Gross profit margins for residential remodelers increased slightly in the 2018 fiscal year, but net margins have remained relatively flat in recent years, according to the National Association of Home Builders' (NAHB) 2020 Remodelers' Cost of Doing Business Study. The nationwide survey of residential remodeling companies is designed to produce profitability benchmarks for the remodeling segment. The 2020 study collected information for the 2018 fiscal year and compared findings to the fiscal years 2011 and 2015.
On average, remodelers reported $2.3 million in revenue for fiscal year 2018, of which $1.6 million (69.9%) was spent on cost of sales (e.g., labor, material, and trade contractor costs) and another $563,000 (24.8%) on operating expenses (e.g., general and administrative, finance, and S&M expenses, owner’s compensation). As a result, the industry average gross profit margin for 2018 was 30.1%, with a net margin of 5.2%.
[According to the study], remodelers have been able to effectively reduce their cost of sales (as a % of revenue) in recent years, allowing them to increase their gross profit margin up from 26.8% in 2011, to 28.9% in 2015, and then to 30.1% in 2018. Higher operating expenses swallowed up higher gross margins in 2018, however, and remodelers averaged a net profit margin of 5.2%, essentially the same as in 2015 (5.3%), but significantly better than in 2011 (3.0%).
In terms of the balance sheet, residential remodelers reported an average of $421,000 in total assets for fiscal year 2018. Of that, $220,000 (52.3%) was owed as either current or long-term liabilities, and the remaining $200,000 (47.7%) was owned free and clear by the remodelers. Looking back shows that remodelers’ average total assets increased by more than 50% from 2011 to 2015, rising from $269,000 to $414,000. By 2018, however, average assets were only 2% higher than in 2015, at $421,000.
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