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.

  • 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 ...
  • 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. ...
  • The Contractor Subcontractor Relationship – An Understanding

    The Contractor Subcontractor Relationship - An Understanding
    With construction, no other mutual bond has such a high dependency on each other as the contractor subcontractor relationship. If the relationship is developed properly and with a mutual understanding, it can be very successful.
  • The Definition of the Different Types of Residential Contractors

    The Definition of the Different Types of Residential Contractors
    There are about a half a dozen types of residential contractors. Each has a different function and goal, this article describes the different types of residential contractors and provides guidance to the reader in understanding the corresponding definition.
  • The Financial Truth about Flipping Houses

    The Financial Truth about Flipping Houses
    These two partners in Texas bought a house, fixed it up, and then sold the house. The show illustrated that they made $52,000 from the deal. Really? I have yet to see a deal like that in my accounting experience.
  • Use Phase Accounting in Construction – Part I

    Use Phase Accounting in Construction - Part I
    The most effective form of a financial feedback loop in residential construction is phase accounting. Phase accounting is a subset of cost accounting and generates accurate information in the world of new home and residential additions for small contractors building up to 20 houses per year.

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