Controlling the profitability of projects is essential. In construction, this means using indicators such as the margin rate and the brand rate. Here are some explanations that can help you improve the management of your costs and sales prices.

Understanding the Margin Rate

The margin rate is an important indicator of Profitability in construction. It reflects the portion of revenue that actually incurred to profits after covering costs.

Definition

The margin rate is a measure of profitability for a business. It Indicates The Amount Left After All Expenses Have Been Covered related to production and services, expressed as a percentage.

The different components of the margin rate

• Direct costs: They include labour, material and subcontracting expenses.
• Indirect costs: They include general and administrative expenses.

Calculus

In the construction sector, the margin rate can be calculated using the gross margin and the cost of production.

Formula: Margin Rate = (Gross Margin/Cost of Cost) x 100.

• The gross margin can be deducted from the sales price excluding VAT and the cost of production.

Formula: Gross margin excluding taxes = Sales price excluding taxes - Cost of production.

• The cost of production corresponds to the sum between the total outlay (Dry payout + Construction costs) and structure costs.

Formula: Cost = Total Disbursement + Structure Costs.

Example: Assume that a building construction project generates a turnover of €1,000,000. The cost of production is 950,000 euros. The net profit is therefore €50,000. The margin rate is then calculated as follows:

Margin rate = (50,000/950,000) × 100 = 5.26%

The importance of the margin rate in the profitability of a construction company

Construction is a sector where the management of costs, deadlines and risks must be optimal. The margin rate is an essential indicator of a company's financial health. It Shows If the Company Earns Enough for What It Spends.

A well-calculated margin rate makes it possible to better set prices, control costs and adjust strategies to ensure sustainable growth.

Understanding the Brand Rate

The brand rate is also an important financial tool. It shows the potential profit compared to the costs incurred.

Definition

The brand rate indicates the Profit That a Company Earnings to Make After Paying Production Costs. It helps determine the selling price of products or services.

The different components of calculating the brand rate

• Direct and indirect costs: Like the margin rate, the brand rate incorporates direct costs (labor, materials, subcontracting) and indirect costs (general and administrative expenses).
• Target profit margin: It corresponds to the profits that the company hopes to obtain.

Calculus

The brand rate is calculated based on the target profit and the cost of production.

Formula: Brand rate = (Gross margin excluding taxes/Sales price excluding taxes) x 100.

Example: Assume that a construction company carries out a building construction project that generates a turnover of €1,000,000. The total costs incurred for this project, including materials, labor, subcontracting, and other fees, amount to €950,000.

Gross margin excluding taxes = 1,000,000 - 950,000 = 50,000.

Brand rate = (50,000/1,000,000) x 100 = 5%.

The importance of brand recognition in construction

The brand rate is proving to be an important tool. It allows you to:

• Evaluate Profitability of your company in relation to other players in the same sector.
• Adjust your selling prices to maintain your competitiveness and maximize your profitability.
• Negotiate cheaper purchase prices with your suppliers, thus helping to improve your profitability.
• Make accurate forecasts based on the brand rate specific to your sector of activity.

A high brand rate indicates high profitability, while a low brand rate indicates more limited profitability. It is an important indicator for businesses because it allows Determine if they are making sufficient profits On their sales to cover their costs and generate a profit.

Comparison between margin rate and brand rate

The two indicators reflect different aspects of a company's profitability.

The differences between margin rate and brand rate

The margin rate Compare the margin to the cost of a construction site. The Brand Rate Takes into account the sales price excluding VAT of the work.

By analyzing the margin rate, a business can identify areas where it can improve its profitability. By Reducing Costs or Increasing Revenue. The Brand Rate, On the Other Hand, Affects Decision-making in terms of selling prices, with the aim of finding a balance between competitiveness and profitability.

What do the two rates have in common

• They are expressed as a percentage.
• They are calculated based on company financial data.
• They provide profitability information.

Thanks to Alobees, improve the profitability of your business

The Alobees construction site monitoring application is a tool that simplifies and streamlines the management of your projects. With its intuitive interface, it offers A Clear and Detailed View of the Progress of Your Projects. It thus ensures serene financial management.

Some of its features:

• Centralization of documents: Get quick access to all your important documents in one place.
• Off-road access: Stay connected and informed wherever you are, whether on the job site, in the office, or on the go.
• Communication: Exchange and share information easily to avoid misunderstandings and delays.
• Scheduling and organization of tasks: Plan and monitor the work accurately. Optimize the use of available resources.
• Management of interventions and timesheets: Consult the agenda of your employees in real time and control labor costs.
• Payroll variables: Simplify payroll management by simply retrieving the payroll variables of your field employees.

Alobees meets the specific needs of construction professionals by offering precision, efficiency and perfect control of construction sites. Try It Free for 14 Days and optimize the management of your projects!

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