ECN Forum Forums General Topics of the Trade Business Related Discussion Lowballer or Overcharger

Yes, I'm just kidding.
What would be considered too much profit?
I've heard a lot of the fast food industries are making 20% net profit. Is this considered too much. I think most electrical contractors make much less than this even the ones with the full page ads. And we're not clogging our customers arteries.

Ever gone to the movies and bought a bag of popcorn & a drink?
I think they even charge little old ladies these prices. The might give them a seniors discount though.

[This message has been edited by A-Line (edited 12-15-2004).]

[This message has been edited by A-Line (edited 12-15-2004).]

It looks like we have differances in opinion of what a company should make. Maybe the differance is how some view their bisiness.

Some have a corprate view that the company is it's own entity who's goal is to generate a proffit for the investors after it pays the workers and bills. Others it seems that the bisiness is their job and the proffits are their income with almost nothing for the company.

A company that does not generate a reasonable proffit is not worth much more than accets at going out of business prices to an outsider, invester, or buyer. I would like to think that someday I will have something of value that can be sold for money twords retirement. A business for sale always has 3 numbers listed. Gross sales, net proffit, and assets.

A few corprate examples of proffit:
Ebay 81% gross 21.5% net
IBM 8.5% net
Home Depot 6.9% net
Abbot Labitories 15.9% net
Johnson and Johnson 19.9%
Nextel 24.4% net
Pepsi 13.8 net
Microsoft 21.4 net (5 year average 29.6%)
XCEL ENERGY (UTILITY) 10.4% NET
Dimler Chrysler 0.2% net (bad year)
You can find this about public tradded stocks at MSN Money.

Why would someone want to invest in a business that makes less than secured investments at a bank?

Here is an example of a job for sale:
ELECTRIC, PLUMBING & HVAC CONTRACTOR #601

OH
Listing Price $130,000
Annual Gross Sales $129,970

Business Description
If you are tired of working for someone else's future, or have been looking for a great opportunity to expand an existing business, we recommend taking a close look at this business. This company specializes in residential and light commercial contracting services that include heating, air conditioning, plumbing and electrical. One of the great advantages of this business is its almost unlimited amount of growth potential. The business is located within 25 miles of much larger cities, with a total population of over 1,000,000. Gross sales of $129,970 with an adjusted cash flow of $52,487. Total Asset Value of $34,000. Located in West Central Ohio. Ask for portfolio number 601.

Sounds to me like the owner is getting $52,400 gross a year and the biz makes $0.

Another one:
ELECTRICAL CONTRACTOR #550

MN
Listing Price $2,400,000
Annual Gross Sales $1,491,053
Franchise Distributorship Independent Business YES

Business Description
This business is for the serious buyer who wants an above average income, a company that will pay for itself, and still has a considerable amount of potential. Their focus is in electrical contracting, servicing, and repair. In addition, this business is located in an ideal area of the United States. They concentrate on the agricultural community of electrical needs. Their forte is grain elevators, feed mills and other related farm needs. The current owners founded this business in 1983, and they have decided to sell so they can slow down. However, they would like to stay on as employees for the next five years. With their 1/2 acre of land and a 4,000 sq.ft. building, there is ample room for expansion and additional sales and profits. Adjusted Cash Flow of $421,868. Total Asset Value of $374,701. Located in West Central Minnesota.

The listing price seems high but at least it shows a proffit on paper.

A lowballer bids out less then the job can be done correctly with a proffit after paying overhead, reasonable emploiee wadges, and overhead including legal requirements like permits, insurance, and taxes.

The only time I would say a customer was overcharged is when the work is sub standard.

Tom

Tom,
I used to be the type that viewed my company as a job and actually maded sure the company had no net profit to avoid corporate taxes.

Now I pay myself a fixed salary that is included as overhead and I work hard to make sure the company has a profit. I pay much of that profit to myself, put it's there.

Now I run a business that I hope to sell. It's hard to sell a job.



[This message has been edited by Electric Eagle (edited 12-15-2004).]

I think the average net profit for electrical contractors is about 2.8%. Not very good! The big contractor mentioned targets young housewives, not little old ladies. They are the ones making the household decisions while their husbands are busy at work.