The construction industry has standards of performance and cost ratios. These standards and ratios are evaluated to determine if your business is performing well or below what is considered reasonable. Use construction industry standards to improve your contracting company.
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.
Profit standards for residential contractors vary depending on the type of contractor. In general, the net profit standard for contractors in the upper tier of performance range from 5.8% to as high as 9.6% of sales.
There is a notion in business that using cash to pay for materials or service is illegal. IT IS NOT ILLEGAL TO PAY FOR MATERIALS OR SERVICE WITH CASH. It is illegal to do this if you do not properly document the transaction. This is especially true in the construction industry.
To reduce risk and provide greater security to all parties the small construction company should consider branching out. What I mean is adding an additional class or line of construction work to the company’s portfolio so that in hard times there are more opportunities for work.
It costs a lot more than you realize to build a home or perform residential repairs. This article looks at both the homeowner’s and contractor’s perspective of what one perceives and the other actually incurs.
This article is designed to help the contractor address the proper procedures and documentation related to allowances in a new home contract.
This is a basic draw schedule explanation for an A-frame ranch model home. This article details the draw schedule format illustrated below. It details the approximate percentages for the respective phases of construction and explains how the draw schedule is laid out and works.
Every construction project has costs beyond the direct costs and the contractor wants to earn a profit. To cover these costs he must have an appropriate markup. The contractor must give consideration to many variables and circumstances to calculate the best markup for a construction project. To determine the best markup percentage on costs, the contractor should consider his indirect costs, overhead, taxes, and final profit desired.
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.
For any company, profit is based on the risk reward concept. With construction, what should be the profit (reward) given the risk? What is a reasonable expectation given the industry and the particular business? There is no single correct answer. The construction industry is divided into several significant branches. This article is focused on the residential contractor.
From the new home builder to the re-modeler, a reasonable profit given the risk should be no less than 9% AND this is net after a reasonable salary to the owner for his management role. This is the take home or actual bottom line profit; the amount after taxes. How do you derive such a figure? How do you determine the markup on the construction project to end up with this profit?
