Fair Market Price
This is something you’ll have no contol over but it’s imperative you know what each trade is costing as a % of the job. Stats are available when you are starting off from publications like Rawlinsons and Cordells.
If you pay the fair market rate you won’t go wrong. If you pay over your popularity will increase but your sales will drop. If you don’t pay the going rate you won’t get the trades when there’s a lot of work around like some trades at the moment.
So let’s start with the trades
Over time you will have these % to 2 decimal places and know their accuracy.
There’s loads of software out there all claiming to be the best but what is right for you will depend on what type of work you are considering doing.
With the the type of work the costs can vary greatly. Alterations and additions will have a lot higher % for labour than say new housing. With say a $100K job the building cost will be somewhere between $75 and $80K and the labour component could be around $41,500 with materials around $36,500.
You will know these numbers when you have undertaken a few similar projects and have empirical data but you can get a good idea from the net.
Now let’s look at the overhead
With technology changing by the millisecond (luckily for the better, faster and cheaper) overheads are changing too.
People expect electronic payments.
Fuel and oil will decrease also, but how much electric utes will cost to run, who knows. We can expect a carbon tax if we don’t upgrade though, it’ll be like smoking, the revenue that’s good for our health.
That’s about cost plus 20% to break even.
It’s best to pay yourself a wage for any time you spend on the tools and similarly quoting, ordering materials etc. at least equivalent to what you would pay someone else. That way you’ll know what you make as a builder.
The 5% profit is over the costs i.e. the money you make on the tools is not in the profit margin.
So with a base cost of $78K in the above example and a selling price of around $100K that gives a 22% gross profit margin. About average.
That’s cost plus 28.21%. About average.