How Construction Business Can Prevent Profit Fade

Profit fade occurs when a business’s profit is less than what was expected. It is a phenomenon that can be found in a wide range of business sectors, but tends to occur frequently among construction companies. Profit fades are common among construction companies because of the dynamic nature of the industry, with projects that are extremely time consuming and complex. Often times, a company’s initial calculation and revenue predictions will not match at the end of a project, thus experiencing profit fade. Often times the root of profit fade lies in external factors, like the increasing price of materials that may hinder a current project. Other common causes of profit fade for construction businesses range from bad estimates, unbillable changes and poor subcontractor performance. Often times, unpredictable weather conditions have been known to cause profit fade for companies that are unprepared without contingency plans in place. Throughout the entire construction process, profits and costs must be monitored regularly. To best curtail profit fade, general contractors, project managers and accountants must work collaboratively with a common goal in mind, and adapt to whatever issues may arise.

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