Net profit margins

[David Riding]

The pipe layer is taking the risk that he may not receive the money for the pipe, which he has paid for.

 

When the contractor invoices for the full amount why would he not receive the money for the pipe it would be included in the invoice.

[Rupe]

No, you can't invoice it so that you end up with the percentage you want. You have to decide what your mark up is and use that. If you mark up your cost by 20% then that fine.

 

(400x20%)+(400x20%)=960.

 

Or you could use a higher mark up to give you a higher gross profit, but you can't just decide what you want the final figure to be and then add the 200 to achieve it.

[Rupe]

When the contractor invoices for the full amount why would he not receive the money for the pipe it would be included in the invoice.

 

He would in normal cicumstance. But there is always a risk of not gettign paid so any initila pay out needs to be rewarded.

[skyhuck]

When the contractor invoices for the full amount why would he not receive the money for the pipe it would be included in the invoice.

 

He may not receive ANY of the invoiced amount, bankrupted firm or some other reason.

 

If we don't get paid for a one day job, we are out of pocket for the labour and equipment costs etc.

 

The pipe layer would ALSO be out of pocket for the materials, hence greater risk.

[David Riding]

No, you can't invoice it so that you end up with the percentage you want. You have to decide what your mark up is and use that. If you mark up your cost by 20% then that fine.

 

(400x20%)+(400x20%)=960.

 

Or you could use a higher mark up to give you a higher gross profit, but you can't just decide what you want the final figure to be and then add the 200 to achieve it.

 

Rupe I fully understand you don't decide you gross profit margin when pricing a job, and you have a "mark up" that therefore gives you a margin.

 

I am wondering if other trades have a better deal as they have more opportunities to increase there gross profit as so many materials are involved. We don't have materials and other trades still have machinery, like I said it may be all relative.

[David Riding]

He may not receive ANY of the invoiced amount, bankrupted firm or some other reason.

 

If we don't get paid for a one day job, we are out of pocket for the labour and equipment costs etc.

 

The pipe layer would ALSO be out of pocket for the materials, hence greater risk.

 

Yeah I can see that makes sense now, bigger outlay risk for bigger profit,

[skyhuck]

Some trades are in reality both service providers and retailer, so do get two bites of the cherry.

 

Personally I like the fact that I don't need to buy in materials, it must be a right pain.

[Tom D]

One thing that I have noticed is that many people on here are way too cheap and are perhaps confusing a wage with a profit. Last year I actually acheived 15% net profit, however I aim for more, ie my markup on my daily operating costs is about 40% but because there always non productive days the figure actually acheived is much less. It has taken me a few years to learn this the hard way but at least now I'm actually making money.

 

What you should be doing is taking all your operating costs over a year, including your wage, and dividing by 261(working days) and that will give your break even day rate, add 40% to this and you should turn a modest net profit.

40% seems a lot to add to your day rate but if I only added 20% that would leave no net profit at all.

[Mike Hill]

We do Trees and landscaping.

 

The landscaping side is able to mark up the materials and transport.No one argues that the stone or cement has to be transported from the retailer and to the job site.Also no client argues that any detris from construction work has to be removed and dumped at a cost.Wether that detris goes to the dump or is burned at my mates farm for example matters none,its still a cost and is billed as if it went to the council tip.

[Stephen Blair]

When the contractor invoices for the full amount why would he not receive the money for the pipe it would be included in the invoice.

 

because some folk arent very nice davis, thats why. they will look for oppertunities not to pay you, and reasons to knockyou down even after you have agreed a price. it amazes me that you havent come across this before but on the other hand it is a very pleasant surprise that no one has tried to rip you off especially inb the comercial game:001_smile: