Cost of running a renovation firm (1/3)
“Renovation firms are a scam.” “Renovation firms earn a lot of money.” “Everyone can open a renovation firm.”
Heard of all this before?
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Many people think this way, and no wonder, because of certain black sheep in the market.
In the first of our deep-dive series, today we will break down how much it costs to run a legit renovation firm.
First, we need to set the parameters.
This renovation firm has 10 IDs servicing homeowners
All works are outsourced (ie. not done by in-house workers, so hacking outsource to hacker, tiling outsource to tiler etc.)
The cost is estimated at run-rate (i.e. based on a stable, self-sustaining firm, not at the initial stage)
It is important to set the parameters as there are many variables involved. For example, a large majority of firms (90%) actually outsource their work, while the minority (10%) use in-house workers. Cost will vary quite a lot between a firm that outsources and a firm that uses in-house (obviously because one needs to spend $3,000 a month to hire a foreign worker while the other doesn’t).
Also, a firm at the initial stage will probably handle many things on their own, but this isn’t sustainable and over-time they will need to hire manpower to service various aspects of the house.
Hence, for this computation, we use the most common way, which is the outsourcing way.
Upfront cost: $120k
This is split into:
$40k for initial cash flow (eg. pay subcontractors and office supplies)
$80k for doing up the showroom
A large part of the cost actually goes into the showroom. We have never seen a successful ID firm without a showroom.
Why? First impressions count. The showroom is the best place to show off the kind of work you can do to impress potential customers. Most importantly, a showroom kinda proves to homeowners that you are a legit and trustworthy firm as nobody will spend so much money to do up a proper showroom only to cheat customers and run away with their money.
Next, we will look at the monthly running costs involved!
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