Average Net Profit After Taxes Equals 9.4% / Business Administration

August 29, 2023

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The residential construction industry’s average net profit after taxes equals 9.4% during 2019. The top four companies in the United States built and sold 151,366 homes during 2019 with an average sales price of $376,703. Each home netted after income taxes $35,464 of profit. This equates to an average net profit of 9.4% in the residential construction industry.

Is your construction company’s bottom line at least 9.4%?

After ALL taxes?

Well, the national AVERAGE for a contractor is 9.4% AFTER taxes!

YEP, that’s the 50th percentile bracket. The top 10% exceed 14% AFTER taxes!

General contractors average 9%. Trades and specialty contractors average at LEAST 11%. The top 5% of trades and specialty contractors have bottom line profits of at least 17%.

The profit is NET of an owner’s compensation package of at least $170,000 per year. Thus, a contractor with revenues of $3.2 Million should generate a $200,000 compensation package to the owner PLUS another $300,000 of profit after taxes. Altogether, an owner of a construction company should TAKE HOME at least $500,000 on revenues of $3.2 Million.

If you want to get there, then do something about it:

TAKE ACTION

This research ties to the following summary schedule from the publicly available financial statements and annual reports:

Name of Company 2019 Closings 2019 Sales 2019 Net Profit 2019 Average Net Profit
D.R. Horton 56,975 $17.593B $1.618B 9.09%
Lennar Corp 51,491 $22.26B $1.85B 8.31%
Pulte Group 23,232 $9.916B $1.02B 10.25%
NVR 19,668 $7.245B $880M 12.11%

This website has many articles within the Construction Industry standards section explaining the respective margins, mark-ups and expected net profits for the various residential contractors including new home, remodeling, restoration and trades. This site includes information pertaining to:

Estimating – proper methods, procedures and tricks;
Mark-up and Margin – learn and understand the difference and the best formula for your company;
Policies – policies that work and how to implement the corresponding procedures;
Accounting – provides best accounting systems and addresses methods used in the construction industry;
Job Costing – information about different tools and systems to record job costing;
Evaluation – learn how to evaluate results and implement lessons learned.

If you want additional information, go to the construction industry section of this website and read the material that best aligns with your information request. Act on Knowledge.