Cost of Doing Business Study, 2016 Edition

By NAHB Business Management & Technology Committee

NAHB's economics and business management experts collected and analyzed financial statements for fiscal year 2014 from builders across the country. They reported average revenue of $16.2 million, 19% higher than in 2012 and 130% higher than in 2010. The Cost of Doing Business Study, 2016 Edition provides statistics and analysis so you can see how you compare to other builders, whether you build two homes a year or 2,000. This one-of-a-kind resource discusses financial performance according to builder type and size, as well as industry-wide averages using these key indicators: Gross margin, Net profit, Cost of sales, Operating expenses, Financial ratios The book also includes 35 proven cost-cutting tips to reduce direct construction costs.

• Language: English
• Publisher: BuilderBooks
• Release date: Jan 1, 2016
• ISBN: 9780867187472

Book preview

The Cost of Doing Business Study, 2016 Edition

BuilderBooks, a Service of the National Association of Home Builders

Disclaimer

This publication provides accurate information on the subject matter covered. The publisher is selling it with the understanding that the publisher is not providing legal, accounting, or other professional service. If you need legal advice or other expert assistance, obtain the services of a qualified professional experienced in the subject matter involved. Reference herein to any specific commercial product, process, or service by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply its endorsement, recommendation, or favored status by the National Association of Home Builders. The views and opinions of the author expressed in this publication do not necessarily state or reflect those of the National Association of Home Builders, and they shall not be used to advertise or endorse a product.

©2016 by NAHB. All rights reserved. No part of this book may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying and recording or by any information storage and retrieval system without permission in writing from the publisher.

Produced in the United States of America

19 18 17 161 2 3 4 5

ISBN-13: 978-0-86718-746-5

eISBN-13: 978-0-86718-747-2

For further information, please contact:

National Association of Home Builders

1201 15th Street, NW

Washington, DC 20005-2800

800-223-2665

BuilderBooks.com

Contents

List of Figures

List of Tables

Acknowledgments

Introduction

1All Survey Respondents

2Builders with Land Costs

3Builders without Land Costs

4Combination Builders

5Small-Volume Builders

6Production Builders

7Builder Financial Performance by Region and Business Model

8Operations

9Historical Data and Trends

10Properly Focused Technology Can Help You Thrive

11Cost of Constructing a Home

12Subcontracting: Three-Fourths of Construction Cost in the Typical Home

Appendix I: Market Base Available Construction Cost Budget

Appendix II: 35 Tips to Reduce Direct Construction Costs

Appendix III: Items to Negotiate with Trades and Suppliers

Appendix IV: The Cost of Doing Business Survey Instrument

Appendix V: Detailed Tables

Glossary

Figures

Chapter 1. All Survey Respondents

1.1.Cost of sales, expenses, and net profit

1.2.Profit margins and owner’s compensation

Chapter 2. Builders with Land Costs

2.1.Cost of sales, expenses, and net profit

Chapter 3. Builders without Land Costs

3.1.Cost of sales, expenses, and net profit

Chapter 4. Combination Builders

4.1.Cost of sales, expenses, and net profit

Chapter 5. Small-Volume Builders

5.1.Cost of sales, expenses, and net profit

5.2.Small-volume builders with land costs: cost of sales, expenses, and net profit

5.3.Small-volume builders without land costs: cost of sales, expenses, and net profit

5.4.Small-volume combination builders: cost of sales, expenses, and net profit

Chapter 6. Production Builders

6.1.Cost of sales, expenses, and net profit

6.2.Production builders with land costs: cost of sales, expenses, and net profit

6.3.Production combination builders: cost of sales, expenses, and net profit

Chapter 7. Builder Financial Performance by Region and Business Model

7.1.Regional differences in costs and profit margins

7.2.Profits and owner’s compensation by business model

7.3.Balance sheet by business model

Chapter 8. Operations

8.1.Main operation

8.2.Years in the residential construction business

8.3.Average number of homes closed in 2012 by type of builder

Chapter 11. Cost of Constructing a Home

11.1.Size of single-family homes

11.2.Lot size of single-family homes

Chapter 12. Subcontracting

12.1.Number of subcontractors used to build a single-family home

12.2.How often NAHB builders subcontract particular jobs

12.3.Jobs where subcontracting share increased by seven or more percentage points since 1999

12.4.Share of builders who always subcontract particular jobs

Tables

Chapter 1. All Survey Respondents

1.1.Respondents’ profile

1.2.Gross profit

1.3.Net profit

1.4.Balance sheet

1.5.Financial ratios

1.6.Top and bottom 25%

Chapter 2. Builders with Land Costs

2.1.Gross profit

2.2.Net profit

2.3.Balance sheet

2.4.Financial ratios

Chapter 3. Builders without Land Costs

3.1.Gross profit

3.2.Net profit

3.3.Balance sheet

3.4.Financial ratios

Chapter 4. Combination Builders

4.1.Gross profit

4.2.Net profit

4.3.Balance sheet

4.4.Financial ratios

Chapter 5. Small-Volume Builders

5.1.Gross profit

5.2.Net profit

5.3.Balance sheet

5.4.Financial ratios

5.5.Small-volume builders with land costs: gross profit

5.6.Small-volume builders with land costs: net profit

5.7.Small-volume builders with land costs: balance sheet

5.8.Small-volume builders with land costs: financial ratios

5.9.Small-volume builders without land costs: gross profit

5.10.Small-volume builders without land costs: net profit

5.11.Small-volume builders without land costs: balance sheet

5.12.Small-volume builders without land costs: financial ratios

5.13.Small-volume combination builders: gross profit

5.14.Small-volume combination builders: net profit

5.15.Small-volume combination builders: balance sheet

5.16.Small-volume combination builders: financial ratios

Chapter 6. Production Builders

6.1.Gross profit

6.2.Production builders with land costs: net profit

6.3.Production combination builders: balance sheet

6.4.Financial ratios

6.5.Production builders with land costs: gross profit

6.6.Production builders with land costs: net profit

6.7.Production builders with land costs: balance sheet

6.8.Production builders with land costs: financial ratios

6.9.Production combination builders: gross profit

6.10.Production combination builders: net profit

6.11.Production combination builders: balance sheet

6.12.Production combination builders: financial ratios

Chapter 9. Historical Data and Trends

9.1.Summary data from The Cost of Doing Business studies

9.2.Cost breakdown of a single-family home

9.3.Publicly-traded builders

9.4.Pretax profit margins for publicly-traded builders

Chapter 11. Cost of Constructing a Home

11.1.Single-family price and cost breakdowns

11.2.Single-family homes sales price breakdown history

11.3.2015 Construction Cost Survey vs. 2014 Cost of Doing Business Study

11.4.Single-family construction cost breakdown history

Chapter 12. Cost of Constructing a Home

12.1.Subcontracting by NAHB single-family builders: history

Acknowledgments

The NAHB Business Management and Information Technology Committee sponsored the survey and this publication. The NAHB Economics and Housing Policy Group conducted the survey and tabulated the findings. The NAHB Business Management and Information Technology Committee compiled the manuscript. The NAHB Business Management and Information Technology Committee has jurisdiction over matters relating to improving the business management skills of NAHB’s builder members in order to enhance their competitiveness, profitability, and professionalism.

In accordance with the NAHB strategic plan objectives,