9 Rules for Staying Profitable as a Contracting Company9 Rules for Staying Profitable as a Contracting Company
Keeping revenue growing while maintaining low overhead is key, according to Heritage Construction owner Jake Brydon.
April 17, 2023
The business of construction is cyclical in nature, and it is important for business owners to plan for and around that. Jake Brydon, founder of Heritage Construction and co-founder of ROOFLINK, spoke on this conundrum at the 2023 International Roofing Expo and shared his insights into how to keep revenue growing while keeping business overhead low.
Brydon noted that many contractors have nonrecurrent revenue and are often working with customers with little to no knowledge of the industry. On top of that, he added, there is a high rate of employee turnover and plenty of competition, especially in the roofing industry.
"It's important to plan around these [known struggles] so that you don't keep bumping into the same walls,” Brydon said. “Those five things are never going to change about this industry.”
With these challenges in mind, Brydon laid out his nine rules to live by to navigate around them and achieve business success.
1. Know your numbers.
If you think you know your numbers, but you don't have a good tool to manage and track them, you probably don't know them as well as you think you do, Brydon said.
Knowing your numbers means knowing all the details about your contracting business: what onboarding a new salesperson costs; what the rate of return on that new employee is; and what the net margin is on a given project sold by that new salesperson.
“It’s important to ask, ‘If we keep doing what we're doing at this rate, will we still be profitable if all these things stay the same?’” Brydon said.
2. Pay attention to and respect the data.
Brydon suggested a handy acronym—FMF, or “forget my feelings”—to help keep the focus on the hard data.
“Feelings aren’t accurate,” he said. “If you’re a business owner and you’re just shooting from the hip and going with your gut, you are going to struggle.”
3. Be positively realistic.
What is key, according to Brydon, is to not be overly optimistic—while also not becoming pessimistic. Think about your company as it is now, rather than where you hope it will be in 10 years, and use the data at your disposal to make sound business decisions.
“When we have these big ideas, we need to run them through a filter,” he said. “The amount of charisma and excitement you have won’t keep you from filing bankruptcy.”
4. Keep your overhead lower by maintaining a 1:10 employee ratio.
Brydon suggested having only one nonrevenue-generating position for every 10 positions that generate revenue. These numbers can scale up as the size of a company grows, but by keeping this 1:10 ratio, business owners can ensure that the focus remains on bringing in revenue.
5. Be consistent in everything every day.
Because this is a nonrecurrent revenue model business, Brydon noted that it’s important to avoid wasting time and resources on projects and people that won’t benefit the business.
“Focus on every day as it stands alone,” he said. “Good days make good weeks, good weeks make good months, and good months make good years.”
6. Keep it simple.
Going back to his point about keeping overhead low, Brydon drove home the message that having one person responsible for managing 10 others keeps processes simpler than 10 employees managing the work of one.
7. Utilize technology.
Brydon didn’t shy away from a fact that was clear to anyone who walked the floor this year at IRE: Contractors have a lot of options when it comes to technology for managing all aspects of their business.
“Make the most out of what's available to you,” he said. “Tech is a force multiplier. If people had to do for me what our company’s chosen technology does for me, it would cost me millions a year.”
8. Do not get involved in other businesses.
Do your best not to get involved with other businesses, Brydon said. Doing so splits your focus and your resources and can hinder your ability to either of the businesses to succeed long term.
9. Do not cross the 50-50 threshold of commissions.
When it comes to commissions, management overrides or anything that has to do with above-the-line expenses, Brydon said it is critical to keep at least 50% of the gross profit for the company.