The Financial Foreman Insights – Plumbing Part 4
The Final instalment in the series, if you would like a summarised guide click here and subscribe to receive more helpful hints. We will focus on the key numbers form all plumbers operating in the plumbing industry, giving you a true indication of how you stack up.
Profit – 12%
For every $100 in sales, the business should have $12 the bank left over. Is this your profit margin? If not let’s see why it’s different.
Wages – 28%
For every $100 in sales, $28 should be going to Wages. Be sure to include owner wages or what you should be playing yourself in this figure.
Purchases – 37%
For every $100 in sales, $37 should be going to Materials.
“Sole Proprietors drawing an income from profit can inflate industry profit margins and wage costs”
Other – 20%
Other is made up of all other expenses that make up the costs of running the business. I.e. Subcontractors (10%), Motor Vehicle Expenses (5%), Insurance, Repairs and Maintenance, professional fees etc.
For every $100 in sales, $20 should be going to Operating Costs.
Depreciation – 2%
Decline in value of equipment.
For every $100 in sales, $2 should be from the depreciation of equipment (non-cash item).
Rent – 1%
Most small contractors don’t rent out an office or warehouse space, so if you don’t you should see this amount left over in the bank.
For every $100 in sales, $1 should be going to rent.
What to do next
These benchmarked ratio’s give a good indication for improvement areas for your business. If Wages are too high, are your staff spending more time travelling to pick up supplies too frequently? If Materials are too high, have you got your Materials to mark up right? Or you might have issues with wastage of Materials. As accountants we love numbers, so if you have a question or something doesn’t quite add up feel free to get in touch and we can help get to the bottom of it.
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Disclaimer: This article should not be intended as your primary source of Tax, Accounting or Financial Advice. Always contact your Accountant for help.
An accountant with nearly a decade of industry experience, Joshua has worked extremely close with his clients, educating and guiding them with through building, growing and preparing their businesses for the future.