Net Profit Help

PoolGuySC · May 12, 2011

I am looking for some impute on my companies Net Profit. We are a custom swimming pool builder doing around 2.5 million a year. We are trying to figure out if our Net profit margin is to low. Some details: Its a family business with three partners all making a gross $1400.00 per week, each of us have a company truck, gas expense card, medical Insurance paid in full as well as cell phones paid for. We also have two office girls and one construction laborer. We sub out about 95% of our work also. As of right now we are showing a 25% Gross profit margin and a 3.5% NET profit margin on 1 million that we have done so far this year in 5 months. Is this to low? What is a good NET profit margin for a luxury item in this economy. Trying to figure out if 3.5% is good based on all the "perks" we get as partners or if we should still be NETTing more?

Grumpy · May 12, 2011

Seriously if you don't have an account, if anyone reading this doesn't have an accountant, close this website and do a search for accountants in your area. Find a good accountant that you can trust with your life and ask that accountant. If you have an accountant, ask him not us. Everyone in business should have an accountant. Even if you do the bulk of the clerical work yourself, even if you manage your books, PLEASE do yourself a favor and get a PROFESSIONAL to at least audit your books once a year.

Look at it this way, your accountant would build an addition or paint a house, or what ever your trade is... your account would do that about as well as you will do your books. I speak from experience. Did I mention, GET AN ACCOUNTANT?

There's too many variables that we just don't know without a proper review of your books to determine your gross or net profit.

Being a seasonal business myself, I don't expect to be actually making any money on the books until JUne and the bulk of our profit comes in the last quarter. For what it's worth I almost always show a loss the 1st quarter. I bring this up because to take snap shot today of my books would make a grown man want to cry, but at the end of the year I get the average. Feast or Famine. Or instead of reporting annually, I could run it on 12 months. Not quite the same, but the result should be very very similiar if not exactly the same.

Mike's Plumbing · May 12, 2011

Well, are you able to raise your rates? If not than run a leaner operation.

Mike

SuperiorHIP · May 12, 2011

This sounds exactly like this old thread,

http://www.contractortalk.com/f16/profit-margin-148/

lomez · May 12, 2011

Well, your "3.5% net profit" is NOT a 3.5A% net. You first have to add back: all partners' salaries, benefits, cell phone, car allowance etc. Then, THAT is the net profit in $$ (often called adjusted net). From there, you can divide by the revenue to determine the net profit before taxes.

PoolGuySC · May 13, 2011

Stop being grumpy

PoolGuySC · May 13, 2011

I am just looking for a average of what other like companies go for. Just trying to find out if 3.5% is to low taking in to count the perks.

Chris Johnson · May 13, 2011

I can't believe you are doing 2.5 million in sales and are now asking about profit.

Framer53 · May 13, 2011

Personally I like Microsofts margin of 30% net, myself. Little hard to achieve,but I am working on it!:whistling

GettingBy · May 13, 2011

Search on investments that guarantee over 3.5%/year. If you find any put your money there.

If you don't mind lying every minute of the day you can make 40%/year, and in MD your chances of going to jail for fraud are 40 out of 20,000 (40 inmates out of 20,000 inmates, that is). Crime pays!

Framer53 · May 13, 2011

Could you explain this post to us?

Jason-F · May 13, 2011

Lets speak a little less generally here. What are you guys operating at? what type of margin are you left to work with after all Cost of Goods / Services Sold are delt with?

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