"Accurately forecasting can be kind of risky because as remodelers, we're risk takers," says Dan Mackey, CR, CKBR, GCP, CGBP, president of Daniel Mackey Construction, Inc. a design/ build remodeler in San Jose, Calif. "When we predict that a job is going to take 10 hours, and we do it in eight we make a little bit of money, but those times when it takes 12 or 14 hours, when we're working at our break-even pricing, then we've lost money on the job."
NA R I ON L I N E CERT IFIC AT ION Break-Even Sales Volume By Jon Minnick f a remodeling company a job is going to take 10 hours, this should be monitored from Quality and service will always I wants to stay in business, it must know and under- and we do it in eight we make a little bit of money, but those year to year. However, working at a break-even number doesn’t be a determinant for hiring a remodeler, but for a lot of people, stand its break-even sales volume. times when it takes 12 or 14 allow any room for error. the bottom line is price. This is the amount a company hours, when we’re working at our One way to factor in error “Knowing my break-even must produce and sell to cover its break-even pricing, then we’ve into a job is to look at the com- sales number has helped in run- overhead. This is neither a profit lost money on the job.” pany history and figure in slip- ning my business,” says Mackey. or a loss, just the price of staying To figure out a company’s page to the break-even number. “We know when we have a need afloat. break-even sales volume, manage- In other words, when a remodeler to hire more workers, and it also “Accurately forecasting can ment has to know what its costs consistently bids X amount of tells us when we might have to lay be kind of risky because as are. That is figured out by track- money on a job, but comes in at a somebody off. Your sales volume remodelers, we’re risk takers,” ing all of the company’s expenses less amount, then they’ve got that has to drive all of your financial says Dan Mackey, CR, CKBR, such as labor, insurance, associ- percentage as their slippage and decisions.” | GCP, CGBP, ated office costs, licenses, taxes, that has to be factored in. president of etc. — essentially all of the things Besides staying afloat, know- Daniel Mackey that it takes to stay in business ing the break-even sales volume is QR has teamed up with Construction, over the course of the year. From important during highly competi- NARI to create a convenient Inc. a design/ that a company can extract the tive times like now. With more way to earn credits toward your build remod- minimum costs for doing a job companies trying to grab smaller Recertification. Read these monthly columns and then eler in San Jose, and know what amount it will amounts of work, they have to take tests for CEUs at Calif. “When Dan Mackey need to make from that job. With know just how low they can www.qualifiedremodeler.com. we predict that fluctuating costs and overhead, go on prices to be competitive. CALCULATING BREAK-EVEN calculate this you will now need
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