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| Subject - profit standards in the ele. industry | |
| todd | Q. I manage a company that is almost 4 yrs old, does approx $800,000 a yr. What percentages in gross profit, labor costs, material costs, and bottom line net should I consider to be avg in this industry? (we do small comm - $10k to 300k and residential of 3500 sqft avg. My prob, I'm not an accountant and neither is my boss!!! |
| David Hyatt | I wish I made that per year. Not sure if it is average but I would be satisfied. |
| JimmyDee | I have been told that after everything is paid, your wages, taxes, rent, labor and materials, if you make 6% on gross sales, you are doing great. So if the profit (net) is somewhere in the area of $48k on the gross of $800k, you would be doing great. The gross profit to produce that level of net profit will vary with each company and other variables like workers productivity and material costs. Jim |
| John A. Peters | I have a friend who said "We try and usually do make 20% In other words on sales of 1/2 million ($500,00.00) we have a taxable income of about $100,000.00 or so. I work full time and my wife works part time in the business." I think he has 3 electricians and a full time office person. This is in California where everything is higher. The jobs are high end remodeling, where the clients have more money than they have time (professionals) |
| Mike Delaney | We did about $500,000.00 in business this year. Almost all from residential new contruction and remodels. That was my second year in business, with alot of start up costs(vans, hole hawgs, etc.), our profit was probably 4%. Hopefully this year we can reach 10%. That my goal! |
| Jjohnny | I wouldnt go thru the headaches for only 10, or 20% |
| Mike Delaney | Jjohnny, How much profit do you shoot for? What line of work are you in? Do you have employees? |
| wilkie | Mike, The national average for new construction contracting is 3%, so since you did 4% your ahead of the game. |
| New Guy | If you are not making considerably more than your top man, especially if you are not a start-up company, then you should be working for someone. It's bad enough that with all the extra hoursthat business owners put in it lowers the truly hourly rate they make. The other choice is go to business school and learn how to do it right. The problem is that most people who go into business might be great electricians, but they don't know jack about running a successfulbusiness. Most contractors go through life just getting by and that is a shame, especially for all the hardwork, stress, lost time w/ family, etc. |
| John A. Peters | Apples and oranges - careful! As a sole owner, the 20% profit before taxes is the pay for the owner, and this is not bad, as long as you are doing enough gross sales to make this number a good one for you. How does it compare to what a good auto mechanic, plumber or Union (just for comparison) electrician makes? A corporation is entirely different. As a corporation the 3 or 4% profit for the stockholder (owner) AFTER he is paid a salary, is not bad. Of course you have to ask how much is his salary? I assume it is equal or higher than his best paid man. I think the equalizer is what is the owner's profit after income taxes. What is the formula they use in Inc Magazine EBT&D (Earnings Before Taxes and Depreciation), is that right? Some issues of INC had a back page where they talked about business that were for sale and they used that EBT&D formula. Can any one help here? Inc magazine has this article Two brothers predict that cash flow will eclipse earnings as the ultimate metric for sizing up a company's health. is located here http://www.inc.com/magazine/20021201/24916.html How To Spot Trouble in Your Financials is another interesting article with samples http://www.inc.com/magazine/20041001/how-to-financial-troubles.html |
| lbr enterprises | After my apprenticeship is over I'm going to business school.I've been working for someone else since 1985. I've had to rebuild my life and credit in the last ten yrs.And I'm not married to any banks for 30yrs. I see here that the contractors are doing well even if the scale here is around 20/hr. A preacher on TV said, all a job means is Just Over Broke. In 1983 I was making $60/day pushing a lawnmower ,in 2001, I made $9.98/hr. as a 1st yr apprentice, since then I've kept my lifestyle to that salary,as opposed to other people I've seen. Some party more as they make more or go buy a $30k F150 and make friends w/ the bank. When school's over I'll pay cash for the van and use the visa for a 30 day loan to finance romex. Might as well try it, I can always pull CLX or THHN for someone else.
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| INDIANA | We're a smaller scale outfit, so our overhead isn't tremendious but if we can't make 20% on any given job we're gonna stay home and drink beer and fish and I don't even like to fish..... I say this but every body knows that you dont ALWAYS make 20%... But usually we do! |
| John A. Peters | Is that 20% the same as what I call taxable income? That is, since I am a sole owner, I have to pay federal taxes on my 20% profit. I have no other pay. Corporations do it differently. They pay tax on the Corp profit, but the owner of the Corp usually has his taxes withheld by the Corporation. This tax is on my personal profit and is listed on my business income tax form as a sole owner. I just want to be sure what we are talking about. Is the 20% your pay or after you pay your self? If you are a Corporation your Corp. profit can be manipulated by how much you decide to make your and your associate's salary or pay. |
| MONOLITH | quote: John, is your company listed as a sole proprietorship? At your size and workload, isn't it almost necessary to incorporate to protect your personal assets from any possible lawsuits? As a sole proprietorship with employees, if one of your workers screws up and burns someone's house down, they can come after you personally. |
| John A. Peters | I have emailed my "part time CFO". |
| Russell120 | The 3 to 4% is on overall volume, but (as I have noted before) construction has an cash flow situation compared to many industries. The very large General Contracting outfit SKANSKA is on record as saying they like a return on investment in the 20% range and they are doing the same "Very Large Projects" as we do. 20% return comes in because on commercial projects that run more then a month or two the owner pays you for partial completion so that you never have to from the entire cost of the project. Thus on a $2 million dollar project you may never actually have a greater cash outlay then $200,000. What is critical with the smaller companies is that you judge your "profits" after you have deducted a fair amount for salary. Otherwise they aren't really profits and what you own is "a job", not a "business." |