How to Keep Better Control of Your Gross Profit Margins
In the highly competitive AV industry, maintaining tight control over your gross profit margins is essential for profitability and long-term business success. According to Jack Perkins, founder of CFO Hub, “Gross profit margin is one of the most crucial barometers of your company’s financial health and competitiveness within its industry—specifically, it helps you evaluate your production efficiency against competitors.” – Forbes, What is a good profit margin?
One of the most effective strategies for achieving this is by involving key stakeholders—particularly subcontractors—early in the process. Here’s a more detailed approach to how contractors can safeguard their margins while improving quoting capacity and project efficiency.
- Involve Subcontractors Early in the Process
It’s critical to bring subcontractors into the conversation from the very beginning of a project. By doing so early on, you can gather accurate, real-time input on pricing, availability, and scope of work. This proactive approach not only helps you avoid unexpected costs later on, but also fosters a sense of ownership and collaboration with your subcontractors, which can lead to better performance and reliability throughout the project.
- Obtain Detailed Quotes from Subcontractors
Once you’ve brought subcontractors into the fold, ask them to provide detailed quotes. These should include a breakdown of labor, materials, and any other anticipated expenses. Ensure that the quote is as comprehensive as possible to avoid surprises later on. Additionally, obtaining quotes from multiple subcontractors allows you to compare pricing, ensuring that you can select the most cost-effective option without compromising quality.
- Double-Check Subcontractor Quotes with Your Engineers
After receiving quotes from subcontractors, it’s important to have your engineers—who understand the technical aspects of the project—review these estimates. Engineers can assess whether the scope of work aligns with the project requirements and whether the subcontractor’s pricing is reasonable. They can also identify any discrepancies or areas where the quoted price may not reflect the true scope of work.
Once you have accurate subcontractor quotes and your engineers have vetted them, the responsibility shifts to your project managers (PMs) or estimators. By offloading the heavy lifting of quoting and subcontractor coordination to them, you can free up your time for higher-level strategic planning.
Benefits for Your Business
There are many ways this approach can benefit your business:
- Improved Efficiency: More efficient quoting allows you to handle more projects simultaneously, increasing revenue without adding overhead.
- Faster, More Competitive Bids: With detailed and accurate quotes, you can submit bids faster and more competitively, reducing the risk of losing out on potential contracts and providing the opportunity to scale operations across multiple projects.
- Higher Profitability: By taking the time to double-check quotes, collaborate with engineers, and involve subcontractors early in the process, you ensure that your pricing remains profitable.
By fostering early collaboration, ensuring transparency in pricing, and leveraging the expertise of engineers and project managers, contractors can safeguard their profit margins while improving the efficiency and accuracy of project bids. Subcontractors, in turn, benefit from clearer expectations, more defined scopes of work, and stronger long-term relationships with contractors who value their input and professionalism.
This synergy not only leads to more profitable and well-managed projects but also strengthens the overall industry by creating an environment where both parties work together toward shared success. In the competitive AV industry, this collaborative strategy ensures that everyone wins—from the bottom line to project delivery. By adopting these best practices, you’ll be well-positioned to grow your business and maintain strong profit margins in the fast-paced and ever-evolving audiovisual industry.