construction company profits

[Phokus]

Should have explained it better: that 35-50% "Profit" is not actually profit, as it goes toward aforementioned Insurance, trucks, tools, overhead, etc.
Net profit is considerably lower.

Wouldn't you include that in your calculation before you even CALL it profit?

 

[iGas]

Should have explained it better: that 35-50% "Profit" is not actually profit, as it goes toward aforementioned Insurance, trucks, tools, overhead, etc.
Net profit is considerably lower.

The 0.6~4% and hardware markup is what it take to pay for tools/trucks/office rent/insurance/taxes/office crew wages (boss, estimator, engineers, book keeper, secretaries)

[add]

The most organized company in my town at times have more than 200 trades men, and they have at any given time 4~5 office worker and it include the bosses (bosses are engineers/estimator & accountant).

 

[jupiter57]

Wouldn't you include that in your calculation before you even CALL it profit?

Just trying to clarify for the OP.
He he seemed to imply that that every dollar above material was "profit".
IE: Gross Profit vs Net Profit.

 

[AUMM]

Anyone have any insight as to how much profit a construction company can make on a typical dormer taking 2-3 months for instance? When we received our permit for work, it had a figure from the town for "estimated cost of construction". This of course was much less than what we're actually paying the contractor. I'm sure no labor was figured in, but the discrepancy is huge. Is it common for a company to make a 45% profit on a single project? Or is the town being extremely conservative somehow, for some reason? I'm not even sure why they put that on there.

All I know is we interviewed a handful of contractors and they were all in that ballpark for bids.

I'm a general contractor, and the "cost of construction" that comes from the city when you pull a permit is typically a veeeeeeeeerrrry general number. I've had instances where it was way higher than actual cost and way lower than actual cost. As long as you get multiple bids and they're in the same ballpark you should be fine.

 

[ViviTheMage]

profit means, to me after costs - equip, labor, salaries, permits, etc.

25-50% is pretty sweet, if they're pulling in those numbers.

 

[DrPizza]

Quote:
Originally Posted by DrPizza
Just because you reinvest your profit into tools, vehicles, etc., doesn't mean it's not profit. Your net worth as a company is growing as you do so.




Exactly!
Tools, vehicles, etc. cannot be considered net worth!
They wear out, get lost, stolen, & destroyed & must be replaced at more cost to the Contractor.

We don't work to break even, we work, & we take the risks to live a better life than we would working for someone else!

Tools, etc., are depreciated, business losses, etc.

 

[ussfletcher]

Most contractors will get bids from often used companies, and mark them up (as their cost to you) or will get a kick back from said company.

 

[Lithium381]

HAH WHAT A bunch of putzes... you need to come over here to california where there are labor unions, you are guaranteed 10x what you should be paid for doing 10x less. The best part is they cant fire you

 

[highland145]

HAH WHAT A bunch of putzes... you should leave california where there are labor unions, you are guaranteed 10x what you should be paid for doing 10x less. Go to a right to work state.

fixed

 

[Phokus]

Just trying to clarify for the OP.
He he seemed to imply that that every dollar above material was "profit".
IE: Gross Profit vs Net Profit.

I've always used the generic version of the word 'profit' to mean revenues minus all expenses (basically net profit), i thought everyone did this, oh well.

 

[DrPizza]

I've always used the generic version of the word 'profit' to mean revenues minus all expenses (basically net profit), i thought everyone did this, oh well.

I recognize that as a common definition of profit, but it's one I don't agree with. That definition is why Star Wars never made a profit. Titanic never made a profit. Almost all movies don't make a "profit."

But, would you say that Titanic was profitable? Sure. But it didn't make a profit. If someone started a company out with $1000, and kept a reserve of $20k in the bank... Let's say 20 years later, that company outright owned a fleet of construction equipment, 1000's of acres of prime land for real estate, multiple buildings, garages, millions of dollars in equipment, but after these 20 years only had a reserve of $19k in the bank,.. As a rule, they reinvested 100% of what was leftover beyond that 20k reserve in equipment for the company, and even dipped into it by about $50 each year.
Could you say that company never made a profit? In fact, would you say that the company operated at a loss over those 20 years??

Personally though, I do prefer your definition. Because, it seems that it's the definition that the IRS likes when I pay taxes. I, sadly, don't make much of a "profit" because I keep reinvesting "revenues" to the extent that on paper, it works out to a loss. I like losing money. My net worth increases and I pay less in taxes. Since I pay less in taxes, I end up with more money in addition to my "loss."

edit: I'm not saying that there aren't other necessary fixed costs that reduce the amount of realized profit. i.e. storage space, heating, electric at the office, office supplies, etc.

 

[MikeyIs4Dcats]

as a commercial general contractor, our profits range from low single digits to 20% or more depending on the particular project.

I have a $6.5mil job currently with 3% profit. This is AFTER all job-specific costs are paid, but before office overhead (the mortgage, lights, copies, secretary, etc.).

 

[Patranus]

Tools, vehicles, etc. cannot be considered net worth!/QUOTE]

Huh? They are very much assets to a business and give value to a business.

 

[xeemzor]

I've done a few audits of construction companies and 20-25% is pretty typical for a healthy construction company. Mind you, these were well established and experianced companies. It would be very hard to get started on your own since you need a lot of specalized equipment and experiance employees. You also have to know the industry inside and out so that you can make profitable bids without driving away customers. It's certainly no cakewalk.

 

[Gibson486]

Yes....it could be very common.

It depends on how the project is structured. Is this a design bid build? a design build? Is this city work?

For public jobs, the cost for things go down ALOT. Normally, you get something like a .85 to .80 multiplier on prices, but with public work, it suddently becomes a .40 multiplier for contractors on alot of stuff.

Consider my latest project....I had to order a flow meter...list was 9 grand. They sold it to us for 6 grand, but if i was an actual contractor that bought stuff alot, I would have got it for 4 grand.

it also depends on how they got the estimated cost to build. If they were off by that much, then the person who did the estimating probably got quotes on the buy price, not the list. or the person who did teh estimate sucks at his job or is using data that is old.

 

[jupiter57]

Tools, vehicles, etc. cannot be considered net worth!/QUOTE]

Huh? They are very much assets to a business and give value to a business.

Yep!
Just like new cars do not depreciate!