Strategies for Spotting ‘Profit Leaks’

Minor inefficiencies in day-to-day business practices may not seem like a major concern, but these inefficiencies can add up and hurt profits over time. According to a recent blog post from Shinn Group, these “profit leaks” aren’t always obvious, but once they are identified, are easy to fix.

For instance, sales teams might focus on selling more homes, while production teams focus on cycle time. Both of these goals are important, but when teams aren’t working with the same financial goals in mind, their conflicting efforts can lead to a reduction in profits. Other inefficiencies can come from using different task management systems across teams. When these tools aren’t integrated, employees may not consider other teams’ objectives when creating their own.

Beyond systems and data, there are also operational hurdles. Resource allocation and capital utilization play a critical role in profitability, yet many builders find it difficult to deploy their people, money, and projects in the most efficient way. Tied closely to this is change management. Even when better systems or processes are introduced, gaining team buy-in can be a significant obstacle.

The reality is that most builders don’t have just one profit leak, they have several. And while each may seem small on its own, together they can have a substantial impact on the bottom line.

The builders who outperform their peers aren’t necessarily working harder, they’re working smarter. They’ve put systems, processes, and disciplines in place to identify these leaks, correct them, and create a more predictable, profitable operation.