Thursday 27 February 2020

What Profit Margin Does Each Division of Your Business Make?
What Profit Margin Does Each Division of Your Business Make?

Posted by at 10:36 AM

What Profit Margin Does Each Division of Your Business Make?

What profit margin does your water division, rebuild division, or mold division produce? Job costing provides the per job profit margin, but how do you get the division-wide profit margin of all similar jobs?

Xactimate charges are comprised of three components; equipment, material, and labor. Your Cost of Goods Sold (COGS) should track expenses according to those three components. Every job related direct expense should fall into one of those three components.

The COGS Chart of Accounts should look like this:

Water Mitigation

  • Equipment
  • Material
  • Labor

Rebuild

  • Equipment
  • Material
  • Labor

When you record an expense, it should be for one of your KINDS of money (a Division), and one of the three components.

Now, let's determine the division-wide profit margin … your total COGS for the Water Division is $227,359, divided by the Gross Income for the Water Division of  $829,312 = 73% gross profit for the Water Division.

Compare Division profits against industrywide profit benchmarks:

  • Water – 75%
  • Mold – 65%
  • Rebuild – 50%
  • Roofing – 40%

This snapshot of all similar jobs reveals your operational efficiency. We make money by maximizing the profit margins of the work completed.

How well are you doing?