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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ĩĝĚĘĤĨĩĤěġĖėĤħĖģęĢĖĩĚħĞĖġĩĤĘĤĢĥġĚĩĚĩĝĚğĤė cannot exceed 52 percent ĤěĩĝĚĨĚġġĞģĜĥħĞĘĚĤħĮĤĪ ĖħĚĚĖĩĞģĜĞģĩĤĮĤĪħĥħĤŽĩ ĈĤĨĩĘĤģĩħĖĘĩĤħĨęĤģšĩĜĚĩĩĝĚĥħĞĘĚĩĝĖĩĩĝĚĮĖħĚ ĚģĩĞĩġĚęĩĤĖģęĞĩšĨģĤĩėĚĘĖĪĨĚĩĝĚŽģĞĨĝĚęĥħĤęĪĘĩ ĞĨģšĩĬĤħĩĝĩĝĚĢĤģĚĮďĝĚĥħĤėġĚĢĤƁĚģġĞĚĨĞģĩĝĚ ĞģĖėĞġĞĩĮĩĤĨĚġġĩĝĚīĖġĪĚĬĝĚģĥħĚĨĚģĩĞģĜĩĤĩĝĚĞħ ĥħĤĨĥĚĘĩĨ üĩĩĝĞĨĥĤĞģĩĮĤĪĖħĚĖėġĚĩĤĖĨĨĚĨĨĥħĤŽĩĖėĞġĞĩĮ ĤģĚĖĘĝĘĤģĩħĖĘĩĨĤġęĥħĞĤħĩĤĨĩĖħĩĞģĜĩĝĚğĤėĄĩšĨ ĥħĚĩĩĮĨĞĢĥġĚĊģĖģĮğĤėĨĤġęÊĞěĮĤĪħĥĚħĘĚģĩĖĜĚĨ ĢĖĩĘĝĩĝĚĘĞĩĚęĚĭĖĢĥġĚËĖģęĩĝĚĘĤĨĩĤěĮĤĪħġĖėĤħ and material exceeds 52 percent, ĮĤĪĖħĚĨĖĘħĞŽĘĞģĜ ĖĥĤħĩĞĤģĤěĮĤĪħĥħĤŽĩ ĎĪĘĝĘĞħĘĪĢĨĩĖģĘĚĨĢĖĮħĚĦĪĞħĚĖģĖęğĪĨĩĢĚģĩ ĩĤĩĝĚĘĤĢĢĞĨĨĞĤģĤģĩĝĞĨğĤėÊĘĤģĩħĖĘĩËĥħĞĤħĩĤĖĘ- ĘĚĥĩĞģĜĞĩďĝĞĨĢĖĮĖġĨĤėĚĩħĪĚĤěĖĘĤĢĥġĚĩĚęğĤė ĚĭĘĚĚęĞģĜ&#ĥĚħĘĚģĩėĖĨĚęĤģĖęęĞĩĞĤģĖġĥħĤĢĞĨĚĨ ĩĤĩĝĚĘĪĨĩĤĢĚħĤěĢĞĨĢĚĖĨĪħĚĨĤĘĘĪħħĞģĜ ĀĖĘĝĤěĩĝĚĘĖĩĚĜĤħĞĚĨĨĪĘĝĖĨĖËěĪġġĮġĤĖęĚę ĢĖħĠĚĩĞģĜĘĤĨĩĨėËěĪġġĮġĤĖęĚęĨĖġĚĨĘĤĨĩĨÎĘĤĢ- ĢĞĨĨĞĤģĨ ĥĖĞę ĩĤ ĨĖġĚĨĥĚĤĥġĚ ĥħĤğĚĘĩ ĢĖģĖĜĚħĨ ĨĖġĚĨĢĖģĖĜĚħĨĚĩĘÏĘËĜĚģĚħĖġĖģęĖęĢĞģĞĨĩħĖĩĞīĚ ĘĤĨĩĨĖģęęËĖġġĤĘĖĩĞĤģěĤħĥħĤŽĩĖėĞġĞĩĮĖħĚġĞĨĩĚęĞģ ĮĤĪħĤĥĚħĖĩĞģĜĨĩĖĩĚĢĚģĩüģĮĥĚħĘĚģĩĖĜĚĞģĘħĚĖĨĚ ĞģĩĝĞĨĖĘĘĤĪģĩĨĝĤĪġęĖĥĥĚĖħĤģĮĤĪħĞģĩĚħģĖġÊĥħĞ- ĤħĩĤĩĝĚĮĚĖħÇĚģęËĤĥĚħĖĩĞģĜĨĩĖĩĚĢĚģĩ Ąě ĮĤĪ ĖģĖġĮįĚ ĮĤĪħ ĖĘĩĪĖġ ħĚīĚģĪĚ ÊĞģĨĩĖġġĚę ĘĤģĩħĖĘĩĨËĖĜĖĞģĨĩĬĝĖĩĮĤĪĖħĚĨĥĚģęĞģĜĩĤĖĘĦĪĞħĚ ĖģęĞģĨĩĖġġĮĤĪħĬĤħĠĩĝĞĨĘĖģĖģęĬĞġġĚģĖėġĚĮĤĪ ĩĤĚĭĖĢĞģĚĬĝĚĩĝĚħĮĤĪħĘĤġġĚĘĩĞīĚĞģĨĩĖġġĚęĘĤģ- ĩħĖĘĩĨĬĚħĚĤħĬĚħĚģĤĩĥħĤŽĩĖėġĚĩĤĩĝĚęĚĜħĚĚĮĤĪ ĞģĩĚģęĚęĬĞĩĝĮĤĪħĥħĞĘĞģĜĥġĖģ ýĮ ěĪħĩĝĚħ ĚĭĥġĖģĖĩĞĤģ ĩĝĚ ĤĥĚħĖĩĞģĜ ÊċÅćË ĨĩĖĩĚĢĚģĩħĚĥĤħĩĨĖĘĤĢĥĖģĮšĨħĚīĚģĪĚĨĖģęĚĭ- ĥĚģĨĚĨĤīĚħĖĥĚħĞĤęĤěĩĞĢĚĄěħĚīĚģĪĚĨĚĭĘĚĚę ĚĭĥĚģĨĚĨĩĝĚĘĤĢĥĖģĮĝĖĨĖģĚĩĥħĤŽĩĄěģĤĩĩĝĚ ĘĤĢĥĖģĮĝĖĨĖģĚĩġĤĨĨčĚīĚģĪĚĨÊĞģĨĩĖġġĚęĨĖġĚĨË ĞģĩĝĚĝĤĢĚĞĢĥħĤīĚĢĚģĩĞģęĪĨĩħĮĖħĚęĚŽģĚęĖĨ ĞģƀĤĬĨĢĤĨĩġĮħĚĨĪġĩĞģĜěħĤĢĩĝĚĘĤĢĥġĚĩĞĤģĤě ĘĤģĩħĖĘĩĨħĚĦĪĞħĞģĜĩĝĚĞģĨĩĖġġĖĩĞĤģĤěĥħĤęĪĘĩĨÉĖ ĘĤĢėĞģĖĩĞĤģĤěĜĤĤęĨĖģęĨĚħīĞĘĚĨ ĀĭĥĚģĨĚĨĖħĚęĚŽģĚęĖĨĤĪĩƀĤĬĨħĚĨĪġĩĞģĜěħĤĢ ĩĝĚĥĪħĘĝĖĨĚĤěĜĤĤęĨħĚģęĚħĚęĨĚħīĞĘĚĨĖģęĖĩ- tendant expenses to support the advertising, sale ĖģęĞģĨĩĖġġĖĩĞĤģĤěĝĤĢĚĞĢĥħĤīĚĢĚģĩĘĤģĩħĖĘĩĨ ĊĥĚħĖĩĞģĜÊċÅćËĨĩĖĩĚĢĚģĩĖĘĘĤĪģĩĨĖħĚĩĚĢ- ĥĤħĖħĮĖģęħĚĨĚĩĖĩĩĝĚėĚĜĞģģĞģĜĤěĖģĚĬĥĚħĞĤę āĤħĚĭĖĢĥġĚĖĩĩĝĚĚģęĤěĩĝĚĮĚĖħħĚīĚģĪĚĨĖħĚ ĘġĤĨĚęĖģęĩĝĚĖĘĘĤĪģĩĨĖħĚĪĨĪĖġġĮĨĚĩėĖĘĠĩĤįĚħĤ ďĝĚĤĥĚħĖĩĞģĜÊċÅćËĨĩĖĩĚĢĚģĩĖĘĘĤĪģĩĨėĚ- ĘĤĢĚĥĖħĩĤěĩĝĚħĚĩĖĞģĚęĚĖħģĞģĜĨWhen all op- erating statement accounts are closed at the end ĤěĩĝĚĥĚħĞĤęĩĝĚģĚĩĖęęĞĩĞĤģĩĤħĚĩĖĞģĚęĚĖħģĞģĜĨ ĬĞġġ ėĚ ĩĝĚ ģĚĩ ĞģĘĤĢĚ Ĥħ ģĚĩ ġĤĨĨ ĩĝĖĩ ħĚĨĪġĩĚę ęĪħĞģĜĩĝĚĥĚħĞĤęüĨĩĝĚĖĘĘĤĪģĩĩĞĩġĚĞģęĞĘĖĩĚĨ ħĚĩĖĞģĚęĚĖħģĞģĜĨĖħĚĚĖħģĞģĜĨĩĝĖĩĖħĚĠĚĥĩĖģę ħĚĞģīĚĨĩĚęĞģĩĝĚĘĤĢĥĖģĮ üĨĖħĚĢĞģęĚħĞģĩĝĚĝĤĢĚĞĢĥħĤīĚĢĚģĩėĪĨĞ- ģĚĨĨĩĝĚĥħĤĥĚħĬĖĮĩĤęĤĖĥħĤŽĩĖėĞġĞĩĮĖģĖġĮĨĞĨĞĨ " ĂħĤĨĨĈĖħĜĞģ # ĊĥĚħĖĩĞģĜċħĤŽĩ $ ċħĚÇĩĖĭċħĤŽĩ üęğĪĨĩĢĚģĩĨĨĪĘĝĖĨĤĬģĚħÊĨËęħĖĬĨ ĈĞĨĘĚġġĖģĚĤĪĨ ĞģĘĤĢĚ ĖģęÌĤħ ĤģĚÇĩĞĢĚ ĘĝĖħĜĚĨĤħĬħĞĩĚÇĤŻĨ čĚĨĚħīĚĤħĖġġĤĬĖģĘĚěĤħĩĖĭĚĨĖģęÌĤħĪģ- ĘĤġġĚĘĩĞėġĚħĚĘĚĞīĖėġĚĨ % ĉĚĩċħĤŽĩ þüĐďĄĊĉċħĤŽĩĖėġĚĤĥĚħĖĩĞĤģĨęĤģĤĩģĚĘĚĨ- ĨĖħĞġĮĘħĚĖĩĚĥĤĨĞĩĞīĚĘĖĨĝƀĤĬďĝĞĨĘĤĢĚĨěħĤĢ ĜĚĩĩĞģĜĩĝĚĥħĤĥĚħĥħĞĘĚĩĤėĚĜĞģĬĞĩĝĩĝĚģĬĤħĠĞģĜ ĬĞĩĝĞģĩĝĚĥħĤğĚĘĩĞĤģĤěĖġġĚĭĥĚģĨĚĨĩĤĚŻĚĘĩĖĥħĤ- ğĚĘĩĚęĥħĤŽĩĖėĞġĞĩĮ ďĤĢĖĠĚĮĤĪħĘĤĢĥĖģĮĢĤħĚĚƄĘĞĚģĩĖģęĥħĤě- ĞĩĖėġĚĨĩĖħĩėĮĚĭĖĢĞģĞģĜĮĤĪħĥħĞĘĞģĜĢĚĩĝĤęĨ then correcting them to ensure you are earning ĩĝĚĥħĤŽĩĩĤĬĝĞĘĝĮĤĪĖħĚĚģĩĞĩġĚę Dave Yoho (daveyoho.com) is president of the oldest and largest consulting group serving the home improvement industry. He is the producer of a recorded series entitled, "How To Run A Protable (Or More Protable) Home Improvement Business." For more information on his business, call 703-591-2490 or e-mail him at dave@daveyoho.com. CHART A ANALYZING PROFITABILITY WITH YOUR OPERATING STATEMENT OR P&L* I. GROSS MARGIN Net contract price less labor, material and miscellaneous installation costs such as trims, underlays, caulking and similar. II. OPERATING PROFIT Revenues derived from the installation of products/services specied in contracts, less sales, marketing and G&A (overhead). III. MISCELLANEOUS INCOME AND EXPENSES (added to or subtracted from net operating prot) These can be listed as miscellaneous income or expenses: income from other than the sale and installation of products/services. Examples: manufacturers' bonuses, prompt payment discounts, processing fees, prot (loss) from sales of equipment, settlements from litigation and similar income (less expenses) and "one time" charges (inventory, write-os, noncollectable receivables). IV. NET (PRE TAX) PROFIT Prior to allocation for taxes, inventory write-os, noncollectable receivables. V. NET PROFIT Assess EBITDA (earnings before interest, taxes, depreciation and amortization). Do not otherwise use as formula for taxation or reporting. * Nothing contained herein is oered as nancial advice. Nor is it intended to conict with or contradict GAAP (Generally Accepted Accounting Prin- ciples). Review with your accountant, lawyer or tax adviser. QualifiedRemodeler.com May 2019 55

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