Construction

Business Economics - A Library of InformationINTRODUCTORY SLIDE SHOW

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New Home 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 residential contracting business your profits should average 5 to 9 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 60 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. 

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 increase in cash flow. Contact me dhoare@comcast.net; I usually respond within a few hours. My rates are reasonable and I’m very responsive.

  • How to Use Class Accounting in Construction

    How to Use Class Accounting in Construction
    Class accounting is a form of accounting whereby the revenues and direct costs are grouped into divisions within the company. It is a very effective form of accounting in construction. Learning how to use class accounting in construction is easy and works extremely well with phase accounting.
  • Implement Cost Accounting in Construction – Document Flow System

    Implement Cost Accounting in Construction – Document Flow System
    This is the second article in a series of articles walking the small business contractor step by step in implementing cost accounting in construction. This article focuses on designing and developing a document flow system for use in cost accounting. The next step after creating a document flow system is learning how to sort and process the ...
  • Implement Cost Accounting in Construction – File Structure

    Implement Cost Accounting in Construction – File Structure
    Taking a small construction company to the next level of financial success requires implementation of cost accounting. This article is one in a series designed to illustrate how you implement cost accounting in a small construction business. The first step in this process is design a file structure.
  • Implement Cost Accounting in Construction – Processing Documents

    Implement Cost Accounting in Construction – Processing Documents
    In construction there is little respect for processing paperwork. Contractors want to build projects, not deal with how paper is managed. But to gain a true understanding of what it costs to build a project and implement cost accounting, the contractor has to process documents in a meaningful way. 
  • Implement Job Cost Accounting in Construction

    Implement Job Cost Accounting in Construction
    Financial success in construction is tied directly to job costing. Without job costing, financial wellness is likely a product of coincidence than authority within this industry. Implementing job costing in construction is the absolute best financial control a contractor can do to ensure success. Tie cost accounting to the estimating process, and prosperity is all ...
  • Job Cost Reports – Balance Sheet Set

    Job Cost Reports – Balance Sheet Set
    Construction accounting uses job cost reports to inform management of progress and existing issues with projects. There are several different sets of reports. The balance sheet set functions as an overall financial picture for the company.
  • Key Performance Indicators With Construction – Backlog and Pipeline of Work (Part 2 of 3)

    Key Performance Indicators With Construction - Backlog and Pipeline of Work (Part 2 of 3)
    Backlog and the associated pipeline of work is the second group of key performance indicators for a contractor. With construction, understanding the volume of existing contracts, i.e. backlog, aids the management team in setting production goals in the near term. In conjunction with pipeline information, a contractor can quickly ascertain future financial performance. In order ...
  • Key Performance Indicators With Construction – Production Reports (Part 1 of 3)

    Key Performance Indicators With Construction - Production Reports (Part 1 of 3)
    The primary key performance indicator with construction is the annual financial income statement (profit and loss statement). For most traditional contractors, the bottom line, net profit after taxes should be no less than 7% with an average of 9.4%. If the contractor desires to be in the upper 10% of the industry, net profit must ...
  • Labor Burden in Construction – Proper Rate Formula

    Labor Burden in Construction - Proper Rate Formula
    Labor burden in construction is a value added on to the respective hourly labor base wage to to determine the total cost per hour for a particular trade or employee. Labor burden rates are used extensively with estimating and recording actual results. The key to labor burden is that the rate is NOT universal. The ...
  • Margins in Construction

    Margins in Construction
    I’ve been asked to identify the average margins in the construction industry. Honestly, there is no such thing. I tried and after several hours of research I couldn’t even get one of the types of contractors to have consistency in their numbers. 

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