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Old 02-26-2011, 09:46 AM   #31
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In fact, given that the profit for construction is around 4%, he may have actually paid well more than the profit expected.
How do you determine "profit" ?

For example, If it cost me $3,000 in materials to build a barn, and the customer pays me $10,000, the profit is more like 70%..

I'm just trying to understand, are you factoring in profit after paying yourself a normal salary? If so, then I can see $500 per day allocated for that, say 4 days at $2000, but we're still at 50%.

-- Joe

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Old 02-26-2011, 07:14 PM   #32
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anesthes;598313]How do you determine "profit" ?

For example, If it cost me $3,000 in materials to build a barn, and the customer pays me $10,000, the profit is more like 70%..
you don't earn money? You are confusing personal labor and business income. I was speaking to profit for the business. ]

as well, your labor is not profit, even in the situation you suggest. You have to remove what you paid you before you can determine what the job profited. Profit is income over and above expenses and your labor is an expense.

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I'm just trying to understand, are you factoring in profit after paying yourself a normal salary? If so, then I can see $500 per day allocated for that, say 4 days at $2000, but we're still at 50%.
profit is money free and clear to the business.
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Old 02-26-2011, 07:34 PM   #33
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you don't earn money? You are confusing personal labor and business income. I was speaking to profit for the business. ]

as well, your labor is not profit, even in the situation you suggest. You have to remove what you paid you before you can determine what the job profited. Profit is income over and above expenses and your labor is an expense.

profit is money free and clear to the business.
I guess. I'm not in the construction business, and I have a CFO who handles the financial.

But when I did own a race shop, essentially "profit" to me was anything I made after the rent, and electricity was paid, and any tool or equipment that was purchased. I didn't have any employees or anything like that.

Now, using my race shop scenario, you could attribute that to construction. For example, a friend of mine had a garage built and paid $15,000. When I did all the math and figured out materials, etc I could have built it at cost for around $7,500. I figured one guy taking his time was about 10 days of work, which at $500 a day is $5,000.

Now the guy who built it was a one man guy working out of a pickup truck. To him, anything after the materials cost was profit. His tools consisted of a few ladders, a few saws, a tape measure and a pencil. I suppose you could account for things like fuel costs, replacement saw blades, etc as business expenses but at the end of the day he made a killing on that garage. And all the guy does is garages and sheds.


-- Joe
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Old 02-26-2011, 07:47 PM   #34
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so, what did he use to buy the truck, ladders, and various tools? That is overhead. Insurance, licensing, having an accountant babysit the books and do your taxes. Those are all costs the take out of the profit.

and at then end of the year, I'm betting he turned the "profit" in as income.
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Old 02-26-2011, 08:43 PM   #35
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Deleted comment, cause I realized I've gotten a bit snarky tonight. Damn husband....
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Old 02-26-2011, 09:33 PM   #36
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Now the guy who built it was a one man guy working out of a pickup truck. To him, anything after the materials cost was profit. His tools consisted of a few ladders, a few saws, a tape measure and a pencil. I suppose you could account for things like fuel costs, replacement saw blades, etc as business expenses but at the end of the day he made a killing on that garage. And all the guy does is garages and sheds.


-- Joe
I love when people think like this

I don't know how somebody who used to own a shop can think like that... well maybe I could understand why you don't have a shop anymore if you can't understand OH&P...
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Old 02-27-2011, 08:02 AM   #37
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I love when people think like this

I don't know how somebody who used to own a shop can think like that... well maybe I could understand why you don't have a shop anymore if you can't understand OH&P...
I don't know what to tell you. Perhaps the construction industry is different.

The race shop made me lots of money for lots of years, but when the economy took a down turn people didn't have money to build race cars - at least this part of the country. Which is fine by me.

The business I'm in now we bring in about 40 million a year. After all the "bills are paid", employees, etc I know our profit is around 5 million based on investor statements and profit sharing. So that's like what, 11-12%.

I'm not debating the overhead, I'm questioning the 4% "average".

-- Joe
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Old 02-27-2011, 12:42 PM   #38
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I don't know what to tell you. Perhaps the construction industry is different.

The race shop made me lots of money for lots of years, but when the economy took a down turn people didn't have money to build race cars - at least this part of the country. Which is fine by me.

The business I'm in now we bring in about 40 million a year. After all the "bills are paid", employees, etc I know our profit is around 5 million based on investor statements and profit sharing. So that's like what, 11-12%.

I'm not debating the overhead, I'm questioning the 4% "average".

-- Joe
Most guys in this industry that I know, that know what they're doing aim for 10% net, but I think more realistically end up with 7-8% if they're lucky

It's a tough business and probably has the most unrealistic customer expectations because they just don't understand how things work and what things cost.

They watch television shows that tell them a $20,000 job costs $3,000 and can be done in 2 days. Well yeah, if you don't count the labour for the crew of 30 people working overnight and all day and you only count the cheap bargain items you picked up and not even any consumables that are used, sure...

That's why I get upset at someone who sits down with a calculator and thinks they know how to calculate the cost of a project. Last time that happened to me I was talking to a guy about building a deck. When I told him the deck he wanted would be at least $8,000 he almost fell over, then got angry. He said he calculated the material to be $700, and thought we should build the deck for no more than $2000. I can tell you right now that the materials for that deck would have been well over $2000. Had to decline that job. I don't like paying to build a deck for somebody I don't even know.

Last edited by fungku; 02-27-2011 at 12:56 PM.
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Old 02-27-2011, 01:52 PM   #39
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Most guys in this industry that I know, that know what they're doing aim for 10% net, but I think more realistically end up with 7-8% if they're lucky

It's a tough business and probably has the most unrealistic customer expectations because they just don't understand how things work and what things cost.

They watch television shows that tell them a $20,000 job costs $3,000 and can be done in 2 days. Well yeah, if you don't count the labour for the crew of 30 people working overnight and all day and you only count the cheap bargain items you picked up and not even any consumables that are used, sure...

That's why I get upset at someone who sits down with a calculator and thinks they know how to calculate the cost of a project. Last time that happened to me I was talking to a guy about building a deck. When I told him the deck he wanted would be at least $8,000 he almost fell over, then got angry. He said he calculated the material to be $700, and thought we should build the deck for no more than $2000. I can tell you right now that the materials for that deck would have been well over $2000. Had to decline that job. I don't like paying to build a deck for somebody I don't even know.
I understand what you are saying and some customers are impossible but you also have to understand things from a customers point of view. I don't really like construction work, but I like paying people even less. I started doing this because of cost reasons. When I used to get quotes on jobs like rebuilding my barn, garage, etc the quotes were very expensive, for example my barn I was quoted over $10,000 and we're talking a very small barn (36x12) and that didn't include things like a floor for the hayroom, doors, and it was with rolled roof not shingles. Same wood (2x4 16 OC), although I went upsized the rafters to a 2x8 and 6pitch where the contractors were quoting 2x6 5 pitch. The whole thing cost me $2800 in materials, plus the $40 for the skill saw, $130 for a framing nail gun. I ended up buying a second ladder for $100, and a few other things to the tune of maybe another $200. So let's round up and say the whole thing cost me $3500 out of pocket including "expenses", and it took me 6 Saturdays to build including tearing down and disposing of the old barn which was NOT included in the quotes I got, AND trucking in fill + stonedust, compacting, etc. Those were also extras that were not included in the quotes nor the $3500 I spent, I'm just talking the building itself.



So to me, as a "customer", it wasn't worth it to pay over $10k for something I calculated out to be around $3k. I then owned a nailing gun, ladder, and other misc carpentry tools that I used to build other things since. The addition on my home for example, which is 700 square feet. My cost was $26,000 which included paying a guy to do and pour the full foundation, etc. Most contractors wanted between $55,000 and $60,000 to do it to the SAME SPECS.

Now, I'm aware that a contractor must pay insurance, workers comp, maintain tools and trucks, etc. I understand that. But once again, as a customer I saved $25+ thousand dollars.


The below pictures were taking prior to trimming the shingles and paint, obviously.

-- Joe
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