Cost of running a renovation firm (2/3)
Previously, we explored the upfront costs of running a renovation firm. Now we’ll go through the monthly operational costs.
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Next, we will look at the monthly running costs involved!
Monthly running cost: $36k
There are four main monthly running costs: rental, staff, tech and marketing.
A. Rental: $5k
We allocate $5k for a 2000sqft space in Ubi, or a 1000sqft space in a more central area.
Source: Screenshot from CommercialGuru
B. Staff: $14.5k
A stable firm of around 10 IDs will require the following manpower.
This salary also includes the cost of CPF. For example, an individual earning $3k a month, costs an extra 17% to the company, at $3,510. This amount is significant for all business owners, and is often overlooked.
1 admin/finance person: $3k
This individual covers the billing, invoicing and payments of the firm. A firm can pay and receive payment easily from 50 different parties/suppliers/customers in any given month
1 operations person/site manager: $3k
This individual specialises in execution and running of sites. Some companies get the IDs to run it themselves, while some hire an individual to assist with this. The intention is to free up bandwidth for IDs to close more sales.
1 3D render drafter: $3k
Similar to the site manager, this person is in charged of drawing renders for the IDs. Of course, the IDs will give the direction, and this frees up bandwidth as well for the IDs to service homeowners.
Source: Deconstruct's renovation firms
1 marketer: $3k
The most important individual to scaling the business, this person is in charge of creating brand awareness and differentiate the renovation firm from the plenty out there.
10 IDs: $2.5k
Many IDs do not have a base salary. However, for new IDs, bosses might give them base salary, between $500 - $800, until they are "good enough" to land sales on their own. For simplicity, we assume half of them have a base salary of $500 (so $500x5 = $2.5k)
C. Tech: $2k
Tech costs refer to softwares to make the renovation process easier. Examples include softwares for instant 3D renders, standardized quotations across IDs, leads management etc. On average, we take about $2k.
Truth be told, from our experience, the stronger the back-end of a renovation firm is, the higher their service quality is, as everything is more organised. But of course, this isn’t a blanket statement.
D. Marketing: $12.5k
Marketing is single handedly the hardest part for any ID firm. How do you stand out, get customers, and gain trust?
Firms get customers through:
Referrals
Self-generated leads
Purchasing leads from renovation platforms
There are pros and cons of each, especially for renovation platforms, because honestly writing and claiming that your IDs & contractors are reliable is easy, but proving it is a whole new ballgame.
It's business ethics after all.
Referrals are “free”, but often comes after a sustained period of credibility, and of course cost incurred before reaching that stage.
The other two, to do their own marketing and generate their own leads, or to purchase leads from renovation platforms, for companies of certain size, often involve hefty sums of money, easily $10k - $15k per month.
This cost includes the outsourcing or hiring of a marketer, paid ads, video production, buying leads, brand awareness, photoshoots etc. We will take take $12k.
Some firms also choose to purchase accreditations from renovation platforms to make them seem "more reliable". We ballpark at $6k a year, which is $500 per month.
E. Miscellaneous: $2k
Anyone who runs a business will know, there will always be “random” costs that you need to account for. Company insurance, website hosting & domains, utilities, banking charges, gifts etc, the list goes on. We will thus lump it as an average charge of $2k a month.
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Next, we will look at the final, combined cost breakdown to run a renovation firm.
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