the highest and best use of any professional’s time on a per hour basis. Don’t get tired of being frugal. One magic phrase is, “I think I can do better someplace else”. Also, whenever a vendor apologizes for a mistake, ask “Can you quantify that?” meaning giving something of value is a better apology.
35. Make sure employees know the revenue / cost (loss) trade off. (Email us for a sample chart) For every mistake or cost, profit pays for it. So at 3% net profit, 33 times the loss has to be generated in revenue to pay for that expense. It is amazing, once your staff is aware, they will think of many ways to fight the cost battle. That is, if you can direct their thinking to apply the above ideas.

This article brought to you by the CFA Management Committee to continue building your company through beneficial information all can share. If you have an interest serving on this committee or another CFA Committee, contact Jim Baty at jbaty@cfawalls.org to find out more. If you have business tips, tricks or topics of interest, pass your idea along and the committee will help bring it to the membership at large. This Association is dedicated to helping you get ahead and stay ahead in today’s challenging business environment.

Matt Stevens is a management advisor who works only with construction contractors. He has been doing so since 1994. Stevens is a Senior Lecturer in Construction in the Faculty of Architecture, Building and Planning at the University of Melbourne in Australia. He has over 35 years of experience in the construction industry. Stevens’ books are published by McGraw Hill and titled Managing a Construction Firm on Just 24 Hours a Day and The Construction MBA. His firm, Stevens Construction Institute, Inc is located at stevensci.com. He may be reached at

mstevens@stevensci.com.