Profit

[JoeNorm]

In a typical business structure does profit come separate from hourly rate and material markup? Or is profit simply generated from the two?

 

[AC\DC]

Well I’ll post but the more experience people will correct me.
Profit is after your hourly labor rate you would pay some one to do the job.
Plus overhead ( overhead from reading other post can be grouped many different ways. But simply cost to run the business.
Plus materials
Then when you get that you would fine your base line to break even. This is when profit comes into play.

For me if I was to higher a journeyman I would have to pay them$ 40-50
Employment tax and other employee expenses I add another 50% increase to cost
So a j-man cost me 60- 85.

Then insurance and cost to have and run the business, another$ 35 an hour that includes every aspect to run business

Then i through in my profit to deal with all this crap $30 an hour that how I get my profit.
Get my hourly rate of $150 for service work.
Ow since I work for my self I am getting the 85+the 30.

Markup on material is for warranty. If I don’t have to go back then it’s added profit but if I install junk crap like the last 9 halo flood lights it out of my pocket.

I hope I bid and don’t do hourly and I can make a lot more.

 

[AC\DC]

After reading your post I guess I would say mine are additive for the profit.

When I bid a job I add profit onto the material.
If I did not answer your question just ignore me

 

[Omid]

I think in an electrical contractor business structure, profit is generated from both the hourly rate charged for labor and the markup applied to materials.

 

[ptonsparky]

I think in an electrical contractor business structure, profit is generated from both the hourly rate charged for labor and the markup applied to materials.

I agree. Don't rely on just one. Some projects will be labor intensive or have high material costs and little labor.

Don't wait 15 years to decide you need to change, you will not make the $$ back. Practically all my work was T&M. Not necessarily the best method.

 

[petersonra]

profit is how much is left over after you pay all your expenses. how you decide to price things up is a different matter.

 

[RumRunner]

In a typical business structure does profit come separate from hourly rate and material markup? Or is profit simply generated from the two?

There are two different types of PROFITS.

Separating the two is crucial if you want to run the business and come up with a comprehensive tracking on whether you are making money or not--. It doesn't matter if you are a "one man show" or with hired employees
The two profits are:
1. GROSS Profit
2. NET Profit

Gross Profit is equal to Net Profit and equal to the cost of materials and labor also those necessary expenditures to run the business.
Do not confuse (or fooled by another term POSITIVE GROSS Profit.

Positive Gross profit doesn’t mean you are making money.

Review the PRINCIPLES of ECONOMICS and ACCOUNTING to understand the aforementioned narrative.
This is a subject included in passing the contractor’s exam for electricians pursuing a career in Electrical Contracting in
California.

Posts #2 and #6 explain it succinctly.

This is a response to your query : "is it only generated from the two?

 

[James L]

I think it's best to measure profits across multiple time frames.

Profit on each job
Profit for a month
Profit for a year

It can be detrimental to look at only one aspect.

Only looking job-to-job can put you on a serious roller coaster ride. Up and down with each customer.

Only looking year-to-year can make you lose sight of where each job is. As long as there's money in the bank you may not be concerned until it's too late.

As to the OP and where profit comes from, it partly depends on the work you do. I know guys who do large retail and say there's no money at all in the materials.

I know guys who do service work and have great material markups

 

[Omid]

I think it's best to measure profits across multiple time frames.

Profit on each job
Profit for a month
Profit for a year

It can be detrimental to look at only one aspect.

Only looking job-to-job can put you on a serious roller coaster ride. Up and down with each customer.

Only looking year-to-year can make you lose sight of where each job is. As long as there's money in the bank you may not be concerned until it's too late.

As to the OP and where profit comes from, it partly depends on the work you do. I know guys who do large retail and say there's no money at all in the materials.

I know guys who do service work and have great material markups

it's important to note that the overhead costs associated with materials for large projects are typically much lower compared to service work.

 

[busman]

I try to make markup on material pay for the following:

1) My time to research and acquire the materials.
2) Wear on tools (almost all materials require a tool to install them)
3) Vehicle costs to get the materials
4) Costs to return defective materials
5) Costs for callbacks due to defective materials
6) Costs for records and bookkeeping.
7) Profit

If I've done that right, then those costs do not eat into my straight labor profits.

Mark

 

[JoeNorm]

I try to make markup on material pay for the following:

1) My time to research and acquire the materials.
2) Wear on tools (almost all materials require a tool to install them)
3) Vehicle costs to get the materials
4) Costs to return defective materials
5) Costs for callbacks due to defective materials
6) Costs for records and bookkeeping.
7) Profit

If I've done that right, then those costs do not eat into my straight labor profits.

Mark

Do you have a fixed percentage for material markup to cover all these things?

 

[Omid]

Do you have a fixed percentage for material markup to cover all these things?

The benefit can be a set percentage, but I believe the overhead varies by the size of the project. However as the project size increases, the overhead also remains relatively fixed as a percentage. But for smaller jobs, the overhead can vary significantly.

 

[busman]

Do you have a fixed percentage for material markup to cover all these things?

No, I have a sliding scale. Markup on cheaper items is a higher percentage than more expensive ones.

 

[Sberry]

There are two different types of PROFITS.

I would say there are 3. First is necessary profit,,, which is enuf to stay in biz and then there is excess which is where the money is made. If eggs are a dollar and the cost is 90 cents no one goes in to the egg biz, you stay, you dont leave. Goes up to 125 and people start entering the biz due to some money left on the table after the necessary.

 

[Strathead]

I am going to send this in a different direction. What do you mean by profit?

Calculated profit from a job you have completed?
Estimated profit you intend to include in a proposal for work?
Gross profit, which is basically an adding up of the first one for all of you jobs in a time period?
Net profit, which is basically gross profit minus reinvestment?

Each one has a different answer.

 

[jaggedben]

Not sure what a 'typical' business structure is in this industry. However a typical contracting approach for smaller contractors is to estimate all the cost for a job, and then simply mark up a percentage for overhead and profit.

 

[dvcochran]

In a typical business structure does profit come separate from hourly rate and material markup? Or is profit simply generated from the two?

In the simplest terms for your question, profit comes from the difference in Your cost for labor and what you charge for labor plus material markup, minus overhead and fixed costs.