How to grow your construction business
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Getting more jobs on the books, taking on larger projects, and catching the attention of big-budget clients can be exciting for a construction company. But if you don't take the time to properly scale your business, that excitement will soon be swallowed up by burnt-out crews, missed deadlines, uninsured liability claims, unpaid invoices, and a phone that doesn't seem to stop ringing.
Strategic planning can help you scale operations, boost profitability, and set your construction company up for long-term success.
Ready to grow? Here are 10 strategies to start winning bigger, better-paying projects and keep clients coming back.
- 1. Define what growth means for your construction business
- 2. Build systems that allow you to take on more work
- 3. Improve your estimating and bidding process
- 4. Strengthen your online presence to generate more leads
- 5. Develop relationships that lead to repeat business
- 6. Expand capacity with the right workforce strategy
- 7. Retain skilled workers and build a strong reputation
- 8. Track the construction KPIs that drive growth
- 9. Strengthen your financial foundation
- 10. Prepare your business for larger and more complex projects
- Understand the construction lifecycle before you scale
- Find construction business insurance that supports growth with Insureon
1. Define what growth means for your construction business
Before you can get started, you need to know where you're going. What does growth look like for your business? The answer looks different for every business owner, so it's important to define your company's growth strategy, which could include:
- Increasing your annual revenue
- Taking on larger projects
- Expanding into commercial or residential work
- Hiring employees or contractors
- Improving profit margins
- Expanding your coverage area
If you don't have one already, documenting your goals in a business plan can give you a clear roadmap to follow as your business grows.
Focus on profitable growth, not just more jobs
Just because your job calendar is full doesn't mean you're raking in a profit. Driving profitable growth requires you to focus on margin and net profit, taking on fewer, better jobs with a greater return on investment.
To get started:
- Price for profit: Understanding your true costs for labor, equipment, and overhead will help you price jobs confidently and get paid what the job is actually worth.
- Stop chasing every opportunity: Being more selective of the projects and clients you take on can help you focus on value over volume.
- Prioritize high-margin projects: Targeting sectors like light commercial and healthcare can bring clients with bigger budgets who care more about quality than finding the cheapest bid.
- Own your niche: Leaning into your solid expertise can spur stronger reviews, more referrals, and the credibility to charge more.
Let's say a general contractor is looking to make $200,000 in construction. They need to understand how their trade, location, business model, and number of workers will impact their earnings. These details will allow them to bid for higher-quality jobs that will get them to their revenue goals.
2. Build systems that allow you to take on more work
Most construction businesses struggle to scale because every decision depends on the owner. Want to grow? Get out of the way.
Establishing standard operating procedures and implementing construction software will automate repetitive tasks and empower employees to take on more of the day-to-day work.
These two systems will work together to boost operational efficiency, reduce errors, and keep things moving forward smoothly with:
- Bidding on and estimating projects
- Scheduling projects and resource allocation
- Managing documents, contracts, and orders
- Handling client communications and project updates
- Tracking real-time data for expenses and budgets
- Invoicing and collections
- Overseeing quality control
There are a variety of construction software options available. A paving contractor might need help with bookkeeping, while a painting business may benefit from a better time-tracking system or project management software. Take a moment to understand which programs will help the most.
3. Improve your estimating and bidding process
Strengthening your construction estimating and bidding process can help you submit more competitive bids, eliminate expensive mistakes, and prioritize larger projects.
Improving your process starts with:
- Standardizing estimates: Templates for your most common types of projects will reduce missed line items, shorten turnaround time, and make it easier to delegate employees.
- Using estimation software: Digital tools will quickly collate material prices, labor costs, insurance premiums, and job history, so you can submit accurate, competitive proposals faster.
- Analyzing past bids: Reviewing your win and loss rates will help you tighten your estimates and strengthen your margins, so your profits continue to grow with each project.
- Focusing on high-margin work: Prioritizing bidding on the most profitable projects is smarter than staying busy with low-margin work.
4. Strengthen your online presence to generate more leads
The internet is a lead-generation powerhouse right at your fingertips. Most project managers, homeowners, and other potential clients usually research contractors online before they reach out.
Here are some ways to establish a stronger online presence to spread your name to a larger audience, build legitimacy, and generate more leads.
Make it easy for potential clients to find and trust your business
Take your business from a word-of-mouth operation to a highly visible, trusted industry leader by enhancing your digital footprint. Here are some of the best marketing strategy tools:
Professional website: Create a simple, mobile-friendly website with your contact information, a project portfolio with professional photos, and a list of the services you provide.
Google Business Profile: Claim your business to officially put your name on the map. Make sure your business address, phone number, hours of operation, and service area are correct.
Customer reviews: Earn trust and credibility by leveraging social proof. Ask happy customers to leave positive reviews on platforms like Google, Yelp, and Angi, and take the time to professionally respond to all feedback.
Social media: Posting behind-the-scenes videos, before-and-after photos, and rave client reviews on Instagram, Facebook, and other social platforms can increase the number of people who know about your business.
Local SEO: Optimize your website for the cities you serve by using location-based keywords such as “roofing contractor in Chicago” and create dedicated service pages for your surrounding areas.
Industry directories: Post your business information in credible trade directories to attract customers from other industries.
5. Develop relationships that lead to repeat business
Curating a book of repeat customers can help you lower marketing costs, get free referrals, and increase your profitability and resilience in a competitive industry. When people like you and respect your work, they're happy to pass your business's name to others.
To get started, focus on building relationships with other industry professionals, including:
- Property managers
- Real estate professionals
- Architects
- Engineers
- General contractors
- Developers
- Previous customers
It's also important to show your appreciation and support by referring your connections to other clients or providing loyalty discounts to customers who keep coming back.
6. Expand capacity with the right workforce strategy
Strategically growing your team will help you take on larger, more profitable projects, avoid employee burnout, and allow you to shift your focus from managing the details to overseeing the bigger picture.
Here's how to determine whether to add employees, subcontractors, or a combination of the two to your organizational structure:
When subcontractors can help your business grow
Subcontractors provide instant scalability, allowing you to take on more projects without the long-term overhead. You should consider using subcontractors when:
- Expanding service offerings
- Taking on specialized projects or complex remodels
- Experiencing a spike in seasonal demand
When it makes sense to hire permanent employees
Investing in experienced, reliable, and capable employees can help you step away from daily tasks and focus on the future. It's usually time to bring on W-2 employees when you're:
- Regularly paying subcontractors more for the same type of work
- Looking to improve quality control, scheduling flexibility, and client-facing communications
- Wanting to delegate day-to-day responsibilities, so you can focus on growing the business
7. Retain skilled workers and build a strong reputation
Construction labor shortages are making it harder than ever to find and keep top-tier workers. Constant turnover hurts morale, leads to expensive recruitment and training efforts, and can cause reputation-crushing project delays.
But there are ways to develop a solid team and build a strong reputation, including:
Offer competitive compensation: Paying your employees well and offering good benefits is a great way to keep workers happy and attract high-quality talent.
Create a career path: Showing your workers defined paths for growth allows them to see a future at your company and stay motivated in their role.
Create a safe workplace: Providing safety training for new hires and periodic refresher courses for employees establishes a strong safety culture that keeps your crew safe and shows you value them.
Earn trust: Having regular check-ins and honest communication helps workers feel respected, valued, and informed, which can be just as important as pay.
Provide recognition: Rewarding hard workers with a shout-out, gift card, or bonus reinforces the value of hard work and acknowledges employees' efforts, building trust and loyalty.
By investing in your people and your professional reputation, you're sowing the seeds for long-term growth. With time, this will become one of your strongest sales tools.
8. Track the construction KPIs that drive growth
Measuring a business's success solely by revenue is a common mistake because revenue is just one component. Key performance indicators (KPIs) provide a clearer view of how your business is actually performing.
The five key performance indicators in construction are:
- Gross profit margin is the percentage of revenue left after subtracting direct project costs. Shrinking margins are a sign your estimates are off, or you're winning the wrong jobs.
- Bid-to-win ratio is how often you win the jobs you bid on. A low ratio means your pricing or proposals need improvement, while a high ratio may indicate there's profit being left behind.
- Project completion rate is how consistently you finish projects on time and on budget. Frequent delays or missed deadlines suggest scheduling, supply chain, or management issues.
- Labor utilization rate is the percentage of your workers' time spent on billable work. A low rate means you're paying for hours that aren't generating revenue.
- Change order frequency is how often project scope changes are requested mid-project. A high frequency points to estimating gaps, unclear contracts, or poor client communication.
Reviewing your annual critical numbers, like revenue, overhead labor costs, and profit margins, alongside your KPIs, will give you a complete picture of your business's health year over year.
9. Strengthen your financial foundation
Whether you need to hire another employee, buy equipment, or bankroll another project while waiting for a client to pay, you need money to make money. Building a solid financial foundation starts with these strategies:
Cash flow management
Between paying workers and buying materials, contractors often spend money before payments come in. Carefully tracking your cash flow can ensure you’re never caught empty-handed during a project or before the next one.
Job costing
If you're not tracking the real costs of every project—labor hours, materials, overhead—and comparing them to your original estimate, you could be leaving hard-earned profits on the table. Good, consistent job costing will show you where your estimates excel and where you're losing your margin.
Equipment planning
Unexpected equipment breakdowns or last-minute purchases can derail a project timeline and budget. Planning for major purchases and accurately factoring equipment costs into estimates will help keep your business on track.
Emergency reserves
Sometimes clients pay late, a job runs longer than expected, weather shuts down a jobsite, or an employee quits in the middle of a project, causing a major impact on your finances. Keeping a cash reserve will allow you to overcome these issues without missing payroll, defaulting on a supplier, or taking out high-interest debt.
Credit and financing options
When growth requires more capital than you have on hand, securing a small business loan can help you cover the difference. Establishing your credit and exploring financing options before you're in a cash crunch will help the process go much more smoothly.
Bigger projects carry bigger risks—and larger clients often require you to carry the right construction business insurance to sign a contract.
10. Prepare your business for larger and more complex projects
A booming construction business brings larger projects, bigger budgets, and higher client expectations. Make sure you have these common industry standards in place before you start going after those bigger fish:
Business insurance and licensing: Most larger clients will verify your credentials and proof of insurance before hiring. Make sure your licenses are current and explore what certifications may be required as you grow. Depending on the laws in your state, you may need a license for specific tasks, such as plumbing or electrical work, or to take on larger-scale projects.
Safety programs: Typically, a documented employee safety program is mandated for larger contracts. A gutter installation business that has regular training and a strong safety record will show clients they run a solid operation.
Contract management processes: Establishing a streamlined process for reviewing project scope, payment schedules, and change orders helps you manage more complex contracts accurately.
Bonding capacity: Commercial and government contracting jobs usually require contractors to be bonded before a project starts. For example, if a welding business increases its bonding capacity, it'll show financial stability and give clients more confidence.
Make sure your insurance coverage can grow with your business
Bigger projects carry bigger risks—and larger clients often require you to carry the right construction business insurance to sign a contract. Here are some of the top policies to consider as your business grows:
- General liability insurance covers basic construction business risks, such as accidental damage to a client’s property or a customer injury. This policy pays medical bills, property repair or replacement costs, and lawsuit-related expenses.
- Workers’ compensation insurance handles medical costs, disability benefits, and lawsuit expenses stemming from work-related employee injuries and illnesses. Most states require this coverage for businesses with employees, and more states are starting to mandate it for contractors, even if they don’t have employees.
- Commercial auto insurance covers the cost of an accident involving your business vehicle. Almost every state requires this coverage for company-owned vehicles.
- Tools and equipment insurance pays to repair or replace a contractor’s tools and equipment if they’re lost, stolen, or damaged in transit or at a jobsite. It’s also called inland marine insurance.
- Builder’s risk insurance helps pay for damage done to a structure still under construction, such as a fire or vandalism at a jobsite.
It’s important to regularly review your insurance policies to ensure your coverage is keeping up with your company’s growth.
Understand the construction lifecycle before you scale
Miscommunications, mistakes, and miscalculations usually bubble up from a problem in the construction process. Understanding the seven stages of the construction lifecycle can help you quickly identify inefficiencies and fix the process, paving the way for scaling your business.
What are the seven stages of construction?
The seven stages of construction break a complex project into bite-sized, more manageable phases. This structured approach can reduce financial risk, improve quality control, and prevent costly mistakes.
Here’s a closer look at construction’s seven stages:
- Planning: Project goals, budgets, and timelines are established. A proper planning phase can eliminate future scope creep, budget overruns, and misaligned expectations.
- Design: Architects and engineers translate the plan into detailed drawings and specs. Catching errors or conflicts in this phase can protect your timeline and budget.
- Pre-construction: Permits, contracts, and site logistics are finalized. This phase ensures all parties are aligned before breaking ground.
- Procurement: Materials and equipment are purchased, and subcontractors are confirmed. Planning purchases early and building strong supplier relationships can wrap this phase up without delays.
- Construction: The active build phase has multiple sub-phases: site preparation, foundation, framing, MEP, and finishes. Clear communication, detailed project management, and jobsite supervision can keep projects on time and budget.
- Commissioning and inspection: Systems are tested, and inspections are completed. A thorough commissioning reduces the risk of defects, client disputes, and lawsuits after the job is done.
- Project closeout: Final documentation, punch lists, and client sign-off wrap up the project. A smooth closeout protects your final payment, strengthens client relationships, and sets the stage for referrals and repeat business.
Knowing what’s happening at every stage of a project can help you improve processes, deliver consistent results, and grow your business with confidence.
Find construction business insurance that supports growth with Insureon
Insureon helps construction businesses find affordable insurance quotes from top-rated insurance companies with one easy online application.
You can also speak with a licensed Insureon agent to determine the right coverage for your construction business needs. Once you find the right policy, you can begin coverage and get a certificate of insurance (COI) in less than 24 hours.
