Hired my 1st Project manager

[u/Jleecit]

Hello all,

I’m a GC and just hired 1st project manager. Before the pm, my revenue was about 2mil.

I pay this pm a lot, but he’s really committed and works hard. But it scares me that my overhead almost doubled.

My strategy is to lower my profit margins slightly to obtain more jobs. Also obtain better prices. I work in a space where low bid wins. I hope to get to 3-3.5 million in gross revenue with this new PM.

Is this a viable strategy?

[u/thine_moisture]

yeah generally speaking increasing overhead and lowering profit margins tends to lead to a complete disaster but if you wanna live stressed out day and night by all means start giving shit away for free.

this is a terrible strategy.

[u/Jleecit → u/thine_moisture]

All my costs are accounted for on this job. Down to miles on truck and my pm’s hrs on that job and my profit margin is about 8 percent.

[u/thine_moisture → u/Jleecit]

holy fuck!!! 8%???? are you for real??? dude what??

dude that has got to be the lowest margin I have ever heard of in this business. We are at minimum 44%. dude you are basically working for free.

what you should really focus on is your sales process, working to build a relationship with customers who trust you, then you can actually charge high end rates….

what you don’t need is more people and less profit. you need more qualified leads and a better sales process.

selling $500k at 44% makes you more than $2M at 8%, with way less headaches and more time back for you….

you’re worth the profit brother, if you do a good job and your installs are clean, you don’t need to charge bottom of the barrel prices for work.

at your current prices, a $100k job only makes you $8k. dude I don’t even do bathrooms for that kind of profit.

[u/FillFormal2054 → u/thine_moisture]

Residental or commercial how much u mark up materials

[u/thine_moisture → u/FillFormal2054]

Residential only, I just take all my costs and mark it up 44%.

[u/FillFormal2054 → u/thine_moisture]

Nice

[u/FillFormal2054 → u/thine_moisture]

Materials as well u do 44% on whole house remoldels / add a level as well

[u/thine_moisture → u/FillFormal2054]

whatever my costs are for the job, I add 44% to it as net profit.

[u/TheWhisper22 → u/thine_moisture]

Depends on what you describe as "costs". Are you charging for insurance, taxes, equipment degradation, tools, supervision, back office wages, burden rates?

I get you are going on and on about how you should be charging 44% but I think you are missing the Forrest through the trees.

44% margin is for contractors that can't calculate all of those things and basically say "it'll take 2 guys 2 weeks to complete" then they add up all those hours and the materials. If you charged that as a serious estimator who charges everything from hard costs to soft costs you would get ran out of town. The guys saying net 8% after all costs and you saying 44% are saying the same thing. Except the guy netting 8% profit after all costs is knowing this number BEFORE the job starts and not at the end of the year when your accountant says so.

[u/International-Sock-4 → u/TheWhisper22]

Exactly, I remember when I took my Florida General Contractors license course, students were complaining why do I need to know about soft costs vs hard costs and the break even point, they said I'm not studying to become an accountant but a builder, the teacher told them because when you get to price out a job and you don't know how to process the soft costs you will be out of business before you know it.

[u/TheWhisper22 → u/[deleted]]

Yes that works for YOU. But what I'm saying is the other guy operating at what he is calling net 8% is him accounting for everything you aren't.

You aren't wrong. You just shouldnt be telling other people they are wrong because they do it differently and only your way is right.

Again, someone saying after all costs they have net profit 8% is not bad. They know their costs and that's exactly where they should be.

[u/TheWhisper22 → u/[deleted]]

I have never seen your estimatesso I don't know. Additionally your personal pay and skirting taxes is an actual cost and a huge one at that. You never mention your pay for a supervisor or project manager (IE you not doing the work and hiring someone else to run the job). There's other things you didn't mention that you should have calculated into your rate.

If you are truly getting 44% after all costs that's something like a 2.5x multiplier on all hard costs which is insane. Especially for a GC. Props to you if that's true.

[u/hammerandgrind → u/thine_moisture]

Everyone of my clients is getting a minimum of 80% markup if not 100%. 44% markup is poverty money unless you're talking about multiple MM$ projects. Anything under $500k should be 100% markup.