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View Full Version : Profit Margins


bigviclbi
08-19-2005, 10:33 PM
Let's say you do a 1) $5000 job and 2)$10000 job how much are you netting? Dont include things like insurance, advertising just labor and materials, disposal, gas etc.

mbella
08-19-2005, 11:15 PM
Vic, typically, my GPM is 40%. Sometimes it is a little more. However, sometimes it's a little less.

bigviclbi
08-19-2005, 11:20 PM
Do you usually make a higher percentage the bigger the job or less? I know everyjob is differeny in complexity but I am talking straightforward jobs like a driveway or patio. I hope Rex answers because I know his prices are similiar to mine in the 6-7 dollar a sq. foot range.

DVS Hardscaper
08-19-2005, 11:29 PM
I cant tell you our gross profit, as in reality that isnt relivant.

But I do track our NET profit on each and every job as we do the job.

Our job estimating and job tracking system is set up to account for labor burden and the indirect expenses such as "insurance".

Our NET Profit is usually 18 -35%. And thats factoring in EVERY single penny affiliated with that job.

We mostly do jobs that go from 15k - 50k. And yes, the bigger jobs are somewhat less profitable, but thats usually due to job costing flaws. Cause when you price a job, large or small you need to target the same dollar amount per hour per man after expenses.

According to many surveys I have seen throughout the years, hardscaping has low profit margins.

mbella
08-19-2005, 11:30 PM
Vic, this year, I haven't noticed much difference. Whether it was a $5000.00 or $40,000.00 job, we were fairly consistent. What is so much different from here to where you are. I average $5-6.00 on materials alone for flat work.

mbella
08-19-2005, 11:33 PM
I cant tell you our gross profit, as in reality that isnt relivant.

But I do track our NET profit on each and every job as we do the job.

Our job estimating and job tracking system is set up to account for labor burden and the indirect expenses such as "insurance".

Our NET Profit is usually 18 -35%. And thats factoring in EVERY single penny affiliated with that job.

We mostly do jobs that go from 15k - 50k. And yes, the bigger jobs are somewhat less profitable, but thats usually due to job costing flaws. Cause when you price a job, large or small you need to target the same dollar amount per hour per man after expenses.

According to many surveys I have seen throughout the years, hardscaping has low profit margins.

I would say gross profit is pretty relevant as it reveals the direct costs associated with completing a given job.

What if a given crew is incredibly efficient, but as an orginazation you're not. How do you know?

DVS Hardscaper
08-19-2005, 11:45 PM
I would say gross profit is pretty relevant as it reveals the direct costs associated with completing a given job.

What if a given crew is incredibly efficient, but as an orginazation you're not. How do you know?


If you do a 20k job and gross 50% profit, it does you no good if you have payments out the backside to make and and so on.

Ever hear the saying "its not how much you make, but how much you keep"?

Grossing $4,000 is not any value, if after you pay all expenses affiliated with that job you only have $1200 left. Net is also known as "the bottom line". Talk to any established, successful contractor about their jobs, and you'll hear that term used frequently :)

Also, as far as "efficiency", thats where your efficeincy sheets come into play. You are tracking every single minute for each task performed for each job, right? Cause then you should have the averages that are used when you cost out a job to develope an estimate.

mbella
08-19-2005, 11:48 PM
What if you're running two hardscape crews and a softscape crew and spreading your overhead over those three crews?

DVS Hardscaper
08-20-2005, 12:12 AM
Again, that still brings you back to NET profit.

If you're off setting fixed, indirect expenses by turning more production hours....then you're gonna have more money left over after all is said and done. Net profit = left over money.

Naturally more production hours will decrease the amount of money that u need to generate per man per hour, to pay the bill in the night.

Insurance rates and labor burden will not be affected, as those are usually based on payroll numbers.

And usually with more crews, you're turning more production hrs. Which means instead of one crew having to generate money to cover the $500 / month yellow page ad, 3 crews will generate the $500 / month equally.

Typically a company will use the lower operating costs as a way of competitively pricing work.

mbella
08-20-2005, 12:19 AM
DVS, I'm replying to your original comment that Gross profit is irrelevant. I disagree. It may be irrelevant as to whether you go to Spain or New Jersey for vacation, but it's not irrelevant altogether.

If I'm running two crews with the same amount of overhead that you're running four crews, wouldn't your gross profit matter to me? Your gross profit per crew may be the same, but you net profit will be more. If I didn't look at your Gross profit, how would I know?

Gross Profit will speak more to how you run each job and not necessarily how you run your business as a whole.

DVS Hardscaper
08-20-2005, 12:46 AM
To each his own.

6 years ago I hired a consultant to help get us in the right direction.

And after seeing and learning the proper way to make an annual operating budget, and calculate operating expenses, as well as hourly expenses per man hour per employee, I have NEVER looked at gross profit. Now that I think about it, our job costing sheet clearly shows estimated gross profit, but I dont even look at it. For me it means nothing. I can't do anything with it. Its not mine. That is until all the expenses are paid for and entered into the tracking sheet.

What matters is that the guys complete the tasks within the allotted times and that we do not spend more on materials than estimated. And agian, those two facits bring us back to 'WHATS LEFT OVER", aka - net profit.

An estimated gross profit of $3000, is irrelivant if its rained every evening and you're spending additional time shoveling mud off the pavements from loading and unloading materials through out the day.

Your ANNUAL net profit and your salary need to be part of your indirect expenses in your annual budget. take that budget, divide it by the gross annual estimated production hrs, and theres how much you need to generate per hour. Whats this gotta do with net? Well if you know your numbers and know your expenses per man hour, and make it happen, and hopefully come out ahead, then a contractor will be sittin pretty. Again, its whats left in the end that dictates success.

Look at the Symbiot. I bet the have huge gross profits. Yet, a rep has come to this board more or less saying money is tight.

mbella
08-20-2005, 12:54 AM
You're missing the point. If I have three crews, wouldn't I want to know what the gross profit is for each crew? If my overhead is spread over three crews, I would want to know which crew is more efficient.

How can you say gross profit is irrelevant. It is totally relevant. Sure, in the end net is more important. However, gross profit is part of the equation.

I don't know how else to explain it. If I have three crews and I want to know which is more efficient, what do I look at? I'm going to look at the gross profit for each crew, not the net. I may have my overhead figured into those three crews as a whole.

DVS Hardscaper
08-20-2005, 09:58 AM
You're missing the point. If I have three crews, wouldn't I want to know what the gross profit is for each crew? If my overhead is spread over three crews, I would want to know which crew is more efficient.

How can you say gross profit is irrelevant. It is totally relevant. Sure, in the end net is more important. However, gross profit is part of the equation.

I don't know how else to explain it. If I have three crews and I want to know which is more efficient, what do I look at? I'm going to look at the gross profit for each crew, not the net. I may have my overhead figured into those three crews as a whole.

No. Not "missing" any points :)

I have a very structured job costing / system. What matters is that we do a job within the estimated production hrs and that we do not spend more on materials than estimated.

Cause if we do....then the net profit suffers and or possibly dimenishes.

In my opinion, "efficiency" pertains more to productivity. Whole different aspect of business. If a crew is not "efficient"....then thats gonna effect a contractors bottom line, aka "net". A non-efficient crew will devour the net.

mbella
08-20-2005, 11:51 AM
How do you measure efficiency in the office? At the end of the year, if we had a gross margin of 40% and no profit, I would want to take a look at that.

I do the same as you. I set production hours and figure material costs, subs, etc. for each job. If we beat all of the above, great. However, that doesn't take into account indirect costs, or g/a.

BTW, I don't doubt your knowledge or the way you do things.

mbella
08-20-2005, 12:51 PM
Vic, I may have misread your question. You stated "net", but when you said "just labor, materials, disposal, etc." I took that to mean gross. What did you mean? Do you mean how much is left after paying labor, materials, disposal and other direct job related costs only (gross profit)?

bigviclbi
08-20-2005, 01:02 PM
Yes mbella i did mean gross, but it was more interesting to listen to you guys yap at each other than the actual answer to my question :) Mike do you also do "soft"scaping and do you find that more profitable? (I do.)This is my third year and I appreciate all your info. alot. Also how do you prepare designs for people, by hand or computer? I use a program called visio but try to use the foot in the gravel method as much as possible.

mbella
08-20-2005, 03:19 PM
Vic, that's what I thought, but wasn't sure. If you wanted to know what our experience was as far as true "net" then I would have agreed with DVS that "gross" is irrelevant to your question. BTW, I don't disagree with anything DVS stated. I was arguing that gross profit is relevant to business in general and to your question because that's what you were asking.

Anyway, yes, we do softscaping. We do design and build work. We do black and white or color hand designs, design imaging and computer generated plotting. Which method we utilize depends on what the customer wants or which we feel will be more effective. Generally, we do a hand design accompanied by imaging.

DVS Hardscaper
08-23-2005, 10:09 PM
Mbella -

Gross profit is relivant. But a good job costing system will handle that automaticlly for you. And with that, all you need to do is watch the net.

Many ways to do things. And they're all correct.

But, I develop an annual operating budget.

Then I estimated how many production hrs we'll turn for the upcoming year.

I take that annual budget and divide it by the production hrs, and thats how much money we need to make per man per hour before direct costs.

And see, my super dooper looper estimating system will show how much per man per hour is estimated. So to ensure that I priced the job to DO, I look at the rate and if its low...I adjust it. If its high - I lower it. In reality this is the gross profit. But I have it broken down to a hourly rate per man per hour. Its a concept that I got from a very large, successful, well known company :)

How much would you be willing to pay for a good estimating / job tracking program, that does everything under the sun and has been in development for over 5 years?

mbella
08-24-2005, 06:15 AM
DVS, I do my budget the exact same way you do. I was just saying Gross Profit is relevant :)

Day to day, all I care about are the hours for each job. From time to time though, I look at GP.

fraggle
09-06-2005, 03:18 AM
Since you seem pretty satisfied with his work, I'm interested to know whom you hired as a consultant, his rates and software prices. I get pretty confused with all this and some direction would be appreciated. Thanks.

neversatisfiedj
09-06-2005, 11:08 AM
Lately I have been charging 3 times the materials. 2/3 of course for materials and labor, and I keep 1/3 ;) Always doesn't work out though.

DVS Hardscaper
09-06-2005, 07:36 PM
Never Satisified:

Not a good way of conducting business.

Most experienced, established, successful contractors will estimate the materials, then estimate production hrs, then estimate profit, travel time, mobilization fees, load/unload time, etc.

If materials are $3000 and the job has tight access to a steep embankment in the back yard....you'll loose your butt. Where is if materials are $3,000.00 and there is easy access with no variables, you might make out.

Gotta account for each variable in an itemized format.


To the other gentleman:

The consultant I used isnt consulting any more. The software is software that I developed and maybe one day will market it, its very powerful and can be of great use for small to medium size businesses.

dmbmikee
09-11-2005, 11:04 AM
I'm still fairly new to the business, so my GP is not as high.....but continues to increase, as I am getting to the point of being able to pick and choose....where as before, I'd take ANYTHING....lol

On a 5K job, I usually walk away with 1500-2000. On a 10K job, I'll net at least 3500 and in upwards of 5K. The job I'm doing right now, or just finished- was 8800. I walked away with 3K....And I'm very happy with that:)

UNISCAPER
09-11-2005, 12:13 PM
"On a 5K job, I usually walk away with 1500-2000. On a 10K job, I'll net at least 3500 and in upwards of 5K."

Does that include you salary being taken out of the job, or are you paying yourself with what is left over from the job? If you are paying yourself after the job is done, you are not taking the amounts you claim from those jobs.

Your company is entitled to profit from work it does, just the same as you are entitled to oay yourself. If a client you choose to sign on does not see things that way, fire them and get one who appreciates the concept, or simply, raise your prices and if somene wants to work for nothing, let them until they go broke.

dmbmikee
09-13-2005, 08:47 AM
I pay myself with what is left over. I pay my workers, depending on what kind of job it is, how hard it was to do the job, how many hours it took etc. It may not be the conventional way to do it, but it seems to work for me. I usually only have my 3 brothers and Dad on the job. I'm not a huge outfit.....just a part-timer.

Thanks for your advice though. If I'm hearing you correctly, I should make a set amount on each job, my salary. And if for some reason money has to get taken out of my salary for supplies or other labor, then that has to get put back in by raising the cost of the job, during or after it's completion. Right? I mean is that what you're saying? Again thanks for your advice! :)