NAHB: A Look Inside Builders’ Books

by Rose Quint — Eye on Housing

If you have ever wondered how much single-family builders are earning these days or how much profit is considered “average” in the industry, then a recently published NAHB study based on a national survey of single-family builders titled “The Cost of Doing Business Study: 2012 Edition” will help provide answers.

On average, single-family builders in fiscal year 2010 made $7.1 million in revenue, had $6.0 million go towards cost of sales, and slightly over $1 million towards operating expenses, which left them with an average net profit of $39,000 (before taxes).  In terms of percentages of revenue, cost of sales represented 84.7% of total revenue, which translates into a gross profit margin of 15.3%.  Operating expenses ate up another 14.7%, leaving builders with a net profit margin of only 0.5%.

The average net profit margin of 0.5% reported by builders in 2010 may be small, but at least it was positive.  The picture was quite different in 2008, when builders reported a negative net profit margin of 3.0%!  In contrast, the average net margin in 2006 stood at 7.7%.

Data also show that builders did some significant belt-tightening around operating expenses.  In fact, these expenses went from representing 17.4% of revenue in 2008, down to 14.7% in 2010.

As far as their balance sheet, builders had an average of $6.2 million in assets in 2010, $4.2 million in liabilities, and $2.0 million in equity.  Only 7.7% of their total assets was held in cash, while 69.7% was held as construction work in progress.

Builders’ balance sheets have shrunk by more than half since 2006, when they reported an average $13.0 million in total assets.  But liabilities have come down by even a bigger margin, going from $9.5 million in 2006 to $4.2 million in 2010.  As a result, on average, builders have seen their current ratio and debt-to-equity ratio improve significantly during this period.

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1 Comment

Filed under Construction

One response to “NAHB: A Look Inside Builders’ Books

  1. Thanks Rose Quint,

    NAHB has come up with the new edition of Cost of Doing Business 2014 edition with lot of new updates. You can have a look on those updates here : http://ebooks.builderbooks.com/product/cost-doing-business-study-2014

    Thanks
    Jason

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