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do contractors make any profit??

D

derwen1959

Member
ivor from uk here and earlier on i was talking with a contractor who does baling and wrapping and digger work and fencing and forage wagon and I was surprised when he said he was busy but struggling to make any profit he said his diesel costs were horrendous and also bale wrap . he has 2 sons with him but one is getting fed up of very long hours in summer sometimes he keeps going around the clock
he bought an ex demo forage wagon 5 years ago and he is thinking of changing but it will cost him ?28000 to upgrade to latest model
 
Yes and no. Some do not have a handle on expenses so they do not charge enough. In the U.S. our income tax laws allow lots of deductions so you can make money but on paper show a loss or very little profit.
 
We build projects that range from a few hundred thousand to 30 million in size. All work is competitive bid public projects. We have done 20 million projects that barely covered costs and half million projects that made 20%. Depends on how competitive things are. We never bid below costs and have suffered layoffs as a result. When dealing with city officials they all assume on a large project the contractor is just rolling around in the money and think charge orders should be free - while the contractor is actually lucky to break even on the project and treat the change orders as the opportunity to make a profit.
 
Actually in the US the "tax" profit is probably a lot closer to actual than book profit. The primary difference in book and tax for a contractor is the handling of depreciation. Book depreciation allows for more deductions early in the life of an asset - while straight line (book) depreciates at an equal amount each year over the life of an asset. Tax is actually closer to actual - a new assets depreciates more when new than when its 5 years old. Bonus and 179 allow substantial deductions in the year of purchase - mirroring the cash position of the contractor. If I buy a $300,000 crane for a project I deduct $300,000 the year I spent the cash on it. Granted I can sell it for $200,000 a year later but if I do I "recapture" the expense and owe income taxes on the entire $200,000.
 
Like any business I guess. There can be a difference between "making a profit" and "making a living".
 
It is like going to a Casino, sometimes you win, sometimes you lose, if the winnings do not offset the losses you go out of business.
 
Exactly! He may make a salary way bigger than you could imagine yet make no profit. Just like how some non profit organizations have ceos taking home millions a year
 
Company I work for, the majority of our work is with the state, + 2 federal jobs I've got currently, and the multitude of county work we get. Not to mention a few larger GC's that require work from us, all in the same field. Diverse, but there is one common denominator - cost accounting, and projecting costs at completion at regular intervals to insure we have monitored the jobs closely once they commence. Everything is taken into consideration. Its a pain in the neck and the method of reporting/tracking is nowhere near streamlined, but the results are necessary or you would lose sight of which direction the job is heading when its too late to make changes to head off one going into the drink.
 
I had my boss tell in a company meeting a week ago that the company was not making a profit. Therefore the company would not be providing paid insurance to their employees.

The fact that there was a 'newly purchased but used' 30 ton forklift sitting outside. And a smaller 'newly purchased' used Toyota forklift, a newly purchased 22 yr. old MF tractor and a less than a year old Dodge 2 ton truck sitting outside.

So making a profit is all relative to who you are trying to impress, I guess.

. . . But all the tax write-offs sitting outside don't lie.
 
I can tell you from 40 years of being a business owner, that a lot of times the employees make more than the boss does. More than once I have have paid the bills and the employees on Friday and didn't have enough left over to buy a hamburger and a coke. I have always operated my business that the bills and the employees had to be paid first and if anything was left over,it was mine. Some days its chicken, some days it feathers. As far a new equipment, that is part of doing business. If you don't have the tools you can't do the job. Just because there is a new piece of equipment sitting there, it doesn't mean that there isn't a payment book to go with it. I have over a million dollars invested in my little business, my employee has a 5 dollar lunch bucket.
 
(quoted from post at 10:47:17 02/05/17) ivor from uk here and earlier on i was talking with a contractor who does baling and wrapping and digger work and fencing and forage wagon and I was surprised when he said he was busy but struggling to make any profit he said his diesel costs were horrendous and also bale wrap . he has 2 sons with him but one is getting fed up of very long hours in summer sometimes he keeps going around the clock
he bought an ex demo forage wagon 5 years ago and he is thinking of changing but it will cost him ?28000 to upgrade to latest model
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ver a period of time, if no money is being made, the business will disappear. So if still around, after financing runs out, then money is being made. Seems pretty simple to me.
 
It's human nature and part of owning any business. Some guys brag about how well they are doing right up to the foreclosure auction, others moan and cry all the way to the bank. The guys who complain the most seem to be the most well off.
 
Good ones do. If you have a lot of money tied up in equipment sometimes it's better to keep it busy for a small profit or break even rather than let it set.
 
I read a book one time about exhaust repair. The biggest thing I got out of that book was, never be the cheapest repair shop in town,be the highest. My shop rate was $100.00 an hour when the dealers were charging $80.00. I left for surgery, and the next guy would do anything to have a full shop.Two years later they had closed,no profit.
 
I don't know about those kinds of businesses but, EVERYONE I know personally, that is in business for themselves is rich and doing quite well
 
i learned a long time ago that anyone can start a business, keeping it going is the hard part. ive seen guys buy a new hammer and a new 4x4 diesel pick up , business cards and think they are now contractors.
 
Don't you just love paying taxes and keeping records? Federal, state, local, sales tax, property taxes. When I add all my taxes together, I'm lucky to keep 60% of profits. I'm glad I have a good CPA. Plan to print out my tax worksheet today and take it to CPA.
 
That is not quite a true statement. The worker in most cases brings his five dollar lunch box, and the skills required to do whatever project you put him on. Its not their fault your not making money. That's on you. jmho gobble
 
(quoted from post at 16:25:41 02/05/17) It's human nature and part of owning any business. Some guys brag about how well they are doing right up to the foreclosure auction, others moan and cry all the way to the bank. The guys who complain the most seem to be the most well off.
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Yup, that's the truth. Got a neighbor that cries poverty. But he's zipping around in a new Kubota side by side, has the latest and greatest tools, plenty of hired help, lots of this and that. Yeah, he's been in farming for his whole life and had the farm passed down to him, but he'll trash anyone trying to break into the game. And if you aren't milking, why, you just aren't a farmer. Gets under my skin after listening to it for a while. He's a good farmer, a good businessman, a great mechanic. But the guy has an attitude a mile wide.
 
Tomturkey. 95% of the work my shop does is for other small businesses. The #1 complaint I hear from them is that their employees couldn't care less if they make any money. The employees think the owner owes them a living and all they are looking for is quitting time and payday. As far as skills.I have trained more upstarts than you can imagine,at my expense, and then they quit and went out on their own.So I will stick to my first statement.
 
Exactly. We are relentless on the Project Managers tracking costs and making sure no one gets paid until performance is complete. All our contracts have a "paid when paid" clause - meaning until the city pays us for your work you do not get paid. When the city holds 10% retainage on the work performed we hold 10% of you payment. When the city pays retainage we pay your retainage. Cost reports with over a thousand line items are quite common for larger projects.
 
Agreed. Employers spend a lot of time and money training people so they have skills - very seldom do they walk in the door.
 
you said a mouthful ,../I ran home imp biznez , /and farmed ,. I hated one and luved the other/ well I like home improvement as a art ,. it stopped being fun whenever it had to be a biznez . farm aint much different, cept I have far less people to look after ,..keep having trouble with one guy ,,. ME ,.. old age has put its cruel fangs in me early ,. .I sleep later than I want to , feel tireder in the morning than when I went to bed,,. but boy back when iwas 45 yrs old , I could look backon 30 yrs of awesome productivity ,,i did the work of 4 men , but also i had good help ,.. trouble is they all went on , with my blessing, i must add , to start their own business . by the yr 2000 ,the previous 5 yrs that i did home imp , my hired guys frustrated me to my limits , i felt i was working for them instead of them helping me .with their underactivity ,being mostly overpaid , and being greatly under inspired,, i could not leave my best trained hep on something they knew over 4 hours without getting headaches from problemsthey cause d ,.. .it was kinda like bouncing a basketball ,. as long as i was there driving them they done ok ,,. as soon as i let go ,the ball rolled over to the side an stopt
 
(quoted from post at 15:29:05 02/06/17) We are relentless on the Project Managers tracking costs and making sure no one gets paid until performance is complete. All our contracts have a "paid when paid" clause - meaning until the city pays us for your work you do not get paid.
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That's what I did when I acted as general contractor building a house, when the bank accepted the stage of work that the contractor did and paid me, I paid them. Never had an complaints about doing it that way. I think they appreciated that I was financed and that they would be paid.
 
There is a lot of value having the cost accounting being part of the project managers role. I have worked for companies that all the accounting was done by others than the PM's, and surely I appreciated that as a career PM not having to deal with it, just abiding by the project budget and influencing the production I need based on same.

I'm still a PM with senior level experience, and the cost accounting we do at this company is not the easiest thing to learn or deal with, and has at times stressed me right out. I don't give up easily, but with the multitude of regular PM responsibilities besides, it interferes with my work and puts me behind, because they are time consuming for the larger jobs. If I am working on these cost reports, I cannot be distracted, yet we all know how that goes as a PM. The end result, you can't deny the value of that, its just the process of doing the reports by the means we use. I'd sure like a simpler way or to have someone else dedicated to do it with my input. Part of the reporting makes you think real hard about projected costs because there are variables, and if you don't know more than the estimate/budget yet, you have to improvise to arrive at an accurate prediction of what it will take to complete a given job, the larger ones are the most complicated too.
 
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