As a financial instructor at the Certified Contractor's Network's conferences, remodeler Tom Capizzi has worked with more than 30 companies to improve their bottom line. The president of Capizzi Home Improvements in Cotuit, Mass., says only 5% of remodelers make an acceptable net profit.
In his experience, there are several reasons for the lack of profit. First, owners do not pay themselves a fair market value for their work. Their pay should be part of overhead.
Second, companies don't charge enough to make a gross profit on the job that will translate to a profitable company. “You can't beat overhead down to make a profit,” Capizzi says.
Third, owners do not know how to analyze financial statements and rarely do so as often as necessary. Having this information enables them to change systems or policies in time to fix problems.
Capizzi feels that most people spend their income. “Their business should be a cash generator,” Capizzi says. “Year after year that pile of cash grows to buy more assets to produce more income.”