Hi Tim,
I'm currently collecting bids on a room addition,which also includes a bathroom and screened porch. I would like to know how much profit should a contractor make on a project like this. How do they determine their profit?
Trevia
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Trevia,
First of all you have to define profit. Are you talking about gross or net profit? There is a huge difference. Profit is also a moving target. It can be calculated any number of ways and it can be included in numbers that are part of the breakdown.
Gross profit often is a number that has to be included in bids to cover all of the soft costs that exist to run a business. That list includes, but is not limited to, insurance, estimation costs, replacement tools and vehicles, taxes, accounting, support office staff and net profit.
Every business should make a net profit. This money is often reinvested in the business to ensure it is thriving and alive when you need it down the road. Businesses that charge excessive profits are the ones that typically do not finish the race. The marketplace roots them out and tends to ignore them.
Tim Carter
www.askthebuilder.com
W3ATB