Maximizing profit margins within the metal building industry is a daily challenge. Many business owners respond to sluggish profits by simply raising their prices across the board. And while this strategy may lead to some gains in your gross margin percentage, you run the risk of losing price-conscious customers. Fortunately, there are some effective steps you can take to increase your margin while avoiding harsh price increases. Below are eight ways metal building companies can increase their profit margins.
Here are 8 ways Metal Building Companies Can Increase their Profit Margins:
- Expedite turnaround time for clients
- Introduce software solutions to help trim waste
- Bolster your customer retention efforts
- Employ software to analyze project costs in real-time
- Optimize your product inventory
- Make cross-selling a top priority
- Switch to online billing
- Upsell when appropriate
Let's review in detail how these can help you increase your profits.
1. Expedite turnaround time for clients
"In the construction process, time is of the essence. Steel prices may change, seasons change (allowing you only certain times to build), and contractors may change their quotes based on how long it takes you to complete your project. Time IS money."
- Ryan Frye, Armstrong Steel Network
Lead time is a top concern for customers seeking metal building services. You can expedite lead time by regularly following up with vendors, ordering in bulk, and staying abreast of anticipated product shortages. One easy way to avoid shortages completely is by using a software with procurement capabilities. Imagine how easy it would be to manage your stock if you tagged and tracked every item in your inventory. Every time a material is used, your inventory is automatically updated and you receive and alert when your stocks are low. At ABIS, we even invented a method to calculate your coils usage based on length and weight being used in real-time. As one customer put it, our coil management system is "spot on accurate". This will help you gain time, decrease turnaround time for your customers, and increase your profit margins.
2. Introduce software solutions to help trim waste
An effective software platform will help you reduce scrap, setups, and manual sheers, thereby trimming your waste and enhancing your profit margin. However, not all software companies are created equal. ABIS, for example, created Trim Genius, a unique nesting algorithm that searches all open trim work orders in the near future and create optimized cut lists based upon factors such as gauge, color, girth, and length. This is the difference between a generic software package and a company with decades of experience in the metal industry. The second has created algorithms and scenarios to answer specific questions and problems related to metal building construction companies. Choosing a specialist is the best way to ensure that you maximize profits for your metal building firm.
3. Bolster your customer retention efforts
One of the most effective ways to stimulate profit margin is to turn a new customer into a loyal customer. RJMetrics reports that over half of customers who make a second purchase will make a third purchase, and the likelihood of a customer returning grows with every successive purchase. You can bolster your customer retention by offering incentives to repeat clients and by providing value-added services.
4. Employ software to analyze project costs in real-time
Real-time access to project costs is essential to staying on budget. A robust software platform will help you establish a budget for each phase of your project and track the specific expenses required for completion of your project. Once your budget is created, you can not rely on estimates and expect to keep a high profit margin. The best way to manage a project efficiently is to track cost revenue information down to the fine detail for every job/project, and to analyze budget costs in real-time. A software with job costing capabilities will help you keep track of your costs and make adjustments to maintain profitability throughout the job.
5. Optimize your product inventory
IBIS World lists the "ability to control stock on hand and maintain appropriate inventory levels" as one of the three most important success factors for a business in the metal building industry. The key to optimizing inventory is to utilize an ERP Software that will enable you to effectively track your inventory and identify patterns in inventory utilization. This strategy allows purchasing agents to anticipate product needs and prevent backorders.
Here is how Matt Mitchell, Purchasing Manager at CO Buildings, uses product inventory and forecasting to have a better buying power, better pricing, and to build trust and credibility with his buyers:
6. Make cross-selling a top priority
"An economic argument for a focus on cross-selling seems obvious. The incremental cost to sell is typically lower, because existing customers already know the brand and likely the product or service on offer. Tenure typically is longer, because existing customers have already traversed the "get to know you" stage, when defection rates are highest."
- John Senior, Tom Springer, and Lori Sherer of Bain & Company
Cross-selling is beneficial to both the customer and owners of metal building companies. By expanding your services to include facility design and building maintenance, your customers save time and money while you enjoy increased sales.
7. Switch to online billing
Paperless billing saves money and conserves resources for metal building companies. By switching to online billing, you immediately eliminate the cost of paper, postage, envelopes, and printing costs. You also stimulate cash flow because customers receive their invoices immediately and can remit payments more quickly.
8. Upsell when appropriate
Upselling is a tactic that is especially effective with existing customers who trust your expertise. As you engage in upselling to provide customers with value-added products and services, make sure that you address the customer's specific needs and provide recommendations that will lend significant benefits to your customer's operations.
The Bottom Line
A strong profit margin is a primary key to your future success as the owner of a metal building company. Through software efficiency, customer retention, and real-time inventory access, you can increase both your gross margin percentage and your gross profit. Request a demo today to learn how the ABIS team can help you increase your profit margin while bolstering your overall efficiency. We look forward to helping you become a leader in the metal building industry!