It is crucial for everyone in a construction company to understand the financial basics of a project. Contractors have razor-thin profits and relatively high risk. > Different types of contractors such as GCs, general engineering, MEP and other subcontractors will have different levels of profitability. This is a general overview. > Each contractor will vary what they call direct costs, indirect costs and overhead. Pretax net profit as compared to how much capital (cash) they require is the best bottom-line measure when comparing. > For more financial benchmark information look at CFMA (https://dbmgt.co/2pDJpoU) or your CPA (https://dbmgt.co/2yh7mq5). When looking at millions of dollars it is easy to get lost in large numbers. Let’s break this down to a $1,000 paycheck. You would have $50 left over at the end of the week after you paid all planned expenses. This would have to cover taxes, unplanned expenses like a car repair and any discretionary spending like going out to dinner. Contractors don’t make money by managing millions of dollars in revenue. They make money through each team member managing the 480 minutes in a day and each dollar they spend trying to save a few minutes and dollars each day. https://dbmgt.co/2NTY7pw
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5yI always thought the best test of a companies viability and vitality is the after tax amount.