Finally, a Solution to Contractors’ Profit Margin Pressures
Feb 4, 2020

ProfitMarginsSmallerImagine if you could actually boost your profits by purchasing maintenance, repair and operations (MRO) supplies from your favorite vendors.

Contractors across the country are doing just that simply by buying through Qmerit’s online marketplace. Because of pre-negotiated contracts on pricing from top suppliers, contractors can boost their profit margins on every job or use the savings to be more competitive. Vendors include suppliers, such as Grainger, Ford and HD Supply. In addition to saving money, contractors also save time using the quick product search and cost comparison features.

Enhance profit margins through lower MRO spend

Between November 2017 and November 2018, construction costs for contractors rose 4.9%, according to the U.S. Bureau of Labor Statistics. With the average contractor's profit margin hovering between 2% and 4%, this statistic causes serious concern. Across the nation, contractors have struggled with diminishing profit margins, forcing them to make painful choices between slashing margins and losing jobs to contractors willing to do the same work for less.

Tariffs on Chinese goods continue to make the situation worse. For example, the 25% steel tariff and 10% aluminum tariff are enough to severely cramp margins if contractors can't pass the costs on to their customers. The January 15, 2019, signing of "phase one" of a U.S.-China trade deal has done nothing to better the situation. With the White House's announcement that a "phase two" deal likely won't occur in 2020, contractors must bake in the cost of tariffs for the foreseeable future.

The third strike against profit margins comes from higher labor costs. In many areas, especially cities in the West, building booms have meant tight labor markets. Many Millennials are opting for postsecondary education instead of careers like construction, blocking off a key source of new workers at a time when baby boomers are looking to retire. As a result, jobs are taking longer and labor costs are higher, both serious detriments to profitability.

How can contractors support their margins to make a comfortable profit while keeping their bids competitive?

They can reduce their maintenance, repair and operations (MRO) spend by 7% to 25% through the Qmerit Marketplace.

Contractors can do nothing about labor market conditions, tariffs or inflation. However, they do control their MRO procurement processes by utilizing a buying strategy that leverages automatic discounts and implementing technology that streamlines and digitizes  the process to save time and money.

How the Qmerit Marketplace works

The Qmerit Marketplace helps reduce profit margin pressure on contractors by offering contracted discounted prices on parts, materials, and equipment from the name brands they rely on. The marketplace's success comes from its ability to use the combined buying power of all its members. Marketplace suppliers are willing to lower their prices because they benefit from higher volumes and cut their operational costs as businesses come to them from a reliable platform.

Buyers benefit from the decreased costs. In addition, they enjoy the convenience of comparison shopping on one easy-to-use platform, allowing them to save time while locking in the best possible prices.

You can still use your favorite suppliers

Purchasing from the Qmerit Marketplace means continuing to buy from the same trustworthy suppliers you use today, just more easily and at a better price. The marketplace includes many top building parts, materials, and equipment suppliers, including Grainger, Koch Filters, HD Supply, Office Depot and many more.

The savings can be applied to service, maintenance and retrofit jobs. This puts you in the position to offset higher labor costs and tariff impacts. Higher profit margins put you in a position to offer more competitive bids, absorb unexpected costs and create a cash cushion for future downturns.

Fast product searches save time

Estimating has always been one of those necessary processes that nonetheless proves costly and difficult to manage. The hours involved suck profits out of the business and striking the balance between higher profits and more jobs often requires more art than science.

The Qmerit Marketplace both reduces the labor involved in creating estimates and even makes them more accurate. Estimators can use Qmerit's Best Value Finder to conduct rapid product searches that result in the best prices and lead times. Whether searching for building materials, a vehicle or equipment, estimators can quickly generate accurate costs and use that knowledge to craft estimates that win.

A strong economy and demand for new construction is keeping contractors busy. While it may seem contractors have it easy, the reality is quite different. Squeezed by rising labor costs, increased materials prices and the China tariffs, contractors are seeing a dip in their margins.

With tariffs likely to remain for years and the tight labor market showing no signs of slackening, smart contractors are finding ways to increase margins by reducing MRO spend. The Qmerit Marketplace provides a one-stop shop where the lowest total cost are available from brand-name suppliers. By contracting with suppliers to offer these rates, Qmerit's Marketplace provides both low prices and convenience. Now contractors can be confident in their materials estimates and use the savings to secure more business at higher profit margins.

To learn more about the Qmerit Marketplace, contact Qmerit's experts or sign up today.

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