How much margin should builders be adding to their projects?
15%, 20%...25%?
It’s a question that has both divided and confused the industry since the dawn of time.
The answer is that it depends on the niche.
Large commercial builders reportedly operate on net margins of around 1%. Complete madness that exposes the company to rising costs and minor estimating mistakes.
However, residential builders enjoy far larger margins with most large companies consistently producing 10%+ net margins.
The reason they are able to produce double net profit year on year is because they get their ‘builders margin’ correct which is the amount of gross profit added to each job.
So, if you are the owner of a residential building company and you are not seeing a 10%+ net margin in your year end accounts, start by asking yourself these 3 questions;
Am I applying a Builders Markup or Margin?
Am I applying a minimum of 33.3% Builders Markup (55% for Remodeling Projects)
Am I investing 3% of revenue into marketing and advertising?
If the answer to any of these questions is no, then you know where to start!
17 сен 2024
