Spotting Hidden Costs:
Four Ways to Reclaim Profit in Your Business

In today’s blog, we’re looking into an important aspect for home service businesses: *hidden costs*. These are those expenses that might seem minor but can add up significantly, draining your business’s profitability over time. Identifying and managing these costs can help you reclaim profit without needing extra sales or new clients. Here are four common areas where hidden costs can lurk—and practical steps to tackle them.

1. Untracked Material Costs

Unplanned or underestimated material needs are a common hidden cost. How often have you found yourself making a last-minute trip to the hardware store? Maybe an extra supply was needed for a job, but it didn’t get added to the initial job cost. Or perhaps the material estimates were off, and the cost wasn’t adjusted.

These “quick trips” have a ripple effect:

• Fuel and wear-and-tear on vehicles add costs.
• Time spent by the crew driving and purchasing materials reduces productivity.

Solution: Set up a system for tracking materials to minimize unexpected trips. Ensure every job has the correct material estimates upfront, so your crew has everything they need before hitting the road. Regularly check in with your team on ways to improve material planning and tracking.

2. Vehicle and Equipment Maintenance

Another often-overlooked hidden cost is equipment and vehicle maintenance. In a busy business, it can be tempting to wait until something breaks to repair it. But skipping preventive maintenance can lead to costly breakdowns, increased repair expenses, and lost productivity.

The impact of a breakdown:

• Downtime: Crews can be stuck on the road, unable to complete their work.
• Extra costs: Expedited repairs and overtime to catch up on delayed jobs.

Solution: Establish a preventive maintenance schedule. Ensure vehicles and equipment get regular check-ups for tires, oil changes, and general upkeep. This small investment in maintenance can save significant time and money by reducing costly breakdowns and unexpected downtime.

3. Unbilled Hours and Unnecessary Labor Costs

Labor costs go beyond just paying wages; they’re also about using work hours effectively. Having extra hands on a job “just in case” or not actively tracking billable hours can lead to unnecessary expenses. If crew members are idling or underutilized, you’re paying for hours that don’t contribute to the job’s profitability.

Solution: Track job schedules closely and staff only as needed. For each project, assess how many people are required each day and ensure there’s enough work for everyone on-site. Adjust staffing as the job progresses—having the right crew size can significantly impact profitability.

4. Subscription and Service Fees

Recurring subscription and service fees can be a surprising source of hidden costs. It’s easy to sign up for software, apps, or memberships, but if they’re not being fully utilized, these fees quickly add up.

Consider this example: a small business owner saved $400 a month by canceling unused subscriptions. Those savings add up to nearly $5,000 a year!

Solution: Review your subscriptions quarterly. Cancel or downgrade any that aren’t delivering clear value. Make sure you’re notified before renewals, so you can reassess whether each service is still needed.

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Conclusion: Reclaiming Profit Without New Sales

Hidden costs might seem small, but together, they can have a big impact on profitability. By tracking materials, scheduling preventive maintenance, managing labor effectively, and reviewing subscriptions, you can reclaim profit without generating additional revenue. Imagine saving hundreds—or even thousands—of dollars each month simply by reducing these hidden expenses.

So, take a closer look at these costs in your business. Where are you overspending? What systems can you implement to keep expenses in check? Addressing these areas will help you increase profitability and set your business on a more financially secure path.

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Need Help Tracking These Costs?

If tracking down these hidden costs feels overwhelming, I’m here to help. Schedule a 15-minute call with me at constructionprofitfirst.com/call, and we’ll discuss where you can save and increase your profitability. Let’s make every dollar count toward building a more profitable business!

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