Break-Even Sales Volume by ProQuest


"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."

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             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       
             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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