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Fix Your Default Net Profit for Estimates 

LMN's budgeting system is used to outline all of your expenses as a company including overhead but it is also working to help you build a net profit on top of what you have to cover in expenses.

Have you built a budget in LMN that has a net profit that you want to earn? Maybe it’s close, but not exact. Outlined below is how you can increase or decrease your net profit so you can get it exactly where you want it for estimating.

How to Increase your Net Profit:

Most businesses should shoot for a net profit of 10%, but that could be higher or lower depending on your specific industry. We recommend you should work on your budget to improve your net profit. Estimating will use your budget's net profit margin to price estimates. You'll want to work on getting your budget to a healthy net profit so that you don't have to override the default profit margin on every estimate you create. Improving your net profit can be fixed by one, or a combination, of the following methods: 

  • Charge more for your work - Increase your budget's sales, but don't increase your expenses. This is just like increasing your net profit on an estimate. 
  • Reduce expenses - Examine each cost budget to look for mistakes, duplication, and/or unnecessary costs. 
  • Reduce overhead - You can reduce overhead by eliminating/reducing overhead expenses, or by increasing your sales and spreading your overhead over more work. 
  • Improve Efficiency - The most effective way to improve profit is becoming more efficient. Improving efficiency is getting more jobs done with the same staff, equipment and overhead. Increase your sales goal and your forecast material expenses (if you do more work, you'll need more materials). Hold your other expenses (labor, equipment, subs, overhead) steady

How to Decrease your Net Profit

Improving your net profit can be fixed by one, or a combination, of the following methods: 

  • Charge more for your work - Increase your budget's sales, but don't increase your expenses. This is just like increasing your net profit on an estimate. 
  • Reduce expenses - Examine each cost budget to look for mistakes, duplication, and/or unnecessary costs. 
  • Reduce overhead - You can reduce overhead by eliminating/reducing overhead expenses, or by increasing your sales and spreading your overhead over more work. 
  • Improve Efficiency - The most effective way to improve profit is becoming more efficient. Improving efficiency is getting more jobs done with the same staff, equipment and overhead. Increase your sales goal and your forecast material expenses (if you do more work, you'll need more materials). Hold your other expenses (labor, equipment, subs, overhead) steady.

Changing your net profit in your budget no different than increasing/decreasing the price on a bid to get a different net profit. By adjusting your budget it decreases the amount of times that you will have to adjust each individual budget to get the net profit that you are looking for. So don't be scared to changed your net profit in your budget to get exactly what you are looking for.

 

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