I had lunch with an old friend of mine last Thursday. He owns a small company that does millright and pipefitting in industrial plants.
He was describing his latest job and was telling me what his net profit was per week. After we parted I was thinking maybe I am in the wrong business as he seemed to be making so much more than I am.
I went home and it hit me that he had 5 guys working on the job so I did the math and the net per hour per man is less than what we do. Curious to this information I used the numbers an electician friend of mine had given me a while back and found the same. Called a couple other friends, one an insurance agent and again found that he makes close to the same on a given week with his 3 employees and himself.
My thought process is and what I started thinking about is that the only real way to increase profit to any significant level is to either be a specialist in a high demand profession of the moment. Or it simply takes more people to raise your true net profit to any degree. And that most small businesses are in that same boat. Unless they happen to be in the demand of the moment position, like generator sales in 1999.
Anyway maybe I am thick headed (hold that thought!) and maybe this whole train of thought has already occured to everyone else but its new to me. DanT
Replies
If you maintain detailed records of job costs and revenues, you can start to figure out how much a carpenter can make you in a week or a year. A business coach who works with contractors around the country could easily give you some average numbers. There's no way to raise that profit-per-employee figure much above the industry average without being the superstar contractor in your area, commanding above average rates. A few guys do that, but when I've looked at the various 'big 50' and 'big 100' types of surveys that come out in the trade mags, the profit per employee figures are pretty consistent.
Subjectively, the contractors I know and have known who have more guys are making more money, living in bigger houses, buying investment properties, buying office and shop space for their businesses, developing land, sending their kids to year-abroad programs from school, and so on. You need to have more than a few employees to start approaching that level of income... start running 10-20 guys year in and year out and you're either making well into 6 figures or something's wrong.
You could also specialize. When radiant heating started happening, there were a few guys who did it. Now every plumber does it. If you can do elaborate Venetian plaster finishes, you will not have much competition and can charge a little more than other trades. One good way to specialize is to do something that's not that much fun but is absolutely necessary.... like replacing water heaters. I know a guy who has a business doing nothing but that. He has it down to a science. Several vans and nothing but mid level plumbers. Call after midnight... no problem. He makes money. So do the guys that do big concrete jobs... lots of hard work, lots of laborers, lots of dirt to eat and rebar to lug. They make money.
Us guys who like these plush, arty "high end" interior remodeling gigs... most of us never make that much... unless we get 10 guys doing 7 jobs all at once.
Us guys who like these plush, arty "high end" interior remodeling gigs... most of us never make that much
Not necessarily true. How many times have we read here from HO's whoi have trouble getting a contraqctor to respond with a bid, or sometimes even to show up to discuss the project? From that, and personal experience, many times you can set the price to whatever level you want. There have been stories here from contractors who submitted what they thought was a high bid, and it was accepted without a blink. I bet Sonny Lykos makes a decent profit on his jobs. If you do good work, and get good referrals, the profits are there.
I'm sorry, I thought you wanted it done the right way.
No argument here... I just think that guys who focus on building more sales and a larger crew are more likely to make some dough. Also more likely to eat the big one if they do it wrong.
That's kinda my opinion. I think at some point, more money is just going through your bank account, not staying there. Same money less control.
You and David are right in your thinking . You both already know that.
I almost hate to respond to this in my own way.
You already know how to up it from labor billings. What was it" you " said ?
Real estate will serve what ever need you happen to have because its so flexible.
That may not be exactly it but Its very close.
I dont think investors fall into those categories and you are as good as your are in the business. No better , no worse. Get up in the morning with a worm in your lips and crash to a pillow at night from working the phone and calulator and its up to you what you want to make. Keeping our eyes open and our mind fresh to react to a good solid business deal sure helps. I sent you an email where evidently I was sleeping at the wheel. Im still trying to recapture it after the absense of thought. I laid an offer Friday at 4pm for a cheaper amount but it probably wont go because they want a lot more now than they did at auction. My timming sucked. I should have pulled the trigger as my mind should have thought ahead to capture a great deal! In stead it got cooked in the squat and never rose in the baking. Flat bisquits arent very good.
Tim Mooney
Tim,
I didn't recieve an email, did you send one recently? Need my address? DanT
When that offer is done , Ill post the results in our folder.
Basis to the story I missed a 30 some odd thousand dollar deal to the bottom line. That would have put me at 75 so far this year. Im trying to recapture it. I shoulda had it in and in the boat. Stupid . If I had been on my game it would have been a dead mortal cinch.
I think if you are looking at more money, thats the direction.
You cant make any money working all the time. Thats what happened to me above. I was trying to make 500 while I was losing 30 thousand and change! Real damn smart I am.
Tim Mooney
I hate to be just plain rude, Tim. But, just what exactly in hell are you talking about?
MikeVB
Sounds like he couldn't see the forest for the trees.PAHS Designer/Builder- Bury it!
I was talkin about the prize of eggs in China not being worth the wear and tear on a hens azz. <G>
Seriously, Mike was talking about making more money with a larger employee base . Hes also talking about running a customer service oriented business that hes also doing .
What he didnt tell you was that he is an investor and a lanlord. He has more choices to make more money than sell more work.
My point to him was that he might make more easiar with his investments, not his customer service business . With a larger business comes a higher over head with more self involvement .
Selling work is not the only way to make money in this business. Doing it for your self can be more profitable. And other ways , but the skill to build does not end with selling that sevice to others . You can reap rewards your self and keep all the profit.
With out going into detail, thats the short of it. But let me bring up a couple of points since Vatom thinks Im having trouble with my eyesight.
Would you rather take a job for 1 million a year than a penny the first day and double it for 90 days?
A lot of times people get short range eyesight speaking on the subject. Let us try and double our business so we might make twice the money. Lets just say since I ran a retirement thread, a few people thought 200 thousand a year to retire on was ridiculus. That much money just isnt neccesary or what ever . Mebbe because its not in range of future retirement plans. What would you say if I said that with the same effort made to double a business to say 200 thousand a year , you might be able to make it 1 million a year ? You would think Im crazy and cant even evaluate a tree . So , I wont tell you that . What I will tell you is that people make a lot of money on what tradesmen build. Have you ever thought about being that person along with the one you know you are now?
Im sure Dan understood my thread and my opology for making it in general terms.
Tim Mooney
I was trying to make 500 while I was losing 30 thousand and change! Real damn smart I am.
Is what I was referring to. And eyesight, or foresight, has a lot to do with it. Like Mike, I have no clear idea what you're writing about.
Metaphors are fine. But they're only metaphors.
If your main point is to be an investor rather than only a worker, well, duh!
Something I learned a long time ago from watching financially successful people was: there are two main methods for earning wealth. Successfully have a lot of employees, or know how to do something that pays very high fees. Both work.
Investing is a total other picture. And something everyone should participate in.PAHS Designer/Builder- Bury it!
8
I was trying to make 500 while I was losing 30 thousand and change! Real damn smart I am.
Is what I was referring to. And eyesight, or foresight, has a lot to do with it. Like Mike, I have no clear idea what you're writing about
OK, glad you asked . Now I can answer instead of mind reading.
I was "caught " working for wages with my mind on that job while I missed an auction where no one showed up. I could have had the house for the opening bid. From the opening price , I determined that I missed a 30 thousand dollar profit deal by not buying it .
My point to that was that we choose how we spend our time and our time spent can determine differences in profit .
Dan T started the thread and brought the more people the merrier up. Dan T is also an investor and a lanlord in addition to the customer service business hes having so much fun running .[read other thread]
I posted my response and should have emailed him privately. Apology again for the general answer. Dan T has several choices for making more money . That was my main thought to him.
If your main point is to be an investor rather than only a worker, well, duh!
I never said that or meant that . You could have waited on my answer since you took the time to ask. I dont have a clue where you had the right to say that after what I wrote.
You could have waited on my answer since you took the time to ask. I dont have a clue where you had the right to say that after what I wrote.
You're right. But you did dramatically post twice before finally explaining. There were at least two of us who had no idea what you were talking about.
Clearly my assumption was wrong. Without an explanation, I thought you were taking the common line about the choice of working for the man, or being the man. Sounded like you wasted your time making 500 when you should have been pursuing 30k. That's not quite right.
Now that you've explained, you merely didn't take the time to investigate the possibility of the 30k. Unless you could not have made the 500 except that morning, it was not a dichotomy, which is how you sounded. Nor was that 30k assured. On another morning, with another bidder(s), it wouldn't have happened.
That's quite different. My apologies for ruffling feathers. I follow a lot of leads that mostly go nowhere. Generally enjoy myself along the way and never worry about losing the time. Occasionally one will pay off nicely. I'm also quite happy to work hourly on many occasions. Keeps the performance pressure low on both methods. And I have on more than one occasion stepped up and bought real estate low. Last time returned 150% in a few months. Could have been faster, but I dragged my feet to closing.
This week I spent considerable time on yet another house tour here. Their land is already purchased, they have no deadline, will definitely require substantial help building, and loved our house's performance. I wasn't looking for work, but that's the prospect I always pay attention to. If it doesn't work out, that's OK too. But to ignore the potential would be a mistake, not unlike yours. PAHS Designer/Builder- Bury it!
Have'nt you guys ever heard of making money by managing other peoples businesses? (as in General contracting) I've done $300,000.00 so far this year, and with the contracts I have out there I'm on track to do about 900,000 this year. Guess how many employees I have..... One, part time laborer. I can still be totally involved in the design and construction of the projects I have, but at the same time stand back and let dozens of other people get their hands dirty, while making money off their work. I still do the fun projects I want to do (like the two story stone, log and timberframe entry for the next house I'm building) but at the end of the day I don't have to worry about how my twenty employees will feed their families next month. Have you ever read the E-myth Contractor, it's a great book for getting new ideas into your head. You're probably thinking I'm some business suit wearing schmuck, but beside the fact that I don't own a suit, I was a lead carpenter for several years before I realized there was more out there. I've just realized I would rather be a successful businessman with a carpentry hobby, than a carpenter with a miserable business hobby. Hope I don't come off sounding like a prick, I just wanted to express my opinion that there are much easier ways to make money than by having gargantuan crews.
Take care. Josh
Edited 5/24/2005 2:20 am ET by sunny
There you go. The other method I mentioned.
I learned a long time ago that I wasn't good running much of a crew. No ambition to compete with sunny and I much prefer smaller scale, but the same process works well for me.
Was awakened this AM by a GC worried that he wouldn't be able to count on me for help with a commercial project in town that he showed me last week. "If you've got the money, honey, I've got the time...." He has the crew that I don't want to supply. I'm a little better figuring how to get kinda complicated things done. This particular project is. We've worked together several times in the past. Works for me. And he gets to deal with the archy. PAHS Designer/Builder- Bury it!