Profit Standards for Residential Contractors
Minimum Bottom Line Profit Should Average 9.4%!
For Trades & Subcontractors, at Least 11%
After Income Taxes Are Paid!
Profit standards for residential contractors vary depending on the type of contractor and the respective level of performance. In general, the net profit standard for contractors in the upper tier of performance range from 11% to as high as 14% of net sales. I know, it’s not a direct answer; but read further and you’ll understand why and more importantly, what you should expect as profit standards for residential contractors.
To answer the question, first, let’s understand that there are 3 levels of performance and each level has a minimum standard of profit to a maximum profit. Once you understand these three levels, it is then important to understand the economic cycle and its impact on this standard of profitability for your company. Finally, every contractor needs to understand that this profit is different depending on the nature of your service. Those involved in the restoration aspect of residential construction are going to have a different profit standard grouping than new home construction. It isn’t necessarily equal across the board for all areas of residential construction. Remember, there is risk reward involved here and therefore, the profitability standard shifts depending on the risk involved. To help you understand, let’s begin with the three standard groups of profit.
Profit Standards – Three Standard Groups of Profitability
The Internal Revenue Service uses a tiered system to evaluate businesses in the same business sector. When a tax return is
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