How This Contractor Made $200K From Change Orders

Change orders are inevitable in contracting. But if they aren’t priced, tracked and communicated properly, they can drain your margin, disrupt your schedule and create unnecessary conflict with customers.

Eric Olson learned this lesson after completing $1.4 million in change orders on a custom home, only to discover that his company had generated just $32,000 in gross profit from the additional work. The changes also extended the project by six months, bringing extra administrative costs, site expenses and lost opportunities to start other projects.

Rather than trying to eliminate change orders, Eric developed a system to manage them as a separate, profitable part of the business. By adjusting his pricing, improving collections and aligning his team around profitability, his company turned an overlooked revenue stream into a meaningful profit centre.

Five Lessons Contractors Can Apply:

• Treat change orders like separate projects. Track their revenue, labour, material costs and profitability independently from the original job. Otherwise, poor change-order margins can disappear inside the project’s overall numbers.
• Charge for the disruption, not just the materials. Change orders require estimating, coordination, scheduling, communication and additional administration. Eric’s company increased its markup to account for the real workload and opportunity cost involved.
• Collect payment before completing the work. Eric’s team invoices for the full change-order amount shortly after approval and does not proceed without payment. This protects cash flow while helping customers understand their budget in real time.
• Document schedule impacts immediately. Every approved change clearly identifies how many days it will add to the project. Updating the schedule as soon as the change is approved prevents disagreements months later about why completion dates moved.
• Give your team a reason to protect margin. Eric introduced profit sharing for the employees involved in producing and managing change orders. Once the team shared in the upside, properly pricing and processing the work became a collective priority rather than another rule imposed by the owner.

The goal isn’t to push customers into making more changes. It’s to create a clear, consistent process for handling the changes they already want.

When customers understand the price, payment terms and scheduling consequences upfront, change orders become less emotional. Your team knows exactly what to do, the customer can make an informed decision and the business gets paid appropriately for the additional work.

The full episode explores how Eric built this system, gained team buy-in and used stronger financial controls to identify other opportunities hiding inside his business.

Book a complimentary discovery call with Breakthrough Academy to explore how better systems, financial visibility and team alignment could improve profitability in your contracting business.