Let’s say the gross revenue from a bathroom remodel is $30,000.
How does that figure breakdown for you in terms of:
I’ve heard that a realistic goal seems to be about a 20% profit margin after all is said and done. Is this too low or too high? How do you think about the project breakdown when you are pricing?
I figure everyhting its going to take to complete a bathroom at my cost. Then i multiply that number by 35-45% this profit will cover my profit and overhead and my time. I don’t get them all but when I do the customer gets personalized service from beginning to end.
Dynamic Property Renovations does 100% of all work. Providing the client stays with original plan (no huge changes ect.) the cost of materials depends on the difference of square footage from home to home and area. You also have to consider each client has different taste in materials. I figure in the permits, materials as discussed, labor, and dump fee’s. I price my labor and any helper i may have per sqaure foot of any materials i will be removing and installing thats it. I also give a 2 year warranty on all work done by Dynamic Property Renovations LLC.
Getting 15%-20% doing good in this economic market. After figuring in cost of material, Permits, Subcontract labor, Overhead costs, and co. labor.
Profit margin will be different for everyone… What each person needs to take into consideration aside from materials and actual labor is company overhead: office labor from estimator right down to your secretary (don’t forget yourself), all insurances and taxes, rent, utilities, etc. Once one knows all overhead then you can find out your profit margin. I have seen in some instances where a compaines profit margin was at 55%! When estimating bathrooms I will stick to a multiplier, I add up all material right down to the cleaning supplies then use my multiplier. I have seen a multiplier vary from 4-6.
I have been estimating most of my jobs based on total material cost, time spent on each process and if any sub contractors are involved with a 10-15% cost on the total then and add 5% for overhead costs. The other factor also required is the degree of difficulty, logistics and any extenuating circumstances that might impede the construction. If the job is going to present a higher level of involvement then 20% in lieu of 15% should be factored in.
Typically a subcontractors OH/P will be much higher than a general contractors OH/P. Most company owners have no clue what is their real OH/P unless they have been in business for least a year - then if your software can run an Income annalist report (where your expenses are broken down by percentages) which will give you your true OH/P - these reports are not available for companies that pay expenses thru their accounting system and when paid by cash they only deposit enough to cover the expenses.
Your OH/P is also in direct relation to how much you bill out vs. how much you expensed out - as once you meet your true OH - your profit margin starts to grow even thou you figured the project at 20% OH and 15% Profit, your profit could end up being the full 38% ($1000 X 1.2 X 1.15 = $1380 - that’s the result of 20% OH and 15% Profit).
Now, If you did $15,000,000 per year and ran a very efficient operation you could make a small fortune figuring work at 3% OH & 2% Profit. For most small companies doing less than $250,000 per year, your OH will be around 25% so if you want to make 15% profit you better figure the job like this, assuming your materials and labor and all other job related expenses are $20,000. Take $20,000 X .25 = $5,000 - now take $25,000 X 15% Profit = $3750 + $25,000 which equals your bid price before sales tax, which is $28,750.00.
Bottom line is you must design your own OH/P chart – think about it if you have a $200 job are you going to figure the job at 3% OH & 2% P – no, you will figure the job at 25% OH (this always stays the same) and $200% Profit. Basically your OH & P chart must go up and down depending on the total direct cost of the job…think about it. If you are a small sub and you figured a job that cost $1,000,000 to do you cannot do the job for 25% OH & 15% P it’s more like – 15% OH & 5% P. why? Many reasons which is another conversation.
OH & Profit also differs from town to town – to make this simple the bigger the city the less OH & P you can get. In a small town it can easily be double of a bigger city – been there, see it, done it. That’s why I live in Prescott, AZ. – Not Phoenix!
