How big is the profit of a contractor?
How big is the contractor’s profile, often we hear our friends or relatives say: “Wow, this is a contractor…!! “Rich as of now … Ok, is this true…? Is the contractor’s salary really that big? Let’s talk now…
The facts to be given are operational profit ratio and ROE (return on equity) data. Many other profit ratios still exist, but the 2 ratios are considered quite representative. ROE is taken because ROE is an important indicator of the profit ratio. Is Means that if the ROE is good then the second ratio is also good. ROE is the rate of profit from business for all available capital. ROE formula = net profit/total equity (capital). ROE is an indicator of a business initiated by stakeholders Success is used to measure.
If we divide the sample into 3 main categories of project actors, ie: Contractors, Developers (Owners), and Suppliers/Manufacturers. We don’t show consultant planners or construction management (MK) because their business is small and has almost no listing on the stock exchange. Understandable Basically, these figures are taken from the financial statements of one of the brokers on the Indonesian Stock Exchange (IDX).
No statistical method is used other than the average. It’s easy, just look at the talking data. Not many samples are taken, just a few that one hopes to represent. Later we compare the risk ratio factors K will do with the levels of data they have to face in running their business. We will see the correlation.
Based on statistics, the following facts can be concluded:
- The average operational margin is the most developer and the least contractor.
- Average ROE, highest contractor, and least developer.
- The highest operational margin is cement suppliers, followed by Deep Over and the lowest are private contractors, cable suppliers, and BUMN contractors.
- Most ROE TOTO brand cement manufacturers and suppliers. While the lowest ROE INDAL brand is aluminum manufacturers, ceramics suppliers, and developers.
- Most stable and most profitable company manufacturer and supplier of cement TOTO brands.
- Companies that continued to reap substantial profits during the 2008 global financial crisis included SOE contractors, cement suppliers, Lionmesh assembled iron suppliers, TOTOTO brand sanitary suppliers, and Asahimas brand glass suppliers.
- The companies most affected during the global financial crisis were cable suppliers, aluminum suppliers, ceramic suppliers, and private contractors
Operationally the contractor’s profit is low. This can be due to the many risks faced by the contractor. Another possible reason is the very strict competition level. ROE could be higher because the contractor has invested enough capital to run the business Not needed. The presence of a down payment in a project does not cause a huge capital requirement. The higher ROE ratio can also be due to the contractor’s second income. Although it is higher than the operational margin, the contractor’s ROE is still lower than the average producer.
BUMN contractors generally retain risk cost (risk emergencies) of about 2-5% in terms of risk analysis over profit. Therefore, if a risk does not present unexpectedly or the risk is well controlled, So the profit plan remains relatively around 5-10%. If there is more risk, the profit plan will be less and so will the loss. Leave private contractors, the lower middle class can’t be reserved. So when an uncontrolled high-risk When happens, the contractor usually loses and the profit ratio falls.
A developer gets more operational profit (as viewed from operational margin), but his ROE is lower. This could be due to several reasons:
- Bank interest charges are quite high.
- Big initial investment.
- Other miscellaneous expenses.
The profit of most suppliers/producers is relatively stable and quite high. The reason may be that they were barely touched by project implementation risks. Order is a standard or clear picture. Production failure is likely. Except perhaps for ceramics producers where of production Failure rate is very high and their goods are broken or defective to some extent. Moreover, they sometimes manufacture types of ceramic that are not necessarily sold in the market. Probably the reason why their profit is good/unstable No. It’s different from cement which can’t be used without using unless the handling process is good so the cement hardens.
There is a question that has not been answered. Why do cement producers and TOTO producers make huge profits? I just replied that cement producer has a cartel element. Remember there is always a shortage of cement at the end and beginning of the year, resulting in a price increase a lot. Then there is TOTO because the product is good, and TOTO has no strong competitor Almost all building planning explanations use TOTO. Okay, it’s a little lethargy on prices (though up to 55% off) but it’s not 100% lethargy because they control the market.
We will present a research result that maps the level of risk carried by project actors associated with the level of creativity.
Consultants are generally at least at risk except for architect consultants. That is if overseas… Then M/E contractor/subcontractor is at a medium risk level. Developers, contractors, and architects are at higher risk. I think research results and reality in the field are reasonable. It shows contractors are high risk and have minimal ideas of creativity Was not profitable at all.
So, do you think the contractor is very lucky? Do you still want to retain your opinion or you are interested in becoming a cement supplier/producer that is profitable and against financial crisis? hehe…
How to Effectively Calculate Contractor Company Profit.
Contracting is a noble job, and many people dream of a contracting profession. The same contractor with abundant profits struggles with real projects. However, it’s not necessarily that more profit ends, there are several accounts that a contractor Should be done through.
For those of you who are running, or still intend to set up a business as a contractor, the following article will help you immensely. This article outlines the different ways to calculate the benefits that A contractor can get, and gives recommendations on calculating the most effective profit for you.
Standard 10% profit
The Indonesian government proposes that a contractor’s profit from wholesale projects be 10% of the general standard of project implementation cost. To simplify the calculation of profit per project, let us deviate from this commonly accepted standard.
10% profit is not standard. Some contractors fix a 5% profit due to marketing and business continuity. Some contractors fix profits up to 20%. Such contractors have no interest in making maximum profit for their customers has the power of an attractive bargain.
Mass infrastructure development contractors working for the government, typically receive 10% of the profit, which includes emergency risk reserves. The cost of risk is usually in the range of 2-5%, plus risks Depend on the results of the analysis. As such, SOE contractors’ profit estimates are relatively consistent, within 5-10% of the applicable price of the project.
For private contractors and medium project contractors, these risk costs are incalculable. Therefore, the profit percentage should be carefully calculated, as the midpoint between maximum profit, and reasons for marketing and business continuity. Looking. Midpoint is in the 10% range, not pushed too down or up, to achieve a reasonable percentage of profit, about 5-15%.
Indications of profit
The next question is, how does a contractor calculate a percentage of profit? There are several ways that cues can be. Here are three of them:
- Benefits of margin
This is the easiest way to calculate. Usually used in small to medium-scale developments. One percentage is achieved by comparing the turnover received with the total cost of development. Formula to achieve the percentage of profit The following is:
profit = business – raw materials (including operating expenses) – administrative and general expenses
For example, for example, turnover to build a luxury home of Rp. 5.5 billion. With raw materials (includes operating expenses) Rp. 4.8 billion, and general and administrative expenses of Rp. 200 million, bringing tomorrow to Rp. 5 billion. Then again Fixed profit Rp. 500 million. In this case, the percentage of profit is 10%.
These indications may refer to a contractor in determining the cost of the working budget plan – Implementation budget plan (RAB-RAPK) figures. Further, according to the above-indicated indication, RAB-RAPk will be the basis for calculating the contractor’s profit.
2. Return on Investment ( ROI )
Another indicator contractors can use to calculate profits is based on investment data. This method is still relatively effective. What a contractor needs to calculate is the amount of investment spent on the business. Yep, compared to the returns on investment again.
What is a return on investment? How much capital is spent on this business? What percentage of profit do contractors get if the difference between the two is calculated?
ROI calculations are commonly used in a variety of companies, including start-up-based companies. This method is typically used by companies as a bargaining force to achieve a destination in the stock exchange, but its application is contracted to contracting Can be done on business as well.
3. Period of payment
Another common method used by contractors to calculate profits is the payback period indicator. The first thing that is calculated is the total cost of the business, then it’s estimated when the business invested. returns. For example, a contractor estimates that from all his expenses, calculating the profit per project, he finds that in 2 years, the business returns on investment. Then the payment period is 2 years. Thereafter, Every profit that appears after 2 years will be counted as profit.
Keep up the benefits
After obtaining a percentage of profit on paper, the contractor needs to make various efforts, to ensure that the profits are not less than the listed figures. Low profit is very likely because such things are not wanted. For example fire disasters, community disruption, sudden rises in raw material prices, etc.
The contractor can find another space to generate profit. For example, by increasing work efficiency through the use of the latest technology, minimizing material residual (recycling raw materials from a previous project), and being a more professional arrangement of work, the time of project completion is on or before the scheduled time, thus reducing. labor costs.
Interested in building a business contractor? Here are the tips
Infrastructure development in various walks of life is rapidly massaging. Thus, the need for contractor services is rapidly increasing. Well, this opportunity certainly can’t be ignored. You can replace this business with profit. Building a contract business is a viable option for success.
However, many people don’t understand what a contracting business is. How to run it? Surely this business can’t go unnoticed. There are several tips to consider to be successful in the contracting field. If you are interested in building a contracting business consider clarifying the information below.
What is a business contractor?
Before filing suggestions, it’s good for you to know what the contracting business is. Well, contractors are often referred to as contractors as well. The contractor comes from the word contract which means contract or agreement. Can also be interpreted as a lease.
Thus, a contractor can be interpreted as a person or legal entity appointed or contracted to perform a work or order based on the contents of the contract won by the project owner. Where the project owner The owner may come from legal firms, government agencies, businesses, or individuals who have made a government appointment.
The official appointment includes project objectives, appointment rules, and order mentioned in the agreement and agreed upon by the owner or project owner with the contractor executing it.
Type of work under the management of the contractor
The contracting business is also known as Building Contractor Services. The types of business they do are quite diverse. According to LPJK or Institute for Construction Services Development, construction processing services have six sectors including:
- Architecture: Single housing, multi-residential houses, commercial buildings, outdoor sports training facilities, gardens, installation of building accessories, glass walls and windows, interiors, wood, metal, buildings, and various maintenance.
- Mechanical: thermal installation, piping, gas pipe, building fitting, elevator and escalator installation, thermal installation, vehicle construction, pipeline construction, production facilities, oil and gas storage, and construction work equipment service providers.
- Electrical: including power plants, new energy power plants, electrical transmission networks, power distribution networks, control and equipment installations, building and factory electricity, and maintenance.
- Civil: Roads, Railways, Airports, Flyover, Civil Drainage, Wires, Irrigation and Drainage, Dam. Demolition work, Land preparation, Stripping Dismantling, Foundation construction, Concreting, Steel construction, Other Special Applicants, Asphalting, and Maintenance.
- Related work
Environmental Management: oil pipelines and maintenance, gas pipelines, clean water pipelines, and lumbago treatment plants. groundwater excavation, forestation, and maintenance work.
Tips on Building a Business Contractor
Anyone can do being a contractor. As long as he has a strong desire to learn, although it is still less with experience. If you want to enter the contracting business, you should do one simple thing first. For example By building houses and shops.
This business will be dealt with successfully if you know the different tips for contractor business in the following reviews. Despite high technology and not complex analysis, contractor business will still be profitable. After full information:
1. Gain experience while working in a contracting company.
You can first start a contracting business by working for a contracting company. One to five years of work history is enough to find a simple description of a property business. From starting a company to running a business There will be ideas and strategies for it.
2. Building relationships with other parties
When working in a company, you should use the time to build good relationships with various teams. Starting with suppliers, clients, and architects. To build strong relationships it is best to complete the work on time and with good quality Jay. So, outsiders wish to work together again.
3. Develop a business plan.
Developing a business plan is very important before actually understanding the contractor’s business. Therefore, you can focus more on running the business and business goals can be achieved.
4. Obtain a business license
To be a successful contractor, of course, you must have a business license. Therefore, before actually establishing it, then register the company to obtain a business license. With this business license, the client will trust your company more. Thus, The contracting business will be more developed, smoother, and more successful.
You can choose to establish a CV or PT. CV is a company that has no legal existence. While PT is a company that has a legal entity. Laws regarding the establishment of PTs limited liability under PT Act No. 40 of 2007 Related to the companies.
For the CV itself, there are no particular rules about it. PT can be used for various kinds of business activities. Whereas CV can only do limited business activities such as construction, workshop, and industry. Trade, printing and services, agriculture, etc.
5. Review of Industrial Business Loans
In the contracting business world, the costs required are quite high. Including buying raw materials, paying subcontractors, paying for labor, and more. Business loans will guarantee a speed of money in a business so it can run smoothly.
The capital for a contractor’s business depends on the type of business. However, in general, this business requires an initial cost of around 10 to 50 million for the company’s CV or PT type.
However, based on law provisions, the authorized capital of a limited liability company is Rp 50,000,000, unless determined by law regarding the implementation of business activities in the Indonesian territory.
Of this investment, at least 25% must be held and paid by the founder of PT or shareholders of the company. The additional investment includes the lease of the company office and recruitment of employees as well as a reserve capital for project implementation requirements. If you want to give a capital loan to the bank, you can try posting tips here. When lending a capital loan to a bank or investor, you must prepare financial reports that convince them about the business you’re building.
Financial statements are the basic protections that can determine whether the business is healthy Willing or not and opportunities for growth in the future. Without good financial reports and bookkeeping, every business can’t transparently monitor the entire financial flow and you can’t measure whether your business is making a profit or loss.
To make it easier for you to create financial reports that are both practical and error-free, you can try using Accurate Online as an accounting software for your contracting business.
Accurate Online is an accounting software suitable for all kinds of businesses in Indonesia. It has been proven to be used by more than 300k users and has won the top brand award since 2016 until now.
6. Expanding the business of contractor
The next tip to becoming a successful contractor entrepreneur is to expand your business. Some things that can be done are by registering project tenders and being more proactive in the employment opportunities available.
7. Don’t stop promoting
To be a great contractor, you should always have promotions. That way, the contractor business services you create are more easily known to the public and widely used.
Some media you can use to promote a contractor’s business include magazines, brochures, electronic media, newspapers, company websites, and online. To promote, you should create ads that are as engaging as possible. So, people Will take more interest in the quality of your company.
The contractor business is not impossible for everyone. As long as you are willing to learn and improve your skills all the time. However, you also have to understand that there are obstacles and it is not impossible to fail. Building property of people and organizations With increasing desire, it is very possible to enter this business opportunity.
Building any business requires commitment and a high level of discipline, contractor business is no exception. Choose a contractor business skill you will engage in, so you better plan Be able to focus. Also, don’t forget to follow the business growth tips above, chances are you’ll build a successful business will be great.