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Discussion Starter · #1 ·
I recently priced a residential repaint at $1500 to paint ceilings, walls and trim in 3 rooms. By multi-tasking and working efficiently, my employee and I did the job in one 10 hour day. The customer was happy that we did it so quickly and clean.

I pay my employee $15/hr and myself $20/hr. We used a total of $150 in paint and supplies. I'm thinking that is $1000 in profit in one day. Is that how this works?
 

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I pay my employee $15/hr and myself $20/hr. We used a total of $150 in paint and supplies. I'm thinking that is $1000 in profit in one day. Is that how this works?[/quote]


I wish this was the way it works. Sounds great but I have the cost of insurance (medical and liability), employee taxes/workman's comp/SDI, advertisement, vehicle costs and wear plus many other hidden expenses that come with running a business.

I would hope to make a wage for myself of $400.00 for that day of labor.
Just maybe.
 

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I recently priced a residential repaint at $1500 to paint ceilings, walls and trim in 3 rooms. By multi-tasking and working efficiently, my employee and I did the job in one 10 hour day. The customer was happy that we did it so quickly and clean.

I pay my employee $15/hr and myself $20/hr. We used a total of $150 in paint and supplies. I'm thinking that is $1000 in profit in one day. Is that how this works?
Your gross profit was $1,000. Gross profit is revenues minus direct costs (labor and materials).

As others said, out of the gross profit you need to pay overhead (rent, advertising, insurance, owner's salary, etc.) and what is left is net profit.

A gross profit of about 50% is recommended, so you did well on this job in that regard.

Brian Phillips
 

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Discussion Starter · #5 ·
Your gross profit was $1,000. Gross profit is revenues minus direct costs (labor and materials).

As others said, out of the gross profit you need to pay overhead (rent, advertising, insurance, owner's salary, etc.) and what is left is net profit.

A gross profit of about 50% is recommended, so you did well on this job in that regard.

Brian Phillips
And is there a rule of thumb for net profit?
 

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And is there a rule of thumb for net profit?

I'm not sure....when does your profit margin become greed? If there is no profit there is no reason to stay in business. Have you ever given money back to your client for doing your job in less time and with less materials?

I'm not asking this because I am pious or a great model (God knows!). I sometimes struggle with this - just asking to see what others do. It's tough giving back when the customer is very satisfied. After all we have those job we know we should have charged much more. What would be your criteria of giving a refund?
 

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Discussion Starter · #8 ·
I'm not sure....when does your profit margin become greed?

The profit margin is what it is. I can try to make it better, that doesnt make me greedy. Maybe ambitious. Was curious what a general goal ought to be for net profit.

If there is no profit there is no reason to stay in business.

Unless you are interested in being a non-profit. Customers would love it. There may be some out here.

Have you ever given money back to your client for doing your job in less time and with less materials?

No. I'm trying to increase profits.

I'm not asking this because I am pious or a great model (God knows!). I sometimes struggle with this - just asking to see what others do. It's tough giving back when the customer is very satisfied. After all we have those job we know we should have charged much more. What would be your criteria of giving a refund?

I can't imagine such a situation. And I dont think that makes me greedy.
 

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Discussion Starter · #10 ·
I aim for 10%-15%. Any more, the better. Any less, I look around to see what happened or what went wrong.
Thanks Pro. People in my market that I talk to (who actually have financials) tell me that 10 is pretty average, 15 would be pretty good. As I try to understand my numbers better, I am going through the archives of previous year P&L's to see where we have been. I feel like I just got here.
 

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Your company net profit is what stays in the company coffers. Its usually 10%-25%. This is what pays for growth, new vehicles, expanded marketing etc. I think Walmart's net is 1%.

Billing $1500 with a 10% material cost factored is good money for a day. I shoot for $1000 per day per crew. My crews work eight hours.
 

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And is there a rule of thumb for net profit?
As a general rule a net profit of 10% is a reasonable goal. But there can be some situations that would raise or lower this.

For example, you are the sole owner of a corporation and the business turns a profit. The corporation will have to pay income taxes on the profit. If you pay yourself some of that profit as a dividend, the corporation is still taxed on the profit and then you are also taxed on the dividend. In that case, it might be better to pay yourself a bonus or a higher salary and lower the corporate profit.

If you have partners or shareholders who don't work in the business, but expect a portion of profits the above wouldn't work. In addition, your salary would need to be reasonable because of fiduciary responsibilities to the partners/ shareholders.

In both situations your long-term goals would also play a role in determining what net profit to seek. If you are trying to grow the business rapidly, a high profit margin might be required to fund the growth. If slow growth is the goal, then a lower profit margin might suffice.

Personally, I don't focus too much on net profit. I focus more on much cash-- directly and indirectly-- the business provides to me. I look at the total of my salary, the cash value of the benefits I receive, and the net profit. I prefer this number because it shows me what the business is doing for me. Depending on circumstances, the specific numbers may go up or down each year, but the total should be increasing.

Brian Phillips
 

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I aim for 10%-15%. Any more, the better. Any less, I look around to see what happened or what went wrong.
I like your figures Pro. Good to aim for. When I started business it only took a few jobs to learn how to estimate properly. The simple math is when you plan a job for 2 days and it takes you 3 days you work for free on the third day. I learned real fast.:)

Thanks!
Jerry
 

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I can't imagine such a situation. And I dont think that makes me greedy.[/quote]

Scott, I am not accusing anyone of being greedy and if some feel that I am I apologize. I meant no personal attack. Just curious. We all need to make a profitable income.

Jerry
 

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I make pure profit working solo. I like it that way better. Less complicated and no worries!
Are you saying you have no overhead? If so, then you are misinformed.

Do you advertise, have signs, or business cards? If so, those are overhead expenses.

Do you carry insurance? If so, that is an overhead expense.

Do you own a vehicle? If so, the wear and tear (depreciation), gas, insurance, maintenance, etc. are overhead expenses.

Do you have painting equipment? If so, the wear and tear (depreciation), gas, maintenance, etc. are overhead expenses.

Do you use any paper, or forms, or postage, or office supplies to conduct business? If so, these are overhead expenses.

I could go on, but the above makes my point. Unless you answered no to all of the above, you have overhead whether you know it or not.

Brian Phillips
 

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Discussion Starter · #18 ·
I can't imagine such a situation. And I dont think that makes me greedy.[/quote]

Scott, I am not accusing anyone of being greedy and if some feel that I am I apologize. I meant no personal attack. Just curious. We all need to make a profitable income.

Jerry

Jerry

Thanks for clarifying. There have been alot of cynical accusations flying around here the past couple of days in otherwise meaningful discussions. No offense taken!

Scott
 

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pintorpete:

I am a solo painter also. I have fuel, insurance on the vehicle, paint brushes, rollers, covers, caulk, filler, sandpaper, tools, equipment, time invested in working bids, city, state business license, liability insurance, lunch, hopefully some money for retirement, medical insurance for wife and I, work clothes, these just what I come with off the cuff.
We all have expenses.
 

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Discussion Starter · #20 ·
HP

Right on! Like many of us out here, I have been down the road solo and made the mistake of not knowing my costs or overhead, and therefore not charging nearly enough. Its fine to work alone as long as you understand that you still have to charge more than $15/hr. Its good to get that message out to guys that are just starting out with it.

Scott
 
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