average profit

[shocker3218]

What kind of profit margin is average for you guys? Obviouisly it depends on a lot of factors, but I would like to know what kind of profit to shoot for when bidding a job.

I just finished a $750,000 job for a company and they made $150,000 pure profit, and are complaining that it should have been more.

First job under my own business is a $10,000 job with about $1200 profit if it all goes well.

Thanks for your input.

 

[fc]

Re: average profit

I would think you would want to make between 20 to 30 %. That's what our company has been doing.

 

[hbiss]

Re: average profit

This is a question that's not as easy to answer as it sounds.

It's easy to say that you should be making x%, but in reality how much you can get away with charging for a job is determined by factors such as the economy in your area and the "bottom feeder" contractor down the block.

Bottom line is you need to figure what you need to gross, (whats left over after paying for materials) usually on a per month basis, in order to cover all your overhead expenses and salaries for your employees as well as yourself. That's the "break even" point and you will need to figure a comfortable amount beyond that which will be your actual profit.

Only then can you figure what your markup on materials should be, what you need to charge per hour and how many billable hours per month you will need to generate in order to stay in business. If your figures turn out to be much more than "what the market will bear" you will have to make some adjustments or find another line of work.

-Hal

[ July 05, 2004, 04:19 PM: Message edited by: hbiss ]

 

[bajan]

Re: average profit

The profit you make will depend heavily on the market. If your competitors are marking down you will either have to do the same or be able to offer a better service or deal. You should monitor your productivity to see if you can improve your profit in that area.. i.e work fsater and smarter. You have to decide how much profit you want.

 

[short circuit faulted]

Re: average profit

I think the gross profit on a job varies depending on the work. On commercial work in our area (South) margins are about 10-12%, on industrial work (whats left after NAFTA) about 30-38% and on service work 38-55%. I caution however, that overheads from vehicles to building, insurance to utility bill must be factored as a portion of job cost, company size will dictate what this percentage will be. This is not to be confused with labor burden (FICA Workman's compensation and so forth this is a separate percentage to cover the costs associated with the business from owners salary to assigned departmental overhead. As a 10% profit on a job which did not include these pro-rated costs, could actually be a loss depending on the job size of course. Bottom line you cannot compete with the low ballers who don't consider these costs and stay in business for the long haul and you need to set up a reserve fund in an interest bearing account, to cover you should you make a mistake in an estimate, without going belly up.