Construction

Construction

Minimum Bottom Line Profit Should Average 9.4%!
For Trades & Subcontractors, at Least 11%
After Income Taxes Are Paid!

As an owner of a construction company, your profits should average 9.4 percent per year after taxes. This profit is net of your personal salary of $100,000 to $140,000 per year. Therefore, if you are contracting around $1.5 million per year, you should be generating no less than $180,000 per year in take home compensation for your efforts. If not, you are not in the upper half of performance within this industry. You are doing something wrong and this section of the website is designed to educate you about the proper organization, systems, policies and procedures you must incorporate in your construction company’s culture.

This section of the website is solely dedicated to contractors. There are over 70 articles covering key aspects of operations and accounting in the construction industry. There is a wealth of knowledge available here. All of the articles are written to help the contractor discover how to improve the bottom line and achieve financial success in this industry. Good modeling measurement tools are taught here; use them to increase overall performance and ultimately the bottom line. Use my experience and learn from my errors and successes to improve your business operation. 

You must be a subscriber to have access to any of the articles in this section of businessecon.org. Yes, there is a fee to subscribe. For $19.99, you can utilize this wealth of information for your company. 

I spent 28 years learning about construction accounting and implementing systems and processes for over 40 different kinds of construction companies. I have spent almost 4,000 hours of time drafting, reviewing and publishing these informative articles. If you wish to subscribe:

Construction Accounting

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    The articles below are business related, they are in-depth and educational in nature. The primary goal of each article is to educate and provide insight, guidance and knowledge to the contractor.

    If you need help, I’m here to assist you. I have deep knowledge about how to set up cost accounting (project accounting) and tie it to financial accounting. Allow me to identify your needs and render solutions. The changes will greatly impact your bottom line and reduce your stress from the increases with cash flow. Contact me dhoare@comcast.net; I usually respond within a few hours. My rates are reasonable and I’m very responsive.

    • Progress Billings in Construction

      Progress Billings in Construction
      Just like a tip of an iceberg, a progress billing for a construction project is an invoice for a small part of the overall contract value. It needs to be recorded correctly and presented to management in a way that is understandable and beneficial for making decisions. This article will introduce the concept and cover how progress ...
    • Project Accounting Principles for Residential Contractors

      Project Accounting Principles for Residential Contractors
      Almost every residential contractor I had as a client had no clue of their financial position as it related to any one of their residential contracts. None of them knew whether the project was fully funded, over funded or unfunded at any point in the construction process.
    • QuickBooks in Construction Accounting – Transfer Work in Process to Cost of Goods Sold

      QuickBooks in Construction Accounting – Transfer Work in Process to Cost of Goods Sold
      QuickBooks does not have a seamless subroutine to transfer costs from construction in process control account to the profit in loss statement’s cost of construction section. Therefore, the accountant has to export data to a spreadsheet and then sum the respective functional costs of materials, subcontractors, labor, land etc. and then make a general journal ...
    • Residential Construction: Average Net Profit After Taxes Equals 9.4%

      Residential Construction: Average Net Profit After Taxes Equals 9.4%
      The residential construction industry’s average net profit after taxes equals 9.4% during 2019. The top four companies in the United States built and sold 151,366 homes with an average sales price of $376,703. Each home netted after income taxes $35,464 of profit. This equates to an average net profit of 9.4% in the residential construction ...
    • Residential Roofing Contractors – Financial Performance Standards

      Residential Roofing Contractors – Financial Performance Standards
      The national average sales for residential roofing contractors are slightly greater than $3 Million per year. A typical small roofing contractor will have a couple of crews working various projects and frequently sub out jobs. In addition, the owner acts as a project manager and there are one to two estimators depending on the volume ...
    • Restoration Contractors – Business Dynamics

      Restoration Contractors - Business Dynamics
      Restoration contractors face a different set of business dynamics than the traditional new home builder or remodeler. Unlike the builder and remodeler, restoration companies deal with a third party in their contract negotiations and performance. The new home builder uses the market to determine the value of their product, whereas the restoration contractor is forced ...
    • Retainage in Construction – Purpose, Accounting and Law

      Retainage in Construction - Purpose, Accounting and Law
      A tool used by a developer, contractor or homeowner to keep the primary party committed to getting the project completed is called ‘retainage’. In effect, retainage means to withhold a small percentage of all payments made until all the work is done. The idea is prevent the contractor, subcontractor or vendor from earning their respective ...
    • Roofer – Business Dynamics

      Roofer – Business Dynamics
      Roofers depend heavily on labor to accomplish their task. They are also highly susceptible to weather conditions and dangerous conditions. There are a multitude of issues they face. If properly managed, an owner of a roofing company can make a good living and profit. Experience is absolutely the best ally for the roofer.
    • Setting Up Item Codes for Contractors

      Setting Up Item Codes for Contractors
      A common problem for contractors is setting up item codes in their accounting software. Most accountants and bookkeepers fail to fully understand the concepts behind item codes and how it works with the construction industry. This article is designed to explain to you the underlying concepts and how to set up item codes for contractors. ...
    • Take-Off with Construction: Part 1 (Concepts and Materials)

      Take-Off with Construction: Part 1 (Concepts and Materials)
      Take-off or takeoff in construction is a term used to refer to the process of detailing units and costs with a job estimate. Take-off is in essence the work papers supporting the final values for both numerical count and dollar amounts of the respective elements of an estimate. Take-offs are not restricted to just materials; ...

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