Qualified Remodeler Magazine

MAY 2019

Qualified Remodeler helps independent remodeling firms to survive, become more professional and more profitable by providing must-have business information, namely best business practices, new product information and timely design ideas.

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IN a recent article, I stated that a well-run spe- cialty home improvement company, which sells a single product line such as replacement ĬĞģęĤĬĨħĤĤŽģĜĨĞęĞģĜĤħĖĘĤĢėĞģĖĩĞĤģĤěĩĝĚĨĚ or similar products, should target to earn no less ĩĝĖģ"!ĥĚħĘĚģĩĥħĚĩĖĭģĚĩĥħĤŽĩ A general remodeling company should plan to earn no less than 5 percent to 6 percent pretax ģĚĩĥħĤŽĩ Now examine Chart A, on the next page, which ėħĚĖĠĨ ęĤĬģ ĝĤĬ ĩĤ ĖģĖġĮįĚ ĥħĤŽĩĖėĞġĞĩĮ ĪĨĞģĜ ĮĤĪħĤĥĚħĖĩĞģĜĨĩĖĩĚĢĚģĩĖġĨĤĠģĤĬģĖĨĮĤĪħċÅć ÿĚĨĥĞĩĚĬĝĖĩĮĤĪĢĖĮĝĖīĚĝĚĖħęĤħėĚġĞĚīĚĖ ĥħĤĥĤĨĖġĚĨĩĞĢĖĩĚĖģęĘĤģĩħĖĘĩĥħĞĘĚĝĖĨĩĤėĚŽĜĪħĚę ėĖĨĚęĤģĩĝĚĞģęĞīĞęĪĖġĘĞħĘĪĢĨĩĖģĘĚĨĤěĮĤĪħĨĥĚĘĞŽĘ ėĪĨĞģĚĨĨĈĤĨĩĘĤģĩħĖĘĩĤħĨĨĩĖħĩĞģĩĝĚħĞĜĝĩĥġĖĘĚÉ ĬĞĩĝĩĝĚĘĤĨĩĤěġĖėĤħĖģęĢĖĩĚħĞĖġģĚĘĚĨĨĖħĮĩĤĥħĤ- ęĪĘĚĩĝĚŽģĞĨĝĚęğĤėÉėĪĩĢĖģĮĨĤĤģġĤĨĚĩĝĚĞħĬĖĮ ĎĩĖģęĖħęěĤħĢĪġĖĨĨĪĘĝĖĨĢĪġĩĞĥġĮĞģĜĮĤĪħ ęĞħĚĘĩ ĘĤĨĩĨ ėĮ "& Ĥħ ĚīĚģ ęĤĪėġĞģĜ ĮĤĪħ ġĖėĤħ ĖģęĢĖĩĚħĞĖġĢĖĮģĤĩėĚĖīĖġĞęěĤħĢĪġĖěĤħĮĤĪħ ĘĤĢĥĖģĮ üģę ĞĩšĨ ĩĤĤ ġĖĩĚ ĤģĘĚ ĮĤĪšīĚ ĨĤġę Ėģę ĞģĨĩĖġġĚęĩĝĚĬĤħĠĩĤŽģęĤĪĩĩĝĖĩĮĤĪĝĖīĚĢĖęĚ ġĞĩĩġĚĤħģĤĥħĤŽĩĤģĖĘĤģĩħĖĘĩ Pricing formulas must be based on actual and ĨĥĚĘĞŽĘĘĤĨĩĨĬĞĩĝĞģĮĤĪħĥĖħĩĞĘĪġĖħėĪĨĞģĚĨĨĔĤĪ ģĚĚęĩĤĠģĤĬÊģĤĩĜĪĚĨĨËĬĝĖĩĮĤĪħĤīĚħĝĚĖęĘĤĨĩĨ ĖĘĩĪĖġġĮĖħĚ ĎĩĖħĩėĮĨĚĥĖħĖĩĞģĜĮĤĪħĨĖġĚĨĖģęĢĖħĠĚĩĞģĜ ĘĤĨĩĨěħĤĢĮĤĪħĤīĚħĝĚĖęĀīĚħĮĖęĥħĤĢĤğĤėĨĞĩĚ ĨĞĜģĔĚġġĤĬċĖĜĚĘĤĨĩęĞĨĥġĖĮĥĞĚĘĚĝĤĢĚĨĝĤĬ ĥĖħĩĞĘĞĥĖĩĞĤģĖģęĨĞĢĞġĖħĞĨĖĢĖħĠĚĩĞģĜĘĤĨĩ ĄģĩĝĚĘĖĨĚĤěīĚħĮĨĢĖġġĘĤĢĥĖģĞĚĨĮĤĪĝĖīĚ ĖĨĖġĚĨĘĤĨĩĚīĚģĞěĮĤĪęĤĖġġĩĝĚĨĚġġĞģĜĉĤĩĩĤ ĖġġĤĘĖĩĚĨĤĢĚĩĝĞģĜěĤħĮĤĪħĥħĚĥĖħĖĩĞĤģĥħĤĨĥĚĘĩ īĞĨĞĩĨĨĖġĚĨěĤġġĤĬÇĪĥĖģęĥĝĤģĚĩĞĢĚĞĨĩĤęĚģĮ ĮĤĪħīĖġĪĚĞģĩĝĞĨĥĖħĩĤěĩĝĚĥħĤĘĚĨĨüĩĩĝĚīĚħĮ least, allocate the percentage that you would or did ĥĖĮĮĤĪħĨĖġĚĨĥĚħĨĤģÉĤħĬĝĖĩĘĤĢĥĖģĞĚĨĨĞĢĞġĖħ ĩĤĮĤĪħĨĥĖĮĩĝĚĞħĨĖġĚĨĥĚĤĥġĚ ĊģĘĚĮĤĪĝĖīĚĩĝĚĨĚĘĤĨĩĨĨĚĥĖħĖĩĚęěĖĘĩĤħĩĝĚĢ ĖĜĖĞģĨĩĮĤĪħĩĤĩĖġĨĖġĚĨĩĤĖĘĝĞĚīĚĖĥĚħĘĚģĩĖĜĚěĤħ ĚĖĘĝďĝĚģĥħĤğĚĘĩĩĝĚģĚĩĥħĤŽĩĩĝĖĩĮĤĪęĚĨĞħĚ ďĝĚĩĤĩĖġĥĚħĘĚģĩĖĜĚĖėĤīĚ%)ĥĚħĘĚģĩĬĝĚģ ĨĪėĩħĖĘĩĚęěħĤĢĖ"!!ĥĚħĘĚģĩĨĚġġĞģĜĥħĞĘĚħĚĥ- ħĚĨĚģĩĨĖġġĤĩĝĚħĘĤĨĩĨĥġĪĨ"!ĥĚħĘĚģĩĥħĤŽĩĖġġĤ- ĘĖĩĞĤģĤĩĝĚħĩĝĖģġĖėĤħĖģęĢĖĩĚħĞĖġĤƁĚģĘĖġġĚę direct costs or ĘĤĨĩĤěĜĤĤęĨĨĤġę ďĝĞĨĞĨĖėĖĨĞĘěĤħĢĪġĖĄĩĢĖĮħĚĦĪĞħĚĢĤęĞŽĘĖ- ĩĞĤģęĚĥĚģęĞģĜĤģĩĝĚĨĞįĚĖģęĨĩĮġĚĤěĩĝĚĥħĤğĚĘĩ ĈĖğĤħħĚĢĤęĚġĞģĜğĤėĨĨĢĖġġĚħħĚĢĤęĚġĞģĜğĤėĨ ĖģęĥĪħĚġĮĨĥĚĘĞĖġĩĮĘĤģĩħĖĘĩĨÉĨĪĘĝĖĨĬĞģęĤĬĨ Ĥħ ĨĞęĞģĜÉĖġġ ħĚĦĪĞħĚ ĨĚīĚħĖġ ĖęęĞĩĞĤģĖġ ĨĩĚĥĨ ăĤĬĚīĚħ ģĤĩĝĞģĜ ĘĝĖģĜĚĨ ĩĝĚ ěĖĘĩ ĩĝĖĩ Ğě ĩĝĚĨĚ ĘġĖĨĨĞŽĘĖĩĞĤģĨġĞĨĩĚęĖėĤīĚĬĚħĚĩĤĩĤĩĖġ48 percent, Are Poor Pricing Methods Destroying Your Bottom Line? No single factor creates as much havoc for home improvement contractors as price. The rst complication is how to factor it; then, the issue becomes how to sell against competition, which often seems to have a lower quote. by Dave Yoho A MODERN (FACTUAL) PRICING FORMULA Percentages supplied are for example only Marketing 10% Sales 10% (G & A) Overhead 18% Net Prot 10% Total 48% (Accountants often classify these under gross margins) 54 May 2019 QualifiedRemodeler.com

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