At the Association of Professional Builders, we’ve created levels to determine exactly what makes a professional and successful building company.
Our Professional Builder Levels are all based around our fundamental belief of never scaling an unprofitable building company, as well relying on financials to make data-driven decisions.
Take a look at our levels below to see where your building company ranks.
Calculating WIPAA Accurately Every Month
The Work In Progress Accounting Adjustment (WIPAA) is the most important figure in a building company’s accounts. If it’s missing, or not calculated correctly, WIPAA can and will silently destroy building companies. In order to reach Level 1, builders must accurately calculate their WIPAA each and every month.
Enough Cash To Cover WIPAA Liability
Running a building company is cash flow positive and your WIPAA is essentially other people’s money (OPM). So in order for your building company to be in a sound financial position, you must hold enough cash reserves to cover your WIPAA liability.
High Converting & Content Rich Optimised Website
Just having a website isn’t quite enough. For builders to reach level 3 they must have a website that has been optimised to generate leads by following the website training included in the APB Membership portal. In addition, the website must be content-rich with a blog section that includes articles that provide helpful information for consumers thinking of building a new home.
Invest 3% Of Revenue Into Marketing & Advertising
Initially, most building companies will need to invest 2% of their revenue in content creation marketing, things like website creation, photography, videos and brochures, and just 1% into paid advertising. As the company grows, the ratio will swap to 1% content creation and 2% paid advertising. But, in order to reach level 4, builders will need to invest 3% of their targeted revenue for the next 12 months into marketing and advertising.
Gross Margins Exceed Industry Benchmarks
When a building company’s gross margin exceeds the industry benchmark for their niche, they reach level 5 of the Professional Builder Levels. If you’re specialising in new homes, your gross margin needs to be above 25%, and in excess of 33.33% for remodeling. But don’t forget, that’s margins, NOT mark up!
Net Margins In Excess Of 10%
In order to be in a position to grow your building company safely, securely and profitably, your net margins need to be greater than 10% after all expenses – including drawing your market salary as the owner of the business, which tends to equate to 5% of your revenue.
Have A Sales Manual In Place
Successful building companies have a documented sales process, so in order to reach level 7, you must have a complete online sales manual for your building company. The sales manual should include the full procedure for the building company’s sales process as well as links to detailed procedures and scripts for each step.
Have A Company Manual In Place
A company manual is important because it ensures your building company always has room to grow and every team member is kept accountable. In order to reach level 8, your building company must have an online company manual created that outlines the job descriptions and KPIs for every existing and planned position in the business.
More Than 3 Months Fixed Expenses In Working Capital
The financial health of a building company is what determines if the business will make it through a downturn. To become a level 9, building companies must focus on protecting their business by building reserves and have the cash for at least 3 months of fixed expenses in working capital. This is just the beginning, the goal is to get 12 months of fixed expenses in your working capital!
>10% Net Profit & A $500K Salary
Level 10 of the Professional Builder Levels is the ultimate goal for all building companies. Level 10 builders have reached 10% net profit after all expenses are accounted for. That includes drawing a $500K salary for yourself each year.
After a building company has achieved Level 10 of the Professional Builders Levels, they become Certified.
When you become a Certified Professional Builder, you’ll have all the fundamentals in place to grow your building company safely and securely.
It’s at this time that you need to focus on building your circle of influence and promoting your fully systemised building company that operates without you being hands on in the day-to-day operations.
You need to continue building connections with the top influential architects in your area, recruiters, developers, building inspectors, building designers, other successful building company owners and more.
These people, your circle of influence, will not only generate your most profitable jobs, but they will also play an important role in you establishing a powerful and influential position within your local community.