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Improve Your Margins
In my dealings with remodelers I have found margins ranging from 20% to upwards of 45% within the same market area. There are two general areas that separate the low margin builders and remodelers from the ones with higher margins - the mark-up used for pricing a project and control over job cost.
Don't be afraid to ask for a higher mark-up. There are plenty of people within your market that does the same thing as you do and are asking for and getting a higher margin.
Understand the difference between mark-up and margin. If you know your targeted markup percent and want to determine the targeted gross profit percent, divide the markup percent by 1 plus the markup percent:
For example: You are marking up 50% and want to know what gross profit that markup would achieve. 50% Markup = .50 = .33 = 33% gross profit 1 + .50
Improve your variances between estimated and actual job costs. How often do you hit your targeted costs that you estimated? If you are like most builders and remodelers you probably average a variance between budgeted and actual costs of around 3%. Resolve to reduce that variance by a minimum of 1%.
Review your job cost reports on a weekly basis and use the information to make decisions, which will assist you in taking corrective action to potential problems before it is to late.
Take steps to investigate variances and make changes to make up for variances occurring during the job. For example, excavation came in higher than you had budgeted for - since it is early on in the project you should have time to make adjustments which could make up for this variance.
Implement procedures for the use of Purchase Orders for your material purchases. Issue subcontract agreements or work orders with detailed specifications to all of your subcontractors.
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Official Charity of 2008
Remodelers Advantage Inc.
535 Main Street, Suite 211
Laurel, MD 20707
ofc: 301-490-5620
fax: 301-498-6869
Info@RemodelersAdvantage.com