How Much Is A Builders Margin

How much margin should builders be adding to their projects?
15%, 20%...25%?
It’s a question that has both divided and confused the industry since the dawn of time.
The answer is that it depends on the niche.
Large commercial builders reportedly operate on net margins of around 1%. Complete madness that exposes the company to rising costs and minor estimating mistakes.
However, residential builders enjoy far larger margins with most large companies consistently producing 10%+ net margins.
The reason they are able to produce double net profit year on year is because they get their ‘builders margin’ correct which is the amount of gross profit added to each job.
So, if you are the owner of a residential building company and you are not seeing a 10%+ net margin in your year end accounts, start by asking yourself these 3 questions;
Am I applying a Builders Markup or Margin?
Am I applying a minimum of 33.3% Builders Markup (55% for Remodeling Projects)
Am I investing 3% of revenue into marketing and advertising?
If the answer to any of these questions is no, then you know where to start!

[@julianfolk]

Thank you for the advice

[@simonoreilly5141]

Great advice, thanks!

[@cheesemaster113]

Historical it was 15%...now its about 54% ...around me maybe higher....its getting out of control in the US.

[@powshredder3716]

so you're saying on a million dollar home the gross profit should be 33% ? that seems greedy no?

[@Mech.01]

Very greedy indeed, doable but your reputation will plummet.

[@InnovativeBuildersmd]

yes the whole premise of the video is markup vs margin if the home is going to cost you 1mil to build you need to charge/markup 33.3% / 1.33mil to make a 24.9% gross profit margin. then subtract 14% overhead and you end up with a net 10% Net profit after its all said and done. We do 6-7mil a year with 12 employees and after hiring a bookkeeping team to really track every expense from Buildertrend our true overhead is around 14% I was shocked... our goal is 25-30% gross profit at proposal and with that goal we average 23-27% real data. we spend about 1% of revenue on advertising and are increasing to 2% this year.

[@powshredder3716]

@@InnovativeBuildersmd And what is net out of that 7 mil ?

[@J0rd4nBr0]

@@powshredder37169-13% net profit margin