Margins in Construction
Minimum Bottom Line Profit Should Average 9.4%!
For Trades & Subcontractors, at Least 11%
After Income Taxes Are Paid!
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.
I think the better question is ‘What should be my margin?’ The answer to this question is ‘How much do you want to earn as a net bottom line profit?’ This is where it begins, not with revenue, not with project margins or even bottom line gross profit (before taxes); but the after tax net profit to reward the owner(s) for risk and to add money to the working capital for future growth. Determine this value first.
Allow me to illustrate, how do you compare a $3,000,000 per year in revenues for a residential contractor to a small bridge builder doing government work with $70 Million per year in revenue?