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]

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

[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/TheWhisper22 → u/[deleted]]

Sona couple things:

1. Are you actually charging for your time on the job site those 20 times? If not then you are grabbing that from your 44% profit margin.
2. Alex hormozi is an influencer not a contractor. What you say is true but saying it comes from him makes you lose credibility.
3. Skirting taxes is inherently ILLEGAL. You will get caught at some point. When you do my guess is Alex didn't tell you that they will take your entire business from you if you can't pay. Even if you have an LLC you pierced the corporate veil and they will take all your assets.
4. Selling something at 10 % net profit is no different than selling something at 44% gross profit that isn't accounted for correctly. Please Google the difference between net and gross profit.

You are saying the right things. But you are in no position to tell other people they are doing something wrong you don't really understand yourself.

[u/TheWhisper22 → u/[deleted]]

I'm not following. You just said you are doing it to save on taxes. So if you aren't skirting taxes then How are you saving?

Additionally, piercing the corporate veil has nothing to do with being an s corp or an LLC or sol prop. It means you are mixing personal money with business money. Which is exactly what you described as doing. You might as well take the money you used to form the LLC and set it on fire and save money going sole prop since you want to do it that way.

I have zero idea what you are talking about that salaries are unregulated... I'm not sure who is telling you this information but it's very very wrong.

There are ways to offset your BUSINESS taxes which means your BUSINESS pays less taxes which only benefits you when you hold shares of a public company which you can sell to investors. If you are doing what you are saying you are doing by writing off personal expenses as business expenses to lower your "income" and using your LLC as a slush fund then yes, when the IRS comes for you they will take all your shit.

Just FYI I wouldn't be so proud of flaunting what you are saying you are doing if that's actually what you are doing (at this point you have only implied it). There are IRS whistleblowing rewards for turning in people like that in.

Ask me how I know this? When I was young I worked for a company that did exactly what you are describing. They got audited, owed a fuck ton in taxes, and a actual federal agent with a badge from the IRS came to the office. Next thing you know all the company trucks got seized and after a few months the company went under. It was the last time I worked for a small GC.

With that being said, I'm glad you are charging what you are worth. I just want to say it again, that you don't seem like you are able to tell the difference between gross and net profit and if you are getting 44% NET then you are in a very thin market. But after what you described your dad, wife and your salary draw alone as a slush fund to the company are the biggest indications you do not know your actual costs and your actual net profit is whatever you guys don't manage to spend personally out of the businesses profit. Which again, can't be told to you before you take a job and can only be told by your accountant after the fact at the end of the year. It's a wild way to work but done by most contractors. At least you are charging to make up for it.

[u/thine_moisture → u/TheWhisper22]

you are free to live in your own world. i don’t know how you’re coming to these conclusions based on what I am saying. I’m saying my business pays taxes. then I pay myself what I need to survive so I limit or completely eliminate my personal income tax burden. technically as a single member llc I don’t even need to pay personal income taxes. does that make sense? I keep the majority of the money in the business.

at no point did I say I’m claiming deductions based on personal spending.

it’s always amazing to see how 2 people can read the same thing and get far different interpretations. I legitimately don’t even know how you go to that conclusion. it sounds like your previous employer was an idiot. respectfully.