# Are we on the correct path for a profit in remodeling?



## MouseB (Sep 16, 2013)

We are a remodeling company in our 4th year of business (started at the end of 2009). I am starting to question if this can truly be a profitable business we have made. Can someone from this industry tell me if we are doing something horrifically wrong? Because we haven't broken even yet and I can't put any more money into this business. We have grown every year, learned a lot (and lost a lot because of it), and made a very good base of customers that are giving us pretty consistent referrals. But if this is doomed to fail, then I'd like to have any insight on that. We are not ready to give up, but also not so naive to know there may be something we are not seeing that could be hindering this company. If anyone can tell us that this amount of losses is crazy and we should get out now, that could help. If there are people out there that have had similar losses and made their way out of it, that could help, too. Here are some numbers for us:

2 Partners of company. Gross profit is meant to cover all overhead and partner's salaries.

Year 1: $265K rev, $64K gross profit (24%)No employees, just the 2 of us doing the labor. 
Our goal was 40% gross, but my partner got injured and we had to hire out his work. Major hit to the pocket book. 
-This was a loss of 32K for the year

Year 2: $529K rev, $101K Gross profit (19%) 1 employee. 
Our goal was 30% gross, but we had large cost overruns on big projects.
-This was a loss of 56K for the year

Year 3: $552K rev, $120K Gross (22%) 2 employees.
Our goal was 23%, but with a revenue of $720K. Didn't make rev goals because we couldn't produce enough fast enough and we were naive to think we could grow as fast as we did from year 1-2
-This was a loss of 32K

Year 4 (current): Goals were: $650K with 26% gross profit giving a 2% net profit after we are paid.
-We are on track to do $815K with 3 employees and pulling 19% gross. 
-This will be a loss of $14K

Obviously, we don't price our projects with a 19% margin (except for projects over $150K). We have margins around 20-30% depending on the project. But we don't pull that off all of the time because of overruns (a very frustrating thing, I might add).

Employees get paid holidays, workers comp, and 1 week paid vacation. Obviously, employees and their benefits/taxes are expensive. But we want to run this company legitimately. Is this injuring us??

Are our overhead costs too high?? 2 partner's salaries with all overhead costs ranging around $160K? 

Our typical project size is $30-40K with some $100K+ projects. We try to always have 2 projects going on at once to keep our employees/crews busy, with an occasional 3rd project we will sub out. 

Any insight from veterans in this industry would really help!


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## EthanB (Sep 28, 2011)

The rate at which your sales are increasing hardly indicates that you are doomed to fail but it sounds like you need a long sit down to review expenses and job costs and determine where you're overspending(if anywhere). If you aren't overspending then you aren't charging enough. Most companies do a little bit of both.

It's better to lose some jobs that you can't make your profit on.

It is very hard for us to just look at the numbers without knowing exactly what you are doing yourselves and what you are subbing out. There are some areas of remodeling where you can have 70% gross and others where you can only get 10%. It's a very diverse field.


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## KAP (Feb 19, 2011)

I'd like to know how you have a GROSS profit in the positive and still have a loss... 

Some calculation is off...


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## MouseB (Sep 16, 2013)

Gross profit is before we pay our overhead and Partner salaries.

Gross profit = revenue-COGS (cost of goods sold) 

COGS is all labor, subs, and materials needed to complete the job.

Overhead is cost to run the business (ie. licenses, insurance, cell phones, utilities, etc.) 

While our Gross profit may have been 100K, if our overhead and salaries is 150K, it is a NET loss of 50K.

Does that make more sense? I know a lot of people seem to have different use of terms on this and I hope I have them correct.

Thanks,


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## Jeff G (Apr 5, 2010)

My advise would be to first purchase Micheal Stone's excellent book: Markup & Profit: A Contractor's Guide, Revisited

Your estimating processes can either make you or break you. In his book he shows you how to establish all specific job costs (labor, materials, etc, including your own wages), then simply multiply this figure (labor and materials) by a specific number (e.g., 1.48) to arrive at your selling price. There is a formula (very simple) he shows you to calculate your specific number based upon such things as all non-specific job costs (those things that cannot be associated with a specific job), all overhead costs of staying in business (which vary from on company to another, and includes everything from insurances, office supplies, phone bills, etc, which would be anything that cannot relate to a specific job cost, and is required in order for you to stay in business), and your net profit, as well as your salary (if you take one) in order to arrive at your markup and profit number.

For example, if your number (which would be different than anyone else in the business) was, say, 1.56, and this is what you would have to get in order to stay in business based upon all overhead and profit you've calculated or projected, you merely multiply the labor and materials total by 1.56, and viola, you have your set price. Any deviation from this price will result in having to either cut back on something, or do without; ergo, there can be no price reductions from this number. It is what it is, and calculated precisely for your business. Once you figure out your specific number, then you have it whipped. All you do is calculate the job costs, then multiply by your number. Easy, peasy, Japaneasy.


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## mk5065 (May 25, 2009)

Maybe you should talk to some sort of buisness advisor. Your sales are very similar to some of my previous years but I made more in profits. The only thing I can say is I have changed the size of the jobs I do. I don't do 100 k jobs and 30-40k is a larger job for us. I noticed that when I did the bigger jobs I made a lot less money. Now we do a ton of smaller jobs and it really pays off. It's more scheduling and paperwork but its worth it. We have 3-5 guys working at all times and I jump in when needed. With doing smaller jobs there is more running around and prep for the next job since you will need to get on it next week! As for the employee thing I don't pay holidays or sick time. If they need healthcare it comes out of their pay. I just pay them a good rate and give bonuses when I can. It's hard when you try to run this like a real company but if your not making money then you obviously can't afford to be that way. Just try to take care of them the best you can afford to. When you are making money then give them more. Once you set sick days and holidays you can never go back. This buisness is not for the typical employee mindset. Good luck and keep trucking along. It took me 10 years to see positive numbers. Your company is young. Don't be afraid to charge and do nothing for free unless it is someone that truly needs it! My wife kept track for 3 months of extras that I did not charge for one year and it was close to 10k. I couldn't believe it and it changed my whole attitude on charging.

Remember it is not the size of the job or how much your sales are that matters it's how much you make when it's all said and done. If you can make twice as muck money installing doors as you can building large additions then I guess doors it is. Stick to what you can make money at and weigh out what is more profitable , my crew or a sub? I've noticed that my guys should be cutting wood, tile, and general repair work. 2,of them are excellent painters but I can't make money when they paint so now no painting! 

Also don't feel bad to make money on your material. Markup your cabinets, doors, fixtures etc. If not you will lose!! My granite company gives me 15% on each counter. I never did this in my beginning and its amazing how much it helps. All the successful companies do it. 

At least you are looking at your numbers. That's the first step!


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## KAP (Feb 19, 2011)

MouseB said:


> Gross profit is before we pay our overhead and Partner salaries.


This is part of your problem right there... your salary DOES NOT come out of PROFIT...

*L*abor 
*O*verhead 
*M*aterials 
*P*rofit

This tells me you aren't charging enough... Some calculate their salary as part of the Overhead and some lump it into the Labor, but your salary does NOT come from the Profit... The Profit is what you pay your business to HAVE capital reserves, emergency fund, etc. that you can absorb overruns, miscalculations, etc. for revenue you can't recoup for same...

Labor and Overhead are broken down and calculated to come up with an hourly cost which is used in estimating (which INCLUDES your loaded salary). Until you have a strong handle on estimated hours it takes to complete a job, I would encourage you to multiple this number by a factor of 1.25 ... Your Materials are above and beyond this and should include costs of acquisition, handling, delivery and mark-up... Your Profit is what goes on top of this total... 

The Profit is NOT what you pay yourselves after everything else has been paid...


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## CompleteW&D (May 28, 2011)

As I'm trying to wrap my head around your situation, and I may be wrong in my assumption, but to have two partners with set salaries and the afore mentioned expenses, is a mistake for a company just getting started.

You two, if you are both doing the majority of the labor, then you need to pay yourselves as laborers and then take a percentage of the net at the end of the year. That way, you're not upside down before you even sell a job. You will also be able to control your expenses better and know exactly where you stand at any given time during the year.

On another note, your sales numbers seem quite good. But, your GP percentage seems a little low to me. I firmly believe you need to be closer to 40% after COGS to be at a point where you can continue to invest in the company long term. But that's OUR number and may not be yours. But, I'll bet if you were closer to 40% after COGS, you'd be a LOT happier right now.

Maybe it's time to stop being too "nice" when it comes to your pricing structure and start being a little more hard core business person. If you can't make the type of $$$ on a job that allows you to earn a comfortable living, while at the same time re-investing in the long term health of your company, it's time to start saying no. 

Less jobs at a higher profit margin will make things a LOT more fun.... than all kinds of jobs at ultra thin or no margins at all.


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## MouseB (Sep 16, 2013)

Thank you, EthanB, for the response. 

Can you recommend a good resource to go to about our numbers? I analyze the crap out of them, but I know another set of eyes on it would be extremely helpful. 

Unfortunately, our bookkeeper isn't much help because they don't understand our industry.

It is true, however, that in our first year of business we very much underbid projects. With the current leads coming in, we are able to go after the better and more profitable projects. Many times our clients will let us know that we came 10K above our competition, but they still went with us. So, I have a feeling that we are in a good range on selling. Although, I have decided to increase our margins for the next quarter to see if I can continue selling at the higher prices. 

Our business expenses (ie overhead), almost always come in perfectly in budget. We don't overspend in that category. 

Where we do go over budget is in 2 places:

1. Project overruns: labor overruns (punch list killers) or mistakes that need to be redone. We used to underbid on our subs (like not putting enough in the budget for the electrician), but those are very few and far between nowadays. It really comes down to punch lists and fixing things.

2. Project timeline overruns: As you can imagine, if our overhead/Partner salaries are around $160K for the year, then that equates to about $600/day (5 days a week working week). If our crew does not get a job done on time that is budgeted to pay us for 4 weeks and they take 6, it's 6K in losses to our company. 
-Sometimes, this isn't even the fault of the crew. We have had subs come in and drag their feet and waste a week or 2 on our projects. How do you make up that money??

Number 2 is probably our worst of the 2. 

As far as what we do and what we sub:
-We sub out elec, plumb, drywall, granite, and hvac. We do all carpentry, framing, flooring, tile, cabinetry, and finish work. (our employees do). We put the same margins on everything across the board 20-30% depending on project size)
-I primarily work in the office and on sales, so my salary comes 100% from our profit margins. 
-My partner recently tried to pull out of the field to be more of a project manager to our crews, but it didn't go well and we didn't do enough revenue to support it, so he leads one of the crews as a working Lead Carpenter. His labor costs from the job will go towards his salary. 

Before the recession, we used to only do kitchens (under another company not owned by us). It was 1 lead carpenter to each kitchen remodel and they would hire a helper when needed. This wasn't very often, because that would mean the lead carpenter would have to give money out of the labor to give to a helper which they normally wanted for themselves. 10-15% would be allocated to the carpenter. So for a 50K kitchen that takes about 5 weeks, they would get about $6K, about 60K a year minus helper costs. 

What I worry about now is that we still have about 15% for labor on our projects, but now we have full time helpers and lead carpenters. Yet I don't feel they can get the jobs done twice as fast. Is a full time crew of 2 excessive for each project? Am I crazy feeling that they aren't getting things done faster as intended? 

Keep in mind these percentages are AVERAGES as each remodel is unique. 

I just can't figure out what we are doing wrong. I hope some of that info helps.


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## Spencer (Jul 6, 2005)

You must have had some deep pockets to start out with to stand losing that kind of money. Wow...

You came to the right place for advice. There are some very good business men here. Welcome. :thumbsup:


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## MouseB (Sep 16, 2013)

Spencer, yes, unfortunately we had an inheritance we have been drawing off of. I say unfortunately because I would rather have her in my life than the money. We also have a few houses we made smart investments on many years ago. 

But I agree, everyone's responses have been extremely helpful. 

mk5065, this has been a lesson we continue to learn over our years as we constantly try to be "nice" and inherently lose money doing it. Although we are getting MUCH better, it's still a struggle. 

I heard from another contractor the other day that he puts in a certain percentage line item (about 5%) of the overall project for overruns and shows it to the client. He says this is HIS money first, and then if he doesn't use it, it it the client's to use for change orders/upgrades. For example, if he misses a flue pipe that needs extending with a new addition roof, he can take from this pile.

The way we do it now is we eat a cost if we didn't catch during a bid. Does anyone else do what this contractor above mentioned does? And can you sell it without problems?

Are we also crazy to eat the cost on a miss like that, or is that typical? 

CompleteW&D, Thanks for that insight. Although we love doing additions, maybe the profitability of kitchens is a better option. Do you think specializing is the best way to be profitable? Or do a lot of GCs make a good living doing the range of everything remodel?

Thanks again for all of the responses. They are so very helpful!!


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## asevereid (Jan 30, 2012)

Subscribed for sure.


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## CompleteW&D (May 28, 2011)

> CompleteW&D, Thanks for that insight. Although we love doing additions, maybe the profitability of kitchens is a better option. Do you think specializing is the best way to be profitable? Or do a lot of GCs make a good living doing the range of everything remodel?


I can't answer that. We don't do major remodels like Kitchens, Baths or Room Additions. Our projects are strictly limited to exterior work (windows, siding, soffits, fascia, gutters and entry doors) where I have a good handle on our costs before I ever quote a project. 

Do I miss things once in a while, sure. And to answer a question you posed to someone else.... when I miss something, it's my nickel that gets spent. But, that's just me. I'm not saying everyone should do that.


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## skillman (Sep 23, 2011)

Where is your location and market place .


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## CO762 (Feb 22, 2010)

KAP said:


> I'd like to know how you have a GROSS profit in the positive and still have a loss...


This is where hammer swingers never get ahead, and also why homeowners can't understand how someone can charge so much.

Gross Income: The check(s) that you got.

Less expenses, wages, equipment, material, portional fees, liability insurance, unemployment insurance (if needed), workers comp insurance (if needed), fuel, rental for shop/etc.

(Been a while since I broke it down), but gross income, less expenses leads to NOI (net operating income). I think this is what's called 'adjusted gross income', but never was a bean counter (CPA). There are other deductions below the NOI on a cash flow, but as I mumbled, it's been a while. For what the self employed, non bean counter users need to remember is:
What you get
Less what it (all) costs
is what you made on that job. 
On that amount is what you'll be taxed (taxable income).

Big Evil corporation PBS/NPR, or any evil rich thing can make a hundred million dollars a year. But if you subtract out everything to get their taxable income, or return on investment (for you people that have any money in anything for your retirement/investments), you'd be amazed at how low the percentage returns are for your earned dollar invested in that. 

Enough blabbering. Lil goth teen chick just walked by the front of this house. Little while later, saw her across the street going the other way, doing the same thing, putting local ad papers on people's doorsteps. Fast food/convenience/retail is all the same. Come to think of it, the only time I see non americans working here is when roofing salesmen come through and their guys are all mexicans.
Weird.


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## CO762 (Feb 22, 2010)

Spencer said:


> You must have had some deep pockets to start out with to stand losing that kind of money.


Standard business model is/was when you start a business, you won't make any money for the first 3-4 years. Not to be confused with having a check in your hands.....  :laughing:


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## VinylHanger (Jul 14, 2011)

If you are losing money, lower your salaries until you are making enough to pay it. I wonder how many of us starting out pull a blanket 80,000 a year out of our companies. I know I don't. 

I'm a sole proprietor, so I buy the equipment needed, pay the expenses and over head and then what is left is mine. Not a perfect system, but it works for now. I couldn't imagine having a huge salary steadily coming out before I even earn it. Pulling from the inheritance, just to make sure you are making a good living is a false sense of profitability. You should be making the money you are spending.

Growing you business with outside money is a hard way to go. Once it runs out and you aren't making an actual profit, things will get pretty tight. It looks like your salaries should be 20-30,000 a year less each and you would be on track. I think your idea of your pay is pretty unrealistic when starting out. Your numbers are showing this. 

Could you run the business without the inheritance money?


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## VinylHanger (Jul 14, 2011)

CO762 said:


> Standard business model is/was when you start a business, you won't make any money for the first 3-4 years. Not to be confused with having a check in your hands.....  :laughing:


I have checks, I must have money? :laughing:


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## greg24k (May 19, 2007)

MouseB said:


> We are a remodeling company in our 4th year of business (started at the end of 2009). I am starting to question if this can truly be a profitable business we have made. Can someone from this industry tell me if we are doing something horrifically wrong? Because we haven't broken even yet and I can't put any more money into this business. We have grown every year, learned a lot (and lost a lot because of it), and made a very good base of customers that are giving us pretty consistent referrals. But if this is doomed to fail, then I'd like to have any insight on that. We are not ready to give up, but also not so naive to know there may be something we are not seeing that could be hindering this company. If anyone can tell us that this amount of losses is crazy and we should get out now, that could help. If there are people out there that have had similar losses and made their way out of it, that could help, too. Here are some numbers for us:
> 
> 2 Partners of company. Gross profit is meant to cover all overhead and partner's salaries.
> 
> ...


IMO the reason you're losing money is because your gross Job cost is calculated wrong. 
How do you come up to your job cost ? 
Material+ overhead % + Profit % = Total Job Cost? if Yes, what is the % for overhead and profit on each job?


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## ohiohomedoctor (Dec 26, 2010)

If your paying yourself $80k a year and slated to loose $14k by your numbers you really made $72k without showing a business profit. This is good for the allowable time the govt will tolerate you loosing money. 

I'd say you might consider paying yourselves $60k for the year and splitting an investment back into the company preferably towards marketing geared towards attracting clients in your most profitable task ie kitchen remodeling.

I wish I would have made $60k/year in my first four years in business...


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## mrcharles (Sep 27, 2011)

Let's face the reality.... They are selling for bad margins (I know this because their 20-30% doesn't include their operating costs), and they have employees they are paying benefits who are not meeting the estimated labor costs. This is probably due large in part to underestimated labor costs. 

You should try and run a job completely subcontracted and see how that goes. When you have employees you are forced to take work just to make payroll. Write very detailed subcontract work scopes and keep these guys accountable. 

Also you should have at least a 5% contingency in your estimates, but this isn't a number broken out for your customers to see.... It is your money to spend and/or keep. 

If you read any of the articles in remodeling magazine they insist that remodeling needs to operate at about a 50% markup... Very rarely have I been able to realize this markup, but 40% can and does happen.


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## Morbidzero (Aug 5, 2013)

mk5065 said:


> If you are having trouble getting the jobs done quickly due to punch lists then try doing smaller jobs. I can't tell you how much this has worked for me.
> 
> What types of hours is a typical day for your crew?


Typical for us is 8hrs days with 40hr week.


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## Spencer (Jul 6, 2005)

mrcharles said:


> Let's face the reality.... They are selling for bad margins (I know this because their 20-30% doesn't include their operating costs), and they have employees they are paying benefits who are not meeting the estimated labor costs. This is probably due large in part to underestimated labor costs.
> 
> You should try and run a job completely subcontracted and see how that goes. When you have employees you are forced to take work just to make payroll. Write very detailed subcontract work scopes and keep these guys accountable.
> 
> ...


Could you define markup for me just to make sure I'm following? What are you multiplying this 40% by? Just learning...


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## Morbidzero (Aug 5, 2013)

mrcharles said:


> Let's face the reality.... They are selling for bad margins (I know this because their 20-30% doesn't include their operating costs), and they have employees they are paying benefits who are not meeting the estimated labor costs. This is probably due large in part to underestimated labor costs.
> 
> You should try and run a job completely subcontracted and see how that goes. When you have employees you are forced to take work just to make payroll. Write very detailed subcontract work scopes and keep these guys accountable.
> 
> ...


Charles can you please give an example of how you would charge for any set percentage as a markup as i have seen to many times people use it incorrectly.


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## MouseB (Sep 16, 2013)

Morbidzero said:


> Mouse is your partner being paid out of the overhead or is he being accounted into the bid as any other employee?


For the first 3 years he was in the field and paid out of the bid/labor. Then, earlier this year, when our business seemed to boom, he pulled out when we ran the numbers that hitting $850K for the year would carry his salary in the margins as a project manager. BIG MISTAKE. Unfortunately, the projects ran less efficiently with his attention divided over 3-4 projects and it confused our crews. 

We are recently back to him in the field running one of our crews and being paid out of the labor costs (just like we would pay a lead). The projected numbers look better with this scenario (obviously), and it should give our crews a more focused approach on their work as they only work on 1 project at a time.


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## Jaws (Dec 20, 2010)

You the husband, wife, son , father, daughter or sibling of the other partner?


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## MouseB (Sep 16, 2013)

mrcharles said:


> Let's face the reality.... They are selling for bad margins (I know this because their 20-30% doesn't include their operating costs), and they have employees they are paying benefits who are not meeting the estimated labor costs. This is probably due large in part to underestimated labor costs.
> 
> You should try and run a job completely subcontracted and see how that goes. When you have employees you are forced to take work just to make payroll. Write very detailed subcontract work scopes and keep these guys accountable.
> 
> ...


First, just to clarify: you are typically "able to realize a 40% markup"? So, is that about a 28.5% margin, correct? 

While I agree after these many discussions that our margins may be too low, our current margins of 20-30% do, in fact, include our operating costs. We are on track to complete $815K this year. If we had pulled off our intended 25% margin for that, we calculated that to be almost $204K. That would have covered our salaries, our overhead (operating costs), and a NET profit of 5% for the year. Unfortunately, we are only pulling 19% for the whole year. Hence the loss. 

As far as the contingency reserve, where do you hide this in your bids? Just added to every line item? 

Thanks for the idea to subcontract a whole job. I believe we will try this out on a job next month and see how it goes. Our decision for employees has always been for the best control and scheduling, but if it is losing us money, it's not worth it.

And to the many people who have assumed we are doing our calculations wrong (mark up vs margin), I assure you, we are doing it correctly by dividing by 1-.25 and not multiplying by 1.25 when adding to labor and material. I very much appreciate the point, though. It seems that could be a very easy and costly mistake. 

Although, I think I may be making several other easy/costly mistakes anyways.


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## mrcharles (Sep 27, 2011)

I must extend some congratulations to you for A: Obviously being charismatic and personable to increase your sales volume very successfully. And B: to recognize you need to change your business operations. 

The two things I would make sure you do is figure out a percentage that can Capture your operating cost.....A very basic way would be to total your incidental expenses, fuel costs, insurance costs, office for the year and then divide it by how many working days there are in a year.... You can then plug this number to how many days a job will take. 

The second thing I would do is make sure you are truly understanding markup and margin. This video does a great job of showing how a misunderstanding of the two is leaving money on the table on every job. 

http://www.youtube.com/watch?v=BCo5i1mMO3E



With respect to my earlier suggestion to subcontract an entire job.....Remember you get what you pay for.... I do my do diligence hiring subs. The cheapest guy usually ends up costing the most in the long run.


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## CO762 (Feb 22, 2010)

Agreed, it is a good thread--and thank those in power here for not burying it in the business section. 

So, to continue the expanding, general discussion:
1. How do the t/m guys handle all this stuff?
Are you an hourly employee of yourself, yet not paying yourself what any business would have to (by law)? Or just "what would some business pay me to do this by the hour?"

2. All the people reading this that use contractors, are you starting to realize how much actually goes into your remod?

Did I read somewhere in this thread where someone "made" over a half a million dollars? Wow. He should retire. Wait, yet his evil business' profit was only 5%? With such a low profit, he should can all his employees, sell all his business goods at auction, then invest his monies somewhere else because, well, every union retirement/pension plan gets more than a 5% return or the taxpaying suckers bail them out. Then let some struggling working man/woman come and do that job at a rate more acceptable to your hourly employee worldview.....

Yet again, good thread.


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## CarpenterSFO (Dec 12, 2012)

For some reason I have a pretty harsh reaction to all this. I'm skeptical that you're running the business properly on a day to day basis. A business that small (4 or 5, including 2 owners) needs to have everyone in the field, including the owners, every day. Maybe not every day with bags on, but there's plenty else to do in the field. 

Punch-list nightmares? There is no such thing - the work that is in-scope is known by you and your crew, and you grind through it, non-stop. You have to push, push, push, on the schedule, because employees won't, because they don't give a damn about the schedule. The items that aren't in-scope become paid change orders - every single one. If you think the owner is dragging out the changes, you need to charge lots more. At the end, you make owners pay exorbitantly, or the trip expenses will kill you.

Forget about paid holidays and vacation pay. A small business that is losing money can't do that. You pay your guys hourly, no salaries. Put your big boy pants on, change the deal right now, and if your employees don't like it, tell them to eff off.

Most of the time, these threads come from the partner with the bags on, and we tell him to get rid of the leech in the office. For a contracting business that size, the sales/business partner spends 2 hours a day doing that stuff, 6-7 hours a day in the field, then some more hours every night doing the business stuff.

Absolutely, understand the accounting, but you better get lean and mean about things day to day first.


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## Jaws (Dec 20, 2010)

CarpenterSFO said:


> For some reason I have a pretty harsh reaction to all this. I'm skeptical that you're running the business properly on a day to day basis. A business that small (4 or 5, including 2 owners) needs to have everyone in the field, including the owners, every day. Maybe not every day with bags on, but there's plenty else to do in the field.
> 
> Punch-list nightmares? There is no such thing - the work that is in-scope is known by you and your crew, and you grind through it, non-stop. You have to push, push, push, on the schedule, because employees won't, because they don't give a damn about the schedule. The items that aren't in-scope become paid change orders - every single one. If you think the owner is dragging out the changes, you need to charge lots more. At the end, you make owners pay exorbitantly, or the trip expenses will kill you.
> 
> ...


This is spot on :thumbsup:

The punch list raised my eyebrows too. I have several buddies who are also builders who ***** constantly about the punch list nightmares. This is for two reasons, namely, they arent present at each job everyday to make lists of chit that needs to be addressed , fixed, brought to the clients attention, the leads attention, materials needed for the next day and week. Also, a few of those guys dont want to do ANY hands on themselves, one doesn't have the skills :laughing::no: Give me a break. Two turn out great products, but it is usually a nightmare and they cant do remodeling efficiently to save their life. 

The days off is probably not smart right now. I think its important to take care of your hands, and we have paid vacation for our two lead guys (one is salary) and the crew gets holidays. We didnt always do that, and if chit got slow I would probably chit can it. Just dont it the week of a holiday, then you look like a dick. 

Like CarpenterSFO said, run lean and mean. Relentlessly prioritize , make lists constantly, push those hands. Be efficient at scheduling, keep holes out of the schedule and make sure you finish on time. The no holes in the schedule actually makes you stay on schedule, which improves your rep. :thumbsup:


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## Chad McDade (Oct 14, 2012)

It sounds like a lot of your problems stem from the work being done in the field - the quality (if you are have to redo things) and overlooking small details that create big punch lists. Have you seriously evaluated your field staff? I'm not trying to say that your guys aren't qualified but I know a lot of guys who are excellent carpenters but couldn't be an efficient remodeler if their life depended on it.


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## BlueRidgeGreen (Apr 21, 2012)

Conclusion:

Forget about multipliers........get your hands on some pliers.


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## CompleteW&D (May 28, 2011)

> Thanks for the idea to subcontract a whole job. I believe we will try this out on a job next month and see how it goes. Our decision for employees has always been for the best control and scheduling, but if it is losing us money, it's not worth it.


Good subs can be a godsend for efficiency. They are businessmen like you. They are depending on themselves to finish the job on time and without punch lists. The more efficient and accurate they are on your job, the quicker they get paid and can move on to the next. 

An employee doesn't have the experience of a skilled sub, very likely doesn't have the, craftsmanship and attention to detail nor the drive to be efficient and smart with his time. An hourly laborer knows one thing, he shows up and gets paid for a 40 hour week. You spend more time "supervising," constantly training and correcting the mistakes of a laborer. than you ever would with a skilled, sub tradesman.

A great sub is worth their weight in gold IMHO.


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## Jaws (Dec 20, 2010)

CompleteW&D said:


> Good subs can be a godsend for efficiency. They are businessmen like you. They are depending on themselves to finish the job on time and without punch lists. The more efficient and accurate they are on your job, the quicker they get paid and can move on to the next.
> 
> An employee doesn't have the experience of a skilled sub, very likely doesn't have the, craftsmanship and attention to detail nor the drive to be efficient and smart with his time. An hourly laborer knows one thing, he shows up and gets paid for a 40 hour week. You spend more time "supervising," constantly training and correcting the mistakes of a laborer. than you ever would with a skilled, sub tradesman.
> 
> A great sub is worth their weight in gold IMHO.


Two things: 

You have had some bad hands if the above is true for you. My carpenters are better than any sub I've ever hired and their craftsmanship is better because they are not in rush to get to the next job. The apprentice level guys, not yet, but they are learning and are good laborers.

I do like using good subs though. Last year and this year I have had a half dozen jobs I subbed everything on, because of time constraints in the schedule and having a lot going on. It went well for me because I still managed the site and the trades properly, I didnt just check in every now and again, I still made my lists and stayed on top of stuff. The subs (especially finish carpenters, painters and drywallers) probably felt like I was a little too picky, but I could give two chits. You want your check it will be done this way. Should of read the scope and tolerances I sent you. 

Thing is, I made more money. I didnt make as much on those jobs, just my GC mark up, but the other jobs my guys were doing I was making money on the labor and my GC mark up on those jobs. As long as your able to run all of them efficiently and well, and provide good face time to your clients, this is a money making way of doing it. A mix of subs and crew.

Just have to be busy enough to need both :laughing: Easier said than done much of the time :laughing:


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## thesidingpro (Jun 7, 2007)

Don't think revenue growth is the magic bullet.

I've found that staying true to high quality work one project after another offers happy customers, low stress, and higher dividends. You start dealing with higher volume and the odds that you fail go up tremendously. You get a field that is in shambles, a pile of office work, and customers that are disappointing for not that much more income.


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## KAP (Feb 19, 2011)

thesidingpro said:


> Don't think revenue growth is the magic bullet.


The answer is NET PROFIT growth... work backwards from there...


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## mk5065 (May 25, 2009)

Morbidzero said:


> Typical for us is 8hrs days with 40hr week.


No offense but I had a feeling that was going to be your answer. It sounds like your not getting enough done in a days work! 8 hours is nice but in this game ( at least when your co. Is so young) I think you need to set goals instead of hours. My guys work an average of 50 hours a week and sometimes more if they put in a Saturday. I work even more. Anyone in this will tell you it's no 9-5. Stop trying to run this like a store will always fail. You don't make anything if the job moves slow. Go to the job and tell everyone tomorrow morning " this is what needs to get done today". If its not done and you were being realistic then they stay late. Watch how fast they work and how much production picks up. If you don't take that approach then they will fall into the " well we are coming back tomorrow" attitude. Sometimes I even set goals that are not so realistic to pick up production and it works if you have guys that care.


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## mk5065 (May 25, 2009)

CarpenterSFO said:


> For some reason I have a pretty harsh reaction to all this. I'm skeptical that you're running the business properly on a day to day basis. A business that small (4 or 5, including 2 owners) needs to have everyone in the field, including the owners, every day. Maybe not every day with bags on, but there's plenty else to do in the field.
> 
> Punch-list nightmares? There is no such thing - the work that is in-scope is known by you and your crew, and you grind through it, non-stop. You have to push, push, push, on the schedule, because employees won't, because they don't give a damn about the schedule. The items that aren't in-scope become paid change orders - every single one. If you think the owner is dragging out the changes, you need to charge lots more. At the end, you make owners pay exorbitantly, or the trip expenses will kill you.
> 
> ...


I totally agree! Even if your placing orders, getting material in the morning, jumping in on the punch lists, etc. I work on the job usually 3 days a week. Sometimes more and sometimes less. But to not jump in and work is crazy. You sound like you are running this like your already successful. And even when you are you need to put it in. I do 40 hours in the dead of winter when things are "slow". This goes for any buisness. No one ever made it on 40 hours!! Sorry to be so harsh but I think you know this and I bet your gonna get your fire back!!


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## mk5065 (May 25, 2009)

Jaws said:


> Two things:
> 
> You have had some bad hands if the above is true for you. My carpenters are better than any sub I've ever hired and their craftsmanship is better because they are not in rush to get to the next job. The apprentice level guys, not yet, but they are learning and are good laborers.
> 
> ...


Great point!


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## BamBamm5144 (Jul 12, 2008)

I think you should try to work more for less. I always thought that was the goal.


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## mrcharles (Sep 27, 2011)

BamBamm5144 said:


> I think you should try to work more for less. I always thought that was the goal.



How's the old saying go "Running a non profit is easy, I've been doing it for years" :laughing:


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## Morbidzero (Aug 5, 2013)

mk5065 said:


> No offense but I had a feeling that was going to be your answer. It sounds like your not getting enough done in a days work! 8 hours is nice but in this game ( at least when your co. Is so young) I think you need to set goals instead of hours. My guys work an average of 50 hours a week and sometimes more if they put in a Saturday. I work even more. Anyone in this will tell you it's no 9-5. Stop trying to run this like a store will always fail. You don't make anything if the job moves slow. Go to the job and tell everyone tomorrow morning " this is what needs to get done today". If its not done and you were being realistic then they stay late. Watch how fast they work and how much production picks up. If you don't take that approach then they will fall into the " well we are coming back tomorrow" attitude. Sometimes I even set goals that are not so realistic to pick up production and it works if you have guys that care.


Maybe you should go back and reread the thread and you might realize how stupid your response was considering i am not the op:/

As for my 8/40 a week. Which is from 5am-1pm
I don't need to work longer hours to get the same amount of work done. I have recruited the best guys i can, I believe the greenest guy i have is 5yrs of being a journeyman. 

I have created something special in my area as i am the only company with production rates so high no one in my area can compete with me on a speed/quality basis as most keep hiring hacks to do the work for them as they are cheap hands. I can expect two hangers to hang 100 sheets of drywall fully screwed within 8hrs.
I can expect two framers to frame 400 ln of wall within 8hrs.
I can expect two guys to stock 1000 sheets on a job within 8hrs. Etc.
Several guys on here have said charge as much as you can until you can't sell anymore work but is any one addressing the production value plus the quality of work that is being accompanied by that cost?
As for the comment about having to work more to produce more the saying work smarter not harder always comes to mind.


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## mk5065 (May 25, 2009)

Morbidzero said:


> Maybe you should go back and reread the thread and you might realize how stupid your response was considering i am not the op:/
> 
> As for my 8/40 a week. Which is from 5am-1pm
> I don't need to work longer hours to get the same amount of work done. I have recruited the best guys i can, I believe the greenest guy i have is 5yrs of being a journeyman.
> ...


I think you missed my point. So you are saying that when you started your co. you only worked 8 hours a day? I've never heard of a new co. only put in 40 all the time. His co. Is young and they have not "made it" yet. It also sounds like you specialize in framing/ drywall. I think your comparing apples to oranges with remodels where there is a ton of little things to do. I'm sure you have a system that works but with remodeling its so much different. I have great guys and pay them well but they know sometimes we have to put it in in order to keep things moving. That's the attitude everyone I know has ever had. When you have a well oiled machine then maybe you can slow down but he does not have a well oiled machine yet!


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## Morbidzero (Aug 5, 2013)

mk5065 said:


> I think you missed my point. So you are saying that when you started your co. you only worked 8 hours a day? I've never heard of a new co. only put in 40 all the time. His co. Is young and they have not "made it" yet. It also sounds like you specialize in framing/ drywall. I think your comparing apples to oranges with remodels where there is a ton of little things to do. I'm sure you have a system that works but with remodeling its so much different. I have great guys and pay them well but they know sometimes we have to put it in in order to keep things moving. That's the attitude everyone I know has ever had. When you have a well oiled machine then maybe you can slow down but he does not have a well oiled machine yet!


Please do me a favor and go back and reread the thread before posting again. 
As for apples to oranges how does that affect what I just posted?
And when did i make the comparison?
If you have a well oiled machine why would you want to slow down?


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## mk5065 (May 25, 2009)

Morbidzero said:


> Please do me a favor and go back and reread the thread before posting again.
> As for apples to oranges how does that affect what I just posted?
> And when did i make the comparison?
> If you have a well oiled machine why would you want to slow down?


I have read it and I think I make perfect sense. I've read some of your posts and can see they your not here to help just to debate via the Internet. I get it. 

To the o.p. best of luck and I really think you have the start of a great co. Many of us have had the same problems except Morbidzero who has it all figured out.


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## Morbidzero (Aug 5, 2013)

mk5065 said:


> I have read it and I think I make perfect sense. I've read some of your posts and can see they your not here to help just to debate via the Internet. I get it.
> 
> To the o.p. best of luck and I really think you have the start of a great co. Many of us have had the same problems except Morbidzero who has it all figured out.


I'm disappointed i was expecting a real answer from you.

As for my 40hrs a week answer it was addressed to your question as to how many hrs my crew worked out in the field and i responded as a reference, these hrs were not reflecting my personal hour input. Like i said please reread the tread before posting.

As for your response for me needing to work more hrs i responded( and please keep in mind i am not the op)by saying i don't need my guys to work more hours as i have the best workers any one could ask for that keep my production rate high so i only need them to work 40 hrs a week for the most part, and even gave some examples. Like i said reread the tread.

Lastly you mention i was making a comparison, really when? I was only responding to your response by giving a reference as to how I run my company and how my guys work. Now you said apples to oranges but in truth i don't understand how what I said can not be applied to remodels or any other trade/market. If you have the best guys giving great production value and meeting the schedule i don't see why any one would need to work over 40 hrs a week unless two things happen 1. The schedule gets pushed which a is understandable it happens sometimes. 2. You don't have the production value to keep up with the schedule that you need to compensate by working overtime. Lastly you said once you have a well oiled machine that you can begin to slow down, really why? I think all new contractors are trying to get up to the point were everything is running smoothly so why slow down? Instead pick it up hire more guys for the field and office keep growing, expanding, and getting bigger. Why any one would want to be stagnant is beyond me.

Nice attempt at taking a jab at me but IMO you just made yourself look more of a fool.


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## mk5065 (May 25, 2009)

Morbidzero said:


> I'm disappointed i was expecting a real answer from you.
> 
> As for my 40hrs a week answer it was addressed to your question as to how many hrs my crew worked out in the field and i responded as a reference, these hrs were not reflecting my personal hour input. Like i said please reread the tread before posting.
> 
> ...


I must apologize to you Morbid. I read your 40 hour comment and thought they was coming from the o.p. My question was for him and you answered. I should have double checked before sending. I was wondering why you seemed so offended. I thought maybe I owed you money or something. Sorry.


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## Morbidzero (Aug 5, 2013)

mk5065 said:


> I must apologize to you Morbid. I read your 40 hour comment and thought they was coming from the o.p. My question was for him and you answered. I should have double checked before sending. I was wondering why you seemed so offended. I thought maybe I owed you money or something. Sorry.


Accepted.


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## VinylHanger (Jul 14, 2011)

Until the last few posts, this was a great thread. :whistling

Anyway, I have been thinking about this thread all week. This summer I had a large remodel job that lasted from May until September. It was priced just right for labor and materials. It was priced totally wrong from an overhead and profit stand point. I kept my bills paid, but once I get through with all the other overhead, I will have probably come out flat, or most likely a few or more grand in the hole.

This thread has brought pretty much every mistake I made to the forefront.

I am usually a one man show with help from a few contractor buddies if needed. This was larger than I normally do. I know I wasn't prepared and it cost me. Couple that with a string of smaller jobs that I had bid for a one man show, at a lower rate due to being referrals and repeat customers, and needing to bring in help and it was a disaster. Now I am going to spend the winter making up for it.

Who needs heat and food anyway. :laughing:

However, when I come out the other end of winter I will be grateful for the experience. I am starting to get the old jobs closed up and will be getting into new, more properly priced jobs in the next week or so.

Also, as has been mentioned in this thread, new scheduling and punch list procedures are in the works. Also more subs. 

I have realized that I can't do everything. Well, I can do most everything, minus floor coverings, however, it isn't efficient for me to do the drywall, the painting, the demo, the repairs, the doors, the windows, etc., etc., etc., in house. 

From now on I will be picking my projects; windows, doors, exterior paint, ie: the fun stuff and letting the faster more well equipped subs do the heavy lifting. 

The main thing I ran into was as we did all the projects ourselves, was that we also had every projects punch list. This was, to use the cliche', a nightmare. 

I would rather leave that to the subs and then my list would be a manageable one of cabinet pulls and light bulbs.

On another note, I don't see how having a guy who is basically a glorified lead carpenter, and only on one job at a time, can be a useful partner. I understand loyalty, family and friendship, so if that is the reason, then I get it. If not, there may need to be some salary adjustments.

Anyway, that is my standard late Saturday night ramble. I should go to bed, but I am sleeping in tomorrow, so I'm feeling spunky tonight. :laughing:


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## greg24k (May 19, 2007)

I think there is a simple solution here... OP loses 20,30,40k 4 years in a row... I think its time to change batteries in the calculator.

If you do 1/2 million in sales and you don't make money, something is wrong there... and only so many things can be wrong. 

1 you over extending yourselves and underbidding the jobs.
2 Someone is skimming off the top
3 Someone needs a few lessons in Math 101.

Because losing 30-40k a year, and being in minus 4 years in a roll, company's usually file for bankruptcy.


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## EthanB (Sep 28, 2011)

greg24k said:


> I think there is a simple solution here... OP loses 20,30,40k 4 years in a row... I think its time to change batteries in the calculator.
> 
> If you do 1/2 million in sales and you don't make money, something is wrong there... and only so many things can be wrong.
> 
> ...


You're right but in the case of small businesses we just short our salaries and keep plugging along. A large business would be in bankruptcy much sooner but the principals in those businesses generally aren't looking at personal bankruptcy as well, if they file.


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## fast fred (Sep 26, 2008)

greg24k said:


> I think there is a simple solution here... OP loses 20,30,40k 4 years in a row... I think its time to change batteries in the calculator.
> 
> If you do 1/2 million in sales and you don't make money, something is wrong there... and only so many things can be wrong.
> 
> ...


TOPIC IS NOW CLOSED...........................

haha ha ha ha ha ha

When I was just a boy many years ago, our boss bought a crappy compressor, it just sucked, so my partner in crime writes on it in big black magic marker letters: "usually I like fish with my lemon"

here is my 1/2 cent of completely colorado fried brain power:

denver is going off right now, the whole state of colorado is going off, it's a location of huge booms and huge busts, every day people are setting up to make millions while next week they fail

I'm guessing your driving around in a nice truck bidding on jobs, patting the bro on the back and winking at his hot wife, lining up work left and right because there is work to be had. How long have you been building? Just starting out? Would you know how to wire up a three way? what about a rafter cut? how quickly can you lay out out a roof? Set a toilet? 

contracting is a buisiness of total bs no doubt about it, you can only bs for so long before it starts costing YOU money

I run a remodeling business and gross half of what you do, it's a nice level but i'd like to get it up alittle higher, then again maybe its not the right thing to do. My bags are on almost every day of the week, I run 2-4 jobs at a time, do all the paper work, bidding, sales, and supervising myself, subbing alot of the work out to people I trust, my rates continue to go up, and I now cherry pick jobs.

every job cost is tracked I know exactly how I win and how I lose from. Which lets me bid better on the next job, you wanna know how much money in fasteners that job cost? I can tell you. Why do you have a book keeper, if your not out in the field with bags on then maybe it's time to learn how to use a spreadsheet, quickbooks, and a good ole fashion notebook. That'll cut down on your overhead, you even said your book keeper doesn't know a thing about the building industry, that just don't sound right to me

I suggest you get in that big nice truck and drive around and think about things. This is the worst business to get into thinking the money is easy, especially when you got some dooshbag guy like me right along side you ready to work harder and longer, whose been doing this for 25 years and knows a whole heck of lot more


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## Jaws (Dec 20, 2010)

greg24k said:


> I think there is a simple solution here... OP loses 20,30,40k 4 years in a row... I think its time to change batteries in the calculator.
> 
> If you do 1/2 million in sales and you don't make money, something is wrong there... and only so many things can be wrong.
> 
> ...


 4. at that size company, with 2 owners, you need to be in the field working most of the time.


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## southernyankee (Feb 21, 2011)

OP: Is your accountant worried that with 4 years of losses, you run a high risk of being audited?


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## MouseB (Sep 16, 2013)

fast fred said:


> TOPIC IS NOW
> I suggest you get in that big nice truck and drive around and think about things. This is the worst business to get into thinking the money is easy, especially when you got some dooshbag guy like me right along side you ready to work harder and longer, whose been doing this for 25 years and knows a whole heck of lot more


Ok, let's get a few things straight:

1. We don't have any nice trucks or fancy shiny things we spend our money on. We have one Ford F250 we bought for cash for $3500 with 30K miles on it 5 years ago and my personal 4-runner I purchased almost 10 years ago as our vehicles. Both were purchased before we started our company.
2. WE ARE NOT TRYING TO GET RICH QUICK! We are a very solid sales/design/build partnership that LOVE what we do and went into this business with every intention of working our asses off to build something we were proud of.
3. We easily work 60 hours a week each, if not more. Always have since we started our company. Just in the past year and a half we vowed not to work Sundays. We did that because we both hit some bad burn out last year. Although, we just worked yesterday and Saturday to paint a house to keep a project on schedule. So I'd appreciate your knocks on our work ethic to stop.
4. I think our losses for the company are being misconstrued: They are not losses to the company overall. We still pay all of the company bills, Cost of Goods Sold (labor and materials). These end up being losses to the partners' income. (which I VERY MUCH consider a loss, still) So when I say we lost 30K that year, it means between the 2 of us, we made $15K less than what we wanted to to live on. To cover this loss of income, we have used our own investments/inheritance to live on and cover the rest of our personal bills. So in my eyes, many of you simply "make less" while I call it a loss. 

And to another comment about "I think you should try to work more for less."-Then I guess that's what we are doing. And I hope that was sarcastic. Because, really, what's the point of that?

While I know there will be several people on here that will say we are just idiots and doing it wrong, I really came on this thread to see if I could get any insight on how to make this better. And if other people have made their way out of this situation to create a successful company.

As I stated before, we are hard workers who have most likely made many mistakes along the way. We simply want to find a way to remedy those so we can make this a business we can live on for many years to come and keep our 3 employees (or more some day) working full time and making money for their own families. 

We are here to build something great like many of you have. 

Ok, so now for some new questions from the other comments I have read from all of you:

So I think we have all concluded that we were too overzealous to have 1 partner in the office and the other as a project manager for our projects at $800K in revenue. We were also too ahead of ourselves when we tried to have 1 partner in the office when we had less than $600K in revenue. Both situations I think lost us the essential labor money we needed to make at that revenue level. Underbidding was also a HUGE factor in year 1.

So, the new tactic is partner #1 in the field full time and #2 on all sales/bids/designs/office work. $800K gross revenue. At that point, partner #1 makes his salary in the field and partner #2 makes salary from overhead. Net profit is then split between the partners (or better yet, reinvested back into the company) 

My question is, does that sound feasible? $800K with a gross profit margin of 20% ($160K) to cover overhead and partner #2, and a net profit on top of that of 5% (40K). So for those of you who have been speaking numbers, after you pay your subcontractors (labor) and materials on a job, 25-35% of the revenue is what you are able to take away to pay for overhead and net profit? Is this right? For those of you in the $800K range, does this go down to the lower end of 25%? Is it a sliding scale at all with margins as you go up in revenue? 

I get very confused sometimes when I speak with other contractors, because many of them tell me that they pull of "x" percentage on a job, but that's because a big chunk of that is labor that they are doing and not paying for someone else to do. So when they say they have 30% gross profit margins, it's because 15% of that comes from the labor they do in the field. Is that how some of you calculate things? Because that's not how we try to do it. Our bids are priced so that if we hire EVERYTHING out to someone else, we STILL should make 25% of the bid. 

To that end, if we hit 1M, pull 25% off the top (as many of you say you sell projects for), then it only stands to reason that neither of us would need to do any labor in the field and we could cover our overhead and salaries with $250K (MORE than enough!)

Yet, it doesn't seem to work that way. Because many of you are telling me that we need to be at 1.5M or more to have a partner in the office and 1 partially in the office. These numbers aren't making sense unless I am not understanding other people's 25-40% margins and where they are coming from.......

Needless to say, our primary goal is NOT to get both partners out of the field right now. My partner loves to build and is happiest doing that in the field. So for now, $800K rev with him in the field is our best plan of action to keep us all happy and making money. But, as I'm sure other people feel about field work, it is tough on the body and in the next 10-15 years, he would like to get away from being on his knees on a daily basis. Have other contractors been successful doing this, and what should be our goals in the next 10 years to do that?

Last question is about employees and what you feel is fair:
If one of your employees has screwed 3 major things up in the duration of 3 months, what is your plan of action after you have paid for him to fix the first 2? This is a lead of a crew, btw. Here are our thoughts on options (note that we haven't warned him of being close to being fired from the 1st 2 mistakes yet):
1. Let him know he has messed up too many times and we can't afford it anymore. We let him go 
2. Tell him he needs to fix the work on his own dime (works for free). He learns a valuable lesson
3. Give him a third warning and that the next mistake is going to be grounds for firing. 

Or if there are other options that work best?


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## Creter (Oct 13, 2009)

* Ford F250 we bought for cash for $3500 with 30K miles on it 5 years ago*

Holy cow that's a hell of a price.


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## MouseB (Sep 16, 2013)

Creter said:


> * Ford F250 we bought for cash for $3500 with 30K miles on it 5 years ago*
> 
> Holy cow that's a hell of a price.


I know it. I shopped for a long time and feel very lucky to have found it. And it has been a fantastic truck for our work vehicle! I just wanted to prove that we aren't big spenders and we constantly try to watch where our money goes.


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## Morbidzero (Aug 5, 2013)

MouseB said:


> Ok, let's get a few things straight:
> 
> 1. We don't have any nice trucks or fancy shiny things we spend our money on. We have one Ford F250 we bought for cash for $3500 with 30K miles on it 5 years ago and my personal 4-runner I purchased almost 10 years ago as our vehicles. Both were purchased before we started our company.
> 2. WE ARE NOT TRYING TO GET RICH QUICK! We are a very solid sales/design/build partnership that LOVE what we do and went into this business with every intention of working our asses off to build something we were proud of.
> ...


Sorry but i didn't finish reading all your post will do so and respond to your other questions later.

Your saying that as of now your average sales volume is 800k IMO you should figure 550-600k being your break even point so your markup should be based on this volume sold in other words once you sell 600 worth you break even and anything above this will be a profit to your company depending on your mark up. For example if your markup is 25% any dollar made past your break even point will add .25 as profit to your company so if you sell 200k past your break even point you will make 50k profit for your company.

If you have a question regarding the above said let me know.


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## Kowboy (May 7, 2009)

"If one of your employees has screwed 3 major things up in the duration of 3 months, what is your plan of action after you have paid for him to fix the first 2? This is a lead of a crew, btw. Here are our thoughts on options (note that we haven't warned him of being close to being fired from the 1st 2 mistakes yet):
1. Let him know he has messed up too many times and we can't afford it anymore. We let him go 
2. Tell him he needs to fix the work on his own dime (works for free). He learns a valuable lesson
3. Give him a third warning and that the next mistake is going to be grounds for firing."

If you haven't warned him that he is close to being fired, you're not being fair or doing your management job. What, is he supposed to guess that he's about to be fired?

Pull the guy in the office and tell him that since you should have told him he was on double-secret probation but you screwed up by not telling him, you are going to give him another chance. Or two.

Employees must be paid for all hours worked. You can't make someone work for free as a condition of employment, no matter how good you believe the reason.

Do a little introspection. How much has the guy who hired this guy cost the company? Does he deserve the chance to hire a replacement?


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## CompleteW&D (May 28, 2011)

ohiohomedoctor said:


> I figured yall missed me...
> 
> Sent from my SM-N910P using Tapatalk


Welcome back Matt.... it's GREAT to see you again. :thumbsup:


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## CompleteW&D (May 28, 2011)

BamBamm5144 said:


> He's back.


You TOO Jake! How's the new gig going?


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## ohiohomedoctor (Dec 26, 2010)

Tom M said:


> Ya know perhaps I dont always explain my reasons so well but your generation knows nothing other than the internet. Its the answer to everything.
> When I started, local advertising got you some calls and you had to earn a good reputation with referral work. Now a young guy with great computer skills looks impressive on the computer with limited construction or business skills. Good thing these forum are here to teach everyone or bail them out after they took on a project. The public no longer looks at builders as skilled as it is with immigration or TV shows so when you put it all together it makes much more difficult.
> 
> I took code classes for a license so when I get a half azzed set of plans (which most are) I could see trouble spots or missing information and prepare my bids better which also save myself a hassle with inspections. That makes me better qualified but as a result more expensive. So I can sell my knowledge but people dont look at the contractor as the like the brains of the job they look at the archy. We are mostly about cost.


The plans Ive been working with are nauseatingly detailed. 

Sent from my SM-N910P using Tapatalk


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## Jaws (Dec 20, 2010)

ohiohomedoctor said:


> The plans Ive been working with are nauseatingly detailed.
> 
> Sent from my SM-N910P using Tapatalk


Commercial? Thats one of many things i like about commercial. 

I just got a set of plans for a new home that were missing unbelievable details a few months ago, it was worse than i had seen in a while, i sent them to a couple members...... looks like i got the job, but i wish i had gotten $20.00 an hour for filling in the blanks. :laughing:


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## ohiohomedoctor (Dec 26, 2010)

100% commercial now. Im so burned on holding homeowners hands. When I reach completion markers, I submit for a draw inspection and get a check from a pre funded escrow acct. If there are any questions its on the plan. If its not on the plan, its a change order. 

Soooo much less bs...

Sent from my SM-N910P using Tapatalk


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## Jaws (Dec 20, 2010)

Tom M said:


> Ya know perhaps I dont always explain my reasons so well but your generation knows nothing other than the internet. Its the answer to everything.
> When I started, local advertising got you some calls and you had to earn a good reputation with referral work. Now a young guy with great computer skills looks impressive on the computer with limited construction or business skills. Good thing these forum are here to teach everyone or bail them out after they took on a project. The public no longer looks at builders as skilled as it is with immigration or TV shows so when you put it all together it makes much more difficult.
> 
> I took code classes for a license so when I get a half azzed set of plans (which most are) I could see trouble spots or missing information and prepare my bids better which also save myself a hassle with inspections. That makes me better qualified but as a result more expensive. So I can sell my knowledge but people dont look at the contractor as the like the brains of the job they look at the archy. We are mostly about cost.


I agree it sucks sometimes when you see stuff other guys dont see or wont bring up, and we have certainly lost jobs because of it, but there are people who want a pro and will pay for it, and in my experience quite a few who can sniff out a paper boy over a guy who knows how to build. It could just be different markets/economys, but we sell quite a few larger projects at what we feel is a decent mark up. I wouldnt say were killing it, but I am comfortable with what we charge. 

I mean this with all due respect, but it seems like your mind set is set in the negative on this matter, and has been for a while. I have been in bad spells and slow times where every job we bid gets under cut, and will be again, and its easy to get down about it, but you gotta take a second look and try to be positive about your prospects, your skills and what you have to offer and your future. Imho.


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## Jaws (Dec 20, 2010)

ohiohomedoctor said:


> 100% commercial now. Im so burned on holding homeowners hands. When I reach completion markers, I submit for a draw inspection and get a check from a pre funded escrow acct. If there are any questions its on the plan. If its not on the plan, its a change order.
> 
> Soooo much less bs...
> 
> Sent from my SM-N910P using Tapatalk


Thats awesome, Im glad your digging it. 

Im kind envious, I like commercial and we do a little, but I am not ready to give up on custom residential, plus i dont want to drive an hour each way to where the commercial is at. 

Be nice to not have to discuss the density of drywall texture, and whether it would look better if it was more sparse? Why does it look different in this light over here? :laughing:


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## ohiohomedoctor (Dec 26, 2010)

I literally paid my last client to let me walk away. "Walk three tiles in, two too the left, crouch down and look at the wall at an oblique angle netween 10am and 1030am"

Now 90% of my walls get covered in beer signs.. My last build the owner actually asked if painting the walls was necessary.

My primary technique for patching celings now, is to screw plywood over it.

Sent from my SM-N910P using Tapatalk


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## Jaws (Dec 20, 2010)

ohiohomedoctor said:


> I literally paid my last client to let me walk away. "Walk three tiles in, two too the left, crouch down and look at the wall at an oblique angle netween 10am and 1030am"
> 
> 
> 
> Sent from my SM-N910P using Tapatalk


:laughing::laughing:


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## Tom M (Jan 3, 2007)

Jaws said:


> but it seems like your mind set is set in the negative on this matter, and has been for a while. I have been in bad spells and slow times where every job we bid gets under cut, and will be again, and its easy to get down about it, but you gotta take a second look and try to be positive about your prospects, your skills and what you have to offer and your future. Imho.


I am so turned off to the chronic horse**** that I would rather do smaller jobs at the right rates then dive into bigger jobs Im married to for months and risk making peanuts.
Downside has been people dont come to you for big projects when they think your only doing small stuff. So now I am getting less and less decent size bids.


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## Metro M & L (Jun 3, 2009)

Ive been thinking about the ops original question. Each partner gets 80k a year come hell or high water. A pretty comfortable salary. I would suggest cutting your salary in half and taking profit quarterly. No profit, no bonus. Lots of incentive to work hard and not waste money. Lots of incentive to get in the faces of the employees and demand more. More quality, more production, more thinking about being efficient. You guys are eating like champions instead of training like contenders.


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## Jaws (Dec 20, 2010)

Metro M & L said:


> Ive been thinking about the ops original question. Each partner gets 80k a year come hell or high water. A pretty comfortable salary. I would suggest cutting your salary in half and taking profit quarterly. No profit, no bonus. Lots of incentive to work hard and not waste money. Lots of incentive to get in the faces of the employees and demand more. More quality, more production, more thinking about being efficient. You guys are eating like champions instead of training like contenders.


Their salaries are 40k a piece. 80k is overhead. Id suggest at that volume they need to be pretty hands on.


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## Calidecks (Nov 19, 2011)

Jaws said:


> Their salaries are 40k a piece. 80k is overhead. Id suggest at that volume they need to be pretty hands on.


At that volume maybe it's time to strap on the bags. I don't think I could feed my puppy on 40k a year. :laughing:


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## builditguy (Nov 10, 2013)

Since this was 2 years ago, has anyone heard about the original poster? Did they finally blow through grandma's inheritance and go out of business or find a way to be profitable?


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## mrcharles (Sep 27, 2011)

ohiohomedoctor said:


> 100% commercial now. Im so burned on holding homeowners hands. When I reach completion markers, I submit for a draw inspection and get a check from a pre funded escrow acct. If there are any questions its on the plan. If its not on the plan, its a change order.
> 
> Soooo much less bs...
> 
> Sent from my SM-N910P using Tapatalk




Until you get into net 90 bs


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## ohiohomedoctor (Dec 26, 2010)

To hell with a net 90. Even if I had to, Id just put all my subs on net 100.

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## SamM (Dec 13, 2009)

ohiohomedoctor said:


> To hell with a net 90. Even if I had to, Id just put all my subs on net 100.
> 
> Sent from my SM-N910P using Tapatalk


Full commercial and your getting better than net 90? That's not very common. :thumbsup:

I won't do more than net 30 on commercial (though I rarely do commercial now)


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## going_commando (Feb 19, 2013)

ohiohomedoctor said:


> 100% commercial now. Im so burned on holding homeowners hands. When I reach completion markers, I submit for a draw inspection and get a check from a pre funded escrow acct. If there are any questions its on the plan. If its not on the plan, its a change order.
> 
> Soooo much less bs...
> 
> Sent from my SM-N910P using Tapatalk


Gotta agree with ya. I'm an electrician, and I'm about to wrap up a ~$25,000 commercial upfit with a 3 week timeframe at the same time I'm wrapping up a ~$25,000 house reno (just electrical portion for both) that I started the week after labor day. Real prints on commercial, design build on the house. Way more labor on the house, and much higher material cost on the commercial job. The commercial job is sooo much easier, and commercial reno is pretty similar profit margin or a bit better for us than new residential. Waaay less headaches dealing with commercial customers. More "just get it done" versus "how much is that going to cost? $10 more? I'll have to think about it. Can you move those 2 lights 6" further apart so it works better for my dining room table? That's not going to cost more money, right?" Sure, you may have to wait a bit longer for your money, but we don't do a job if its going to be stretch to cover it, anyways.


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