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Bam, I took COGS to be what I described and his expenses to be his overhead and salary. If so, 13% is pretty good.
 

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I know its not apples to apples....not everyone can be an over paid plumber

I know of some prime contractors who charge 40% profit...they are very high end and expect perfection (and they get it)

it would be nice to get paid to just organize the jobs and not swing a hammer...id love it as I get older....
So they are making 40% profit after taking a salary or is their salary taken from that 40%?
 

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Discussion Starter · #23 ·
huggytree said:
about the only thing that stands out with me is how many employees you have and your sales are only $500,000 im at $525,000 this year all by myself...most remodelers I know have a couple of employees and are in the millions.. the small 1-2 man operations are $300,000-$500,000.....1 kitchen could be $60,000+...so $10 kitchens a year is all you'd have to do to make $500,000..... with my plumbing business id expect $2,000,000+ with that many employees....I know some high end service shops that expect $500,000 per plumber a year I think 13% profit is low also on remodels I like to be at 30-35%, new homes 10-15%
13 is my net profit for year. 30% is my gpm. But yes that is my fear to many employees
 

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So they are making 40% profit after taking a salary or is their salary taken from that 40%?
I'm thinking it's their mark up, not their margin, much less net after salary.

Good for them if I'm wrong.
 
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I think you should analyze your three tiers of jobs and the associated marketing, closing and adminstrative costs of performing them. It may be difficult to isolate the marketing costs but I would not be surprised if net profit went up when focusing on the larger projects.

Every client you take on is a time leech. Do you want fifty 2000$ leeches or 2 50k ones?
 

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13 is my net profit for year. 30% is my gpm. But yes that is my fear to many employees
Are your hands busy the whole time? No slow spells where you have too many standing around?

Might look at just using subs. I've considered it, but I can't give up the control on the finish work, and I like doing forming and framing. Most GCs here use subs exclusively.
 

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I think you should analyze your three tiers of jobs and the associated marketing, closing and adminstrative costs of performing them. It may be difficult to isolate the marketing costs but I would not be surprised if net profit went up when focusing on the larger projects.

Every client you take on is a time leech. Do you want fifty 2000$ leeches or 2 50k ones?
If the smaller job produces twice the margin I'll take 50 ;)
 

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Discussion Starter · #28 ·
BamBamm5144 said:
Isn't that an extremely high amount for costs of goods sold? Basically that's a fancy way for saying material costs, correct? What am I missing.
Cost of goods sold is my material and labor costs for each job
 

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Did I miss something

$482,000 x 13% profit = only $62,000.

Is that all you paid yourself for an entire year because after taxes and health insurance you are only netting about $800 per week, or $20 per hour.

If my numbers are correct you would be better working for someone else if you can't change your business model.

My opinion is that any business owner who runs a serious business should be paying himself, or earning no less than $2,000 per week and after taxes that is only about $1300 per week. So, you need a profit of about 30% and not 13%.

As for working in the field I am 63 years old and I still work in the field making repairs 6+ days a week. There are several advantages such as I set the pace for my employees and I can keep in touch with the need to make changes for difficulties, prices and work-related issues.

I can't function when working in the office in the daytime because there are too many distractions to stay focused. I can he more productive in the field during the daytime and more productive in the office during the evenings.
 

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$482,000 x 13% profit = only $62,000.

Is that all you paid yourself for an entire year because after taxes and health insurance you are only netting about $800 per week, or $20 per hour.

If my numbers are correct you would be better working for someone else if you can't change your business model.

My opinion is that any business owner who runs a serious business should be paying himself, or earning no less than $2,000 per week and after taxes that is only about $1300 per week. So, you need a profit of about 30% and not 13%.

As for working in the field I am 63 years old and I still work in the field making repairs 6+ days a week. There are several advantages such as I set the pace for my employees and I can keep in touch with the need to make changes for difficulties, prices and work-related issues.

I can't function when working in the office in the daytime because there are too many distractions to stay focused. I can he more productive in the field during the daytime and more productive in the office during the evenings.
The definition of net profit would be after your salary is paid, not before. The 63k would be after his salary if it's true net profit.
 

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It is scary to think about how different everyone's "opinion" is on finances and what there definition of profit is.

If you are making 62,000 after you pay yourself a salary I'd say you are doing fine.
 

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I think it also depends on the legal structure of the company. If one is a sole proprietor, then what they consider net profit may very well be their take home pay.

I know a lot of people think very differently about this subject, but my thinking would be of net profit for the company. My salary is paid every Friday, just like other employees and therefore just another operating expense. As the owner though, I also earn quarterly dividends, (or monthly however you set it up) it could be a variant amount depending on how well the company is doing or just a set amount.

I would consult with your accountant for which ever way you go.
 

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Discussion Starter · #33 ·
Some guys have this thing confused. 40% is not what I charge. 40% is my target gross profit margin. My markup is what I charge and I have haven't given you that number. Some one could figure it out simply based off of the gpm that I am trying to hit. Anyways...

I realize that I could be more profitable banging nails myself. But that's not the business model that I am after.

Yes net profit is what I took home or could have taken home. Yes it seems small for the amount of sales we did because I now have a office manager and a guy helping me do bids while I watch and manage the field guys. I step in on the big bids and do all the design work for our bigger remodels. My stress level has dropped tremendously and I have been able to be a great family man.

This year the message is GROSS PROFIT MARGIN! We have to hit those percentages (see original post). These last couple of years I have just been getting and doing the work. I have 2 years of quick books data. I use Michael stones formula for market

I guess the whole point of this thread was just to see where others stand in regards to my numbers. My expense percent, my net percent, my gpm goal, my cogs percent. I want to know what others numbers are at and how so I compare.
 

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So they are making 40% profit after taking a salary or is their salary taken from that 40%?
40% before salary

they take my bids and x 1.40 or divide .6 (not sure)

I know others that use 30% range for mid level remodelers

the only expenses they have is building rental and misc office equipment and an accountant....so ill bet they keep 80% of that 40%
 

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It is scary to think about how different everyone's "opinion" is on finances and what there definition of profit is.

If you are making 62,000 after you pay yourself a salary I'd say you are doing fine.

I agree with this!...if your making a salary AND $62k in profit your doing just fine(ignore my stupidity)

I thought you meant you were making only $62k total

if your paying yourself $1 in salary then id say your not doing so well with $62k total
if your giving yourself $50,000 in salary then id say your doing well
 

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Just a couple of quick observations based off the information you provided:

1. Seventy percent COGS is too high, and will limit your potential for growth unless, you reduce it by 10-20%.

2. Thirty percent GPM is a bit low. Successful businesses usually have 40% GPM's and above. Charging more money for your services will help COGS and GPM improve.

3. Are you figuring your weekly salary into overhead?

4. Based on the above numbers and information you provided, I'm going to assume the 13% net is your salary.

5. How are you putting money away (nest egg) into the company for growth, and hidden expenses? This is what a true net is. Looks like your net is 0%, am I correct?
 

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Sophisticated Siding Guy.
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Yes net profit is what I took home or could have taken home. Yes it seems small for the amount of sales we did because I now have a office manager and a guy helping me do bids while I watch and manage the field guys. I step in on the big bids and do all the design work for our bigger remodels. My stress level has dropped tremendously and I have been able to be a great family man.
Lot of liability for 60k a year imo. One bad job and you could be left with -60k income for the year.
 

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Discussion Starter · #38 ·
lawndart said:
Just a couple of quick observations based off the information you provided: 1. Seventy percent COGS is too high, and will limit your potential for growth unless, you reduce it by 10-20%. 2. Thirty percent GPM is a bit low. Successful businesses usually have 40% GPM's and above. Charging more money for your services will help COGS and GPM improve. 3. Are you figuring your weekly salary into overhead? 4. Based on the above numbers and information you provided, I'm going to assume the 13% net is your salary. 5. How are you putting money away (nest egg) into the company for growth, and hidden expenses? This is what a true net is. Looks like your net is 0%, am I correct?
Do you mind me asking what your business model looks like? Do you do the labor just manage the guys?

41% of my cogs is labor cost. We are going to start giving the guys hour limits. So if I have 40 hrs in the bid for labor and he gets it done in 30 then he gets 10hrs incentive pay. Or maybe he gets 7hr incentive pay and the company gets 3hrs.
 

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Lot of liability for 60k a year imo. One bad job and you could be left with -60k income for the year.
Totally agree with this. If the 60k+ is your only take home and a normal salary isn't in your expense numbers I would be a little scared. Sorry if I have that wrong! We usually net 10-15% after all expenses and owner salaries. Most of the net has remained in the company for now for working capital, equipment purchases, slush, etc. as we are pretty new and growing our equipment/truck fleet some. If something goes down hill you might be in deep poop.

How good is your new estimator? Not sure how our areas compare cost of living/salary wise, but a good estimator in my field/area should make in the $20-40/ hr range. Could you improve in that area any? Could help the bottom line a bunch if you guys look at things different. We are in a pretty competitive market where I live and I can't believe some of the numbers companies throw out around here and expect to make any money.
 
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