Profit Maximization Strategies Employed by the Small and Medium Size Building Contractors in Dar-Es-Salaam, Tanzania

Abstract

When it comes to a firm's growth, profitability and profit maximization are sensitive matters that cannot be neglected, due to the fact that profit and profit maximization are the main aims for any building construction business. Thus, the study intended to explore the profit maximization opportunities available for small and medium size building contractors (SMSBCs) in Dar-Es-Salaam, Tanzania; by exploring the profit maximization strategies employed; examining the challenges faced by these contractors that affect realization of profit maximization; and proposing profit maximization measures, that can be employed by the SMSBCs in Dar-Es-Salaam, Tanzania. This designed survey study, employed the SMSBCs in Dar-Es-Salaam Tanzania, as a unit of analysis, which involved building contractors from Class IV, V, VI and VII, as study population and unit sample. Moreover, the descriptive design survey study involved probability sampling as a sampling technique. Literature review; open and closed ended questionnaires, were used in collecting primary and secondary qualitative and quantitative data. In collecting data, total of 94 questionnaires were distributed, whereby 78 (84.3%) were returned. Quantitative data were analyzed using Statistical Package for Social Sciences (SPSS), while qualitative data were analyzed thematically. Findings revealed charging for all amendments and change orders; dropping of low performers; minimization of waste on site; timely execution of works on site; proper tendering procedures; improving construction productivity; reliable chain of supplies; and requiring more site job experience, as the most important opportunities employed by SMSBCs. Furthermore, the critical challenges revealed were; non-payment of debts; taxes and license; lack of capital equipment; low share of work opportunities; delays caused by clients; as well as uncertainty and unexpected climate conditions. The study concluded that; most of the contractors use all the opportunities to maximize their profits in construction projects. Most of them have survived because, they continued maintaining professionalism when it comes to work despite having low share of work/ tender opportunities. Also, corruption is one of the critical factors that affects the industry, hence hindering the contractor's growth. With the new reform and government systems, this factor has reduced to some extent as compared to how businesses were operated before, but not completely eliminated. The overall satisfaction of the profits and growth of these SMSBCs has been reduced by government reforms and policies, despite the government effort to fight corruption. When it comes to taxes and license fees, most of the contractors are irritated with constant need to pay for cost/license of operations or the presence of both withholding tax and Skills Development Levy(SDL) imposed to them when conducting business. Lastly, the study recommended; introduction of proper taxation policies; centralization of government agencies responsible for collecting annual payment f...

Application of machine learning in predicting construction project profit in Ghana using Support Vector Regression Algorithm (SVRA)

“…Its role is critical because it gauges the financial strength of a business (Mahamid, 2011). Avetisyan et al (2020) defined profit of margin as the ratio of profit earned to sales receipts (costs) over a period. This means that the profit margin measures the amount of profit that a firm accrues from sales of a product or service.…”

“…This means that the profit margin measures the amount of profit that a firm accrues from sales of a product or service. There is a tendency for less capital to be locked up in a contract when the margin of profit is higher (Avetisyan et al, 2020). On the other hand, a greater amount of capital is locked up when the margin of profit is less (Mahamid, 2011).…”

“…With the construction industry being associated with low-profit margins due to competition, contractors are encouraged to rely on cash flow as a mechanism to generate profit. A company must, therefore, operate efficiently to recover not only the cost of production but to provide compensation for clients in exchange for risk acceptance to generate a sizeable profit margin (Avetisyan et al, 2020;Asante, 2014).…”

“…Profit is the financial benefit realised when work is done, and also when the expenses incurred by a business are exceeded by the amount of revenue generated by the activities of that business (Avetisyan et al, 2020). Mathematically, profit can be expressed as (Avetisyan et al, 2020;Halim, 2014):…”

“…It is one of the items required to continuously determine, control, and plan in connection with profit. Total expenses, on the other hand, is the total cost incurred in the construction or production of the goods or service (Avetisyan et al, 2020). The succeeding subsections present some of the notable theories on profit.…”