Smaller home improvement companies can often fall victim to an incorrect mindset: A goal to break even with (hopefully) a chunk of cash at the end of the month. That cash would then likely be used for operating expenses, and then the cycle restarts. MarketSharp Founder and Director of Business Development Tim Musch says this outlook immediately sets remodelers up to lose.
The problem with hoping to break even with a meager profit percentage is that it sets precedence. There’s no goal in mind, so there will be no goal to drive a team toward. “You can’t look at it that way,” says Musch. “You got to begin with the end in mind in your business, in all aspects, and that starts by knowing what you want profitability-wise out of your business.”
Musch says a solid share to strive for would be between 15% and 20% net profit for specialty home improvement professionals—and once trouble spots are identified within your processes, it’s an obtainable profit margin.
Data from the National Association of Home Builders’ Remodelers’ Cost of Doing Business Study, 2020 Edition, which analyzed data from the 2018 fiscal year, found remodelers averaging a net profit of just 5.2%. Musch says the two key factors that help remodelers achieve this goal are keeping marketing costs in check and ensuring your prices support the goal.
RELATED: Praying or Playing for Profit?
Add new comment
Related Stories
4 Steps to Prep Your Business for Contraction
How a remodeling company plans ahead for the worst of times (and the best of times)
Creating a Company Fire Drill: How to Prepare for the Worst
A disastrous fire could have been a lot worse if the business wasn’t prepared for the unexpected
The Fundamentals of Growing Profitably
On this episode of Women at WIRC podcast, Nip Tuck Remodeling Owner April Bettinger shares how she plans for her company's profitable growth
3 Things to Add to Your Construction Contract—From a Lawyer
Did you know you can add these three elements to your contracts?
Study Finds Remodelers’ Net Profits Declined
How far did net profits decline and what's influencing the drop?
The Home Depot Bets on Pros Amid Predictions of Flat Sales Growth
For the first time since 2019, The Home Depot’s revenue fell short of Wall Street’s predictions amid a general softening in the home improvement market
Indicators of a Softening Market and How to Prepare
Market conditions could be changing, but don't panic. Richardson shares ways to stay on top of market conditions and how to prepare for any potential softening down the road.
Grow Your Business Through Collaboration with Remodeling Peers
Remodeling Mastery Forums offers a unique business opportuniy for remodelers