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How do the profit margins work?

Last revised:
Friday, 30 July 2010

Answer

The information presented here is current for ShedTech versions 2.03 and earlier. In a future version of ShedTech, this tool will be extended to provide a great range of function and more accurate profit and loss statements. You should also check the System Number FAQ for related information.

You can load the following dialog by following Tools > Margins and Payments > Profit Margins

profitmargins

On this dialog there are 3 fields where you can type in values that are used when doing quotes in ShedTech. The actual value/margin used depends on the type of quote you are creating. On each of the property windows that are displayed when creating quotes, the very first option is the quote type, which can be:

  • Supply of Kit Only
  • Kit Supply and Erection
  • Supply, Erection and Slab
It is important to note that these margins do not have any direct corresponding relationship to the calculated quote amount and the ShedTech system number. These figures are only used to calculate your profit on the kit.

Normally once you work out what your margins are, you can set these values and then never have to touch them again. Every time you start a new quote these margins will then be used to calculate quote amounts. However, if you currently have a quote open and change these values, the current quote amount will automatically update with the new figures.

If you feel you need to discount or mark up a particular quote, a better way would be to overwrite the calculated price when printing the quote, rather than changing the margins, and then of course changing them back again after the quote is completed.

Supply of Kit Only

The Kit Only Margin is only used for this type of quote and works as follows:

  • Assume that the total cost of the kit for a quote is $1,000 ex GST.
  • Assume that you have entered 20% as the Kit Only Margin.

ShedTech will add on 20% of $1,000 or $200 into the quote amount as your profit.

 

Kit Supply and Erection

For this type of quote the Erection Margin is used and not the Kit Only Margin. A lot of confusion is raised when people enter this value expecting it to just cover the cost of erection. Currently this figure needs to cover the cost of erection and your profit margin on the kit.

Here is how to work out what erection margin you should enter.

  • Assume that you want to make 20% on the kit.
  • Assume that your builder is greedy and wants 25% of the kit price to erect the shed.
  • Assume that you want to make an additional 5% margin on the erection costs (because you can).

You should enter a value of 20 + 25 + 5 = 50%

Assuming you had a $1,000 kit price, ShedTech would add on 50% of $1,000 or $500 into the quote amount.

Of course this amount covers the actual 25% erection cost (to the builder) = $250, which then means you are making a profit of $250 on the job.

 

Supply, Erection & Slab

This type of quote uses the erection margin but only differs in that it adds on a price for square metres of concrete based on the width/length of the building. The price that you enter in the Slab Cost field is the price you wish to quote to the customer. If you can actually get the slab at a cheaper price, or are making a margin - hats off to you.

Assume that you enter $65 as the slab cost per square metre:

  • You are quoting a 9m x 6m shed = 54m²

ShedTech will add $65 x 54 or $3,510 to the quote amount.

 

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