If your Gross Profit margin is lower than it should be, there are only two possible culprits: your prices are too low, or your costs are too high — sometimes, it’s both. But let’s zoom in on the cost side of that equation today.

Too many contractors accept vendor price increases without question. Over time, these small hikes compound and slowly eat away at your margins. Just because a supplier increases their rates doesn’t mean you should absorb the full cost. Have you had a real conversation with your vendors lately? You may be surprised by how open they are to renegotiating, especially if you’re a consistent customer.

Another overlooked factor: overstaffed or understaffed jobs. Sending more people than needed adds unnecessary labor cost. Sending too few leads to delays, callbacks, and overtime. And if your crew is wasting time on inefficient workflows or waiting around for materials, that’s money down the drain.

The goal isn’t to cut corners — it’s to tighten up operations so you stop bleeding cash where you don’t have to.

Real World Mistake & Lesson:

We worked with a general contractor whose cost of sales had crept up 7% over 18 months. The culprit? Their lumber vendor quietly added surcharges. Nobody on the team noticed. They also routinely sent too many crew members to jobs out of “habit.” We renegotiated materials pricing, streamlined labor planning, and implemented a simple job costing checklist. In just 60 days, their Gross Profit margin rebounded by 5 points — without raising prices.

 Pick up your free copy of my new book, “The 7 Minute Conversation-How to Hear the Story Your Small Business Financial Statements Are Telling You-CONTRACTOR EDITION”.  Go to www.7MinuteConversationBook.com

Ready to find out where your cash and profits are really going? Book your free 15-minute Profit and Cash Flow Call with me. No pressure. Just real clarity. I’ll help you see where your money’s hiding — and what to do about it. Schedule at www.CashFlowCallWithLarry.com