By Craig A. Shutt
Consumables. Staples, nails, caulk and a wide range of other consumables that are used while installing fixtures and other materials often aren't included in estimates. In some cases, the number seems too small to add on, but if these aren't accounted for, their cost comes out of profits.
"You have to take a look at the cost of running your business and ensure you're charging enough to cover costs — and you have to know what all those costs are," she stresses. Too many remodelers think they're making more money than they are because overlooked expenses are draining away profit. That minimizes their chances to grow.
"Owners need to spend time working on their business, not just in it," she says. "Even if you're wearing all the hats, you still have to put a price on each of those hats, because sooner or later you want someone else wearing some of them while you do other things."
Don't forget to pay yourself
Sometimes the biggest of those hats — that of the owner — is the last to be considered. Too many small remodelers don't allocate a cost for their own salaries, taking their pay from the company's profits or not at all. "This time isn't free," says Shiner. "It's fine to consider it 'sweat equity' you're putting into the company, but it's still a cost." The remodeler thinks he's making money because he deletes this expense, as well as his wife's time for handling his books, making out invoices and similar activities. But at that point, he's giving it away for free, not putting it back into the business.
If no salary is included in estimates, there will be no way for the remodeler to later hire someone to handle these duties and allow the owner to expand the business. "Determine a cost if someone else were doing what you do, and factor that into your estimates," she suggests. "You don't have to take the money; you can put it back into the business. But unless you charge for it, you'll never change it."
A similar problem arises for remodelers working out of a spare bedroom or basement room. They're saving the cost of rent, but they aren't charging a sufficient amount to ever save enough to afford a separate location. Once the company is established, such cost-cutting keeps the owner locked into a situation with no funding to change it. Charging less than rent would cost — but charging something — ensures a better profit on the job.
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