I dont see how.

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Re: I dont see how.

The profit margin on new houses (1800-2400'ft) is about $300-600 per trade. For the life of me, I dont know how your trades make any money besides in volume. One guy screwing up torpedoes all your gain. This comes to me from my neighbor , an accountant for a fairly large plumbing contractor. They do the new resi to keep guys working, but where they actually turn a profit is commercial and industrial new construction, and commercial service work.
 
Re: I dont see how.

Originally posted by william runkle:
But back to the original post would any of us do the job less than we bid? 10k was the bid the G.C. wanted 4.5k doesn't matter if you are the only employee or you have an army would you do the job for a lower price?
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No chance I'd do that job. If the GC wants to hedge me down a few hundred bucks, maybe we can deal. But knocking $5500 off of a 10K bid is a bit too much to consider reasonable. Maybe there are EC's that can do that house for 4500. But, if I bid 10K, I did so for a reason and no matter what the GC thinks is reasonable, I can't profitably cut my bid in half.
 
Re: I dont see how.

I will go work at McDonalds before I wire a 2400 sq. ft. house for 4500K. Im not going to help pay for the builders 500K house, 60K 4X4 pick up, 30K Harley that he and his old lady take out on weekends, and all the other "toys" he gets to play with while Im getting arthritis and carpal tunnel from working 12 hr. days sling'n romex and twisting wire nuts on a thousand splices. Not in this lifetime. Aint gonna happen. Atleast at Micky D's I would be in the A/C all day.
 
Re: I dont see how.

Originally posted by GG:
Atleast at Micky D's I would be in the A/C all day.
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Yeah, right. You working the dining room? :D

In my hash-slingin' days, there was one AC register in the back--and I think it was in the manager's office. :D
 
Re: I dont see how.

Well as a guy who tried to get a service company up and running and is now doing tract homes here are my two cents. Ive done a lot in my few years. I started out in commercial. Found it fun but somewhat too slow paced for my liking. Going to the same job for months at a time is not my cup of tea. Went from doing commercial to condos. Doing condos on the rough is fun. As is getting to run the bus duct or work in the electrical room. However if youre not the kissass of the crew you may not get to stay on the electrical room. So now the rough is over and you get to go switch and plug for 3 months. Then since the painters werent done when you plugged the unit you get to go put on faceplates for three months. Or you can go work the slab with the sun beating down on you all day. So I went to custom homes. Great time doing rough and trims. However when youre in a 3 man company the bosses buddy can be lazy while you bust *** every day. No thanks. So I go talk to a spec home contractor. He offers you the same money. Pays for youre hand tools. Pays for a week off at christmas and the 4th of July. Whether youve been there a year or not. Says you can work as much ot as you want. Has beer at the shop for you when you get off. His guys all bust *** every day all day. Oh by the way hes been in the business for 55 years. Now who offers the best deal. To me its the spec guy. Plus I learn the spec speed and maybe someday I can take it too the custom level and my own company. Once again just my two cents. By the way George thanks for the tips.
 
Re: I dont see how.

Originally posted by cselectric:
And, in general I show no disdain for you.
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I didn't mean to single you out, your post reflected that side of the discussion well, so I quoted it. :)

Knuckle-draggers have feelings too! :(

It's one of the reasons I believe I'd get crushed if I started a business. I don't have the resolve to do that kind of stuff.

One good thing about this forum: it has led me to understand the effect that sidework has on our industry, and has caused me personally to totally abandon it. I'll pass on the quick buck, for the principle of there being a market for me to join, if/when I'm ready. ;)
 
Re: I dont see how.

Reading all these posts and opinions just go to point out our free market system works.

The 2000/year contractors making a $300/unit profit are getting along just fine. They keep their men busy and it's all about speed and being the low cost provider. They are able to use inexperienced workers that gives the owners a chance to make money and gives the workers a chance to earn money and learn a trade.

The 1-man shows are in business doing the work that takes more experience and command more money which gives us a chance to earn money.

The big guys must keep work all of the time because they have overhead that does not go away and they have workers that become overhead if they are not productive.

The little guy can pick and choose for higher profit jobs because the overhead is not as big an issue.

The free market system works, and is great.
 
Re: I dont see how.

Originally posted by georgestolz:
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I just can't help but wonder if that just the nature of business in general. Everybody's looking out for number one, and if it means cutting the next guy's throat, so be it. It's a dog-eat-dog world, regardless of how you make a living in it. :(

It's one of the reasons I believe I'd get crushed if I started a business. I don't have the resolve to do that kind of stuff.
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I don't think things necessarily have to be cutthroat. That's not the way I run my operation.

All I do is offer my services to the public via ads in several publications. In some of them, I'm the only EC advertising. People call me, I bid the job, and I get hired. I won't compete against other bids, but that hasn't been an issue. I don't hear much about people getting multiple bids.

I think getting hired involves a lot more than just price. I've had people eager to hire me before we even talked numbers. Things that I've heard from customers:
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  • <font size="2" face="Verdana, Helvetica, sans-serif">"My friend said you did great work for them."</font>
  • <font size="2" face="Verdana, Helvetica, sans-serif">"I wanted to hire someone local."</font>
  • <font size="2" face="Verdana, Helvetica, sans-serif">"Our drywaller said you were the guy to call."</font>
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My rates are competitive, and I don't go after jobs by being the Wal-Mart of the EC world.

[ August 29, 2005, 12:42 PM: Message edited by: jeff43222 ]
 
Re: I dont see how.

Originally posted by GG: 2000 homes at $300.00 is $600,000.00
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Let me offer another perspective on the mathematics of this situation. In order for the "big company" to pull in that $600,000 profit, they would have to have paid for salaries, federal taxes and other withholdings, and general overhead (e.g., for billing and admin time), and of course there is the cost of materials. At $4,500 per house, and with 2000 houses, they will have taken in $9,000,000. But that means that they would have spent $8,400,000 to earn the profit of $600,000. That is a profit margin of 6.7%.

Now if I had $8.4 million in my back pocket, and wanted to invest it, I could do what that company did, and earn 6.7%. Or I suppose I could invest it in some other business, or in the stock market, or even in government bonds, and I might make more than 6.7%. So my question is, is this the best way to invest my money?

From the perspective of a small company or a single-person outfit, the math works the same, even though the numbers are smaller. You have to invest (in your company) a certain amount of money, in order for the company to earn a profit. Is a 6.7% profit going to be enough for you? Then you have to add in the "hassle factor." If you are only going to make $300, and if it takes you two long hard days (i.e., 20 hours) to get that $300, you would earning $15 per hour. Is that enough for you? I imagine that it might not be enough for many people, and I fully understand why some have said that they were glad to get out of the residential business.
 
Re: I dont see how.

Originally posted by charlie b:
At $4,500 per house, and with 2000 houses, they will have taken in $9,000,000. But that means that they would have spent $8,400,000 to earn the profit of $600,000. That is a profit margin of 6.7%.
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Charlie,

I've heard this type of argument made before, and the fallacy is the 8.4 million was not money they had. If they did not wire the 2000 houses, they would not have had the 9 million so they would not have had the 8.4 million either.

6.7% to the bottom line with that volume is not too bad, but I would question that we really are aware of what all the overhead costs are and I doubt they are at 6.7% net.
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Re: I dont see how.

It's not really a fallacy. They might not have started with the $8.4M in the bank. But they did have, as a corporate asset, a credit line (for which they had to pay) that was sufficient to enable them to contract for the job with the 2000 houses. They had to invest that credit line, in order to earn a 6.7% profit. And I agree that the profit was probably not that high.

But my point is that this is a business decision. We have to make our choices about what jobs we will take on, and how much of our own assets (including the asset of our own time and labor) we are willing to invest in a job, given the probable profit that the job will net us. I was merely saying that I understood the decision by jimwalker and others to look for more profitable business elsewhere.

I equate this situation to the TV commercials that tell us how much we can save if we . . . . My response is that what we save means nothing. What matters is what we spend, and what we get for it. That works for a business as well.
 
Re: I dont see how.

Originally posted by jeff43222:
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  • <font size="2" face="Verdana, Helvetica, sans-serif">"Our drywaller said you were the guy to call."</font>
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Isn't that a bit like the knocked-up teenage daughter referring to her boyfriend as "responsible"? :D
 
Re: I dont see how.

Originally posted by charlie b:
Then you have to add in the "hassle factor." If you are only going to make $300, and if it takes you two long hard days (i.e., 20 hours) to get that $300, you would earning $15 per hour. Is that enough for you?
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But there's one element missing here: Was 20 hours spent by the person collecting the $300?

In general, collectively over a month, I wouldn't expect an EC to spend 20 hours hassling over a tract project that is established and manned by a seasoned(-ish) crew. Perhaps an exaggeration, but you get the gist of what I'm saying.

And in that month, for 20 hours (imagine half a work week!) administering over the job, as many as 10 or 12 houses could be roughed. So, really, for 20 hours of administration (keeping the doors open), 12 houses were completed for $3600 profit, or $180 per admin hour.

Now that doesn't look too terrible, does it? :)

The labor is all paid for. The guy sweating in the field never saw the $300 profit for that house. He may still be making good money, who knows. But his labor is already out before the $300 hits the bank.

Unfortunately, I am still the guy sweating out in the field. But I dream big. :D
 
Re: I dont see how.

One thing it appears that is being overlooked by some when evaluating the $300 profit is what is the definition of profit. For me, $300 profit means money left over after all expenses. So, if after I paid myself, helper, benefits, overhead, taxes, materials, etc. and made around 7% final adjusted net profit that is respectable. My last job with a fortune 500 company, the final adjusted income number they shot for was 8%, with anything over 6% kicking into the incentive plan pool. To look at the $300 divided by my time is saying that I will work on a piece rate basis for whatever is left after expenses which don't include my wages. Just MHO.

Tony
 
Re: I dont see how.

Originally posted by georgestolz:
Originally posted by jeff43222:
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  • <font size="2" face="Verdana, Helvetica, sans-serif">"Our drywaller said you were the guy to call."</font>
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Isn't that a bit like the knocked-up teenage daughter referring to her boyfriend as "responsible"? :D
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:D

In this case, no. This is a drywaller who does meticulous work. I've referred him to people whose walls I've wrecked, and they raved about how good the work was.

Last time I got a referral from him was when he was doing a drywall job, opened up the ceiling, and found a mess of K&T. He immediately advised the homeowner to get me involved to deal with the wiring. It turned into a nice job for me.
 
Re: I dont see how.

Originally posted by charlie b:
That is a profit margin of 6.7%.
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Put that inperspective, some other profit margins:

Sears 0.5%
Wal-Mart 3%
Eaton (Cutler-Hammer) 7.3%
ExxonMobil: 11%
Microsoft: 30%
SquareD: 42%

I was never really clear if the $300 was average profit after accounting for callbacks, or a base profit that could still get nicked.
 
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