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NOW UPDATED FOR 2006!
The most recent benchmarking data for Building Contractors is now available, both in print and in downloadable PDF format, with your purchase of the Building Contractors Business Benchmarking Guide. (NOTE: 2006 updates not yet available in online HTML subscription version of this guide - please call MAUS Sales Centre on 1 300 300 586 for further info.)
This Small Business Profile presents the results of a survey of Building Contractors for the financial years up to June 30, 2004. The survey was based on 77 businesses.
Are you keen to learn some of the financial secrets of the trade, so youapos;re not just a victim of apos;boom and bustapos;? If so, youapos;ll need to make sure youapos;ve got a handle on a few things like:
- Getting new work and making sure you make money on it
- Juggling the mix of full- time employees and sub-contractors so that youapos;ll have flexibility in handling workloads, yet your costs will be predictable costs
- Watching the overheads
- Keeping an eye on the large amount of money youapos;ve got rolling around in the business so you donapos;t face financial surprises.
These things will take a bit of effort and some active management, but the rewards from following them through in the building industry can be very impressive.
These issues and more are all addressed in the guide, along with practical goals from the best firms, in an easy-reading style.
Survey Results
These are the results of a survey of building contractors. These results should not be considered to be representative of all building contractors in Australia. However, they will allow business owners to identify strengths and weaknesses in the ability of their business to generate revenue, control expenses and earn sufficient profits. This is done by identifying these elements of business performance and comparing them with benchmark performance levels currently being achieved by the sample of businesses in this survey.
Most of the building contractors in our survey were from the eastern states of Australia. New South Wales was the most heavily represented area, while there were no firms located in the Northern Territory in our sample.
Businesses from rural areas (population under 20,000) represented around 40% of the entire group with another 32% of businesses located in larger regional centres (population over 20,000). The rest were city-based businesses.
The following table will give you a snapshot of the variance in results found in your industry for various Key Performance Indicators (KPIs). Each KPI (shown in rows) should be considered independently of each other. For example, a business with a high percentage gross profit would not normally also have a high relative percentage of their income spent on wages.
For each KPI, the table shows the average, high and low results found in the business surveyed. The KPIs should not be 'added together' under the high and low columns as they do not necessarily relate to the same business.
The KPIs show the 11th highest and 11th lowest actual result for each performance indicator. The range of values shown therefore covers the middle 80% of reported results.
| Indicator | Average | Low | High |
|---|
| Gross Profit | 35.34% | 16.56% | 54.10% | | Wages & Salaries (staff only, not
owners) | 9.63% | 0.00% | 19.62% | | Materials Used | 41.30% | 19.32% | 59.48% | | Sub Contractors | 23.37% | 0.00% | 39.65% | | Vehicle Operating Costs | 3.11% | 0.50% | 7.99% | | Days' Debtors | 28 | 9 | 51 | | Net Profit (bos*) | 15.08% | 2.60% | 28.54% | | Hourly Charge Rates for Qualified Trades Staff | $34 | $25 | $40 |
*(bos) before owners' salaries
and benefits
So, how does your firm 'stack up' against these averages? These results will give you an idea of where your business falls in relation to the sample and give you a better understanding of your relative strengths and weaknesses.
The remaining expense items each represented less than 2% of total income on average; however some businesses reported some larger results for such items as:
- Advertising and Promotion of up to 2.52%;
- Accounting and Legal Fees of up to 1.98%;
- Interest, Bank Charges, etc of up to 7.65%;
- Licences, Permits and Subscriptions of up to 1.41%;
- All Occupancy Costs of up to 4.16%;
- Depreciation, Lease and Hire Purchase of up to 4.46%;
- Repairs and Maintenance of up to 5.61%;
- Staff On-Costs of up to 3.10%.
To summarise this, larger businesses had:
- Higher net profit per working owner
- Lower non-salary overhead costs
- Lower gross profit margins, resulting from both higher use of sub-contractors and relatively more spent on materials
- Better productivity per completed job (larger jobs).
The more profitable businesses:
- Had a larger turnover size, on average
- Had lower non-salary overhead costs
- Had higher personnel productivity
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