Finding Your Profit Margin

Whether you’re running a 50 man multi-million dollar shop, taking over an existing shop, running a 5 man crew, or just recently acquired your Master Electrical License and are stepping out on your own for the very first time, one thing is clear:

You must know your profit margin.

Being a smart, safe and knowledgeable electrician is key to completing quality work, but what does it take to run a profitable business? What jobs make your company the most money? How do you track your jobs? What costs do you track within a job? Many of us are working hard completing jobs, estimates, payroll, and on and on, but we have no idea how much money we are making……. or losing.

Lets look at those questions:

1. What jobs make your company the most money?

Not all jobs are created equal. Sometimes a $200,000 job can net the same as a $20,000 job. Sometimes you’re working yourself to the bone chasing several smaller jobs that net very little when you could possibly bite off one larger job and net more. You cannot be sure until you track the jobs you are completing. Once you know your numbers, you can focus on bidding the most profitable jobs and tailoring your business toward those jobs.

2. How do you accurately track a job?

At the end of the day, you’re tired and the last thing you want to do is sit down and build a spreadsheet to see how your job is looking. Within Electric Ease you can cost your job quickly and easily right from the same page you built your estimate from. You have a live look at both the progress of your project as well as where you’re ahead or behind. For example – say you bid forty 6″ can lights, but the report from your foreman is that there are 45. Did you miss five of them or do you need to issue a change order? Your employee’s time cards show 20 hours on site work – you bid 10. Do you need to talk to the employee about how they completed the work or do you maybe need to estimate more time on site work on the next bid? Tracking your job from the same estimate form allows you to see a constantly accurate picture of what you bid vs what you are installing.

3. What costs do you track within a job?

So many small pieces are missed when we look at job costing. Do you issue a company vehicle to your electricians? Do you pay into a retirement plan? Paid holidays and vacation? These, along with employment taxes and insurance, equal employee burden. Burden must be applied to your employee cost, otherwise you are instantly loosing money. The same applies to material. You must mark up your material and account for sales tax. When you purchase material, someone is handling and preparing it and you are paying that someone to handle it. That is a direct cost to your job and business. In order to recoup that cost, the material gets a mark up. Something many owners or estimators miss is sales tax. If you pay sales tax on your material, you should factor that into your material markup as well. Fuel? Permits? Specialty tools? All of these should be charged to the job they are aligned with. Once all costs are accounted for, you will have an accurate picture of what your margin is.

Incorporating job costing into quality electrical estimating software helps you look at your projects, including how much materials have cost, the amount of labor involved, and other similar data. This information will help you so that you can see whether small residential structures, industrial complexes or office buildings are the best bet for your company’s skill set and experience.

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