At this point, there are two main things every business owner needs to determine: how much do I spend on overhead each year and how much profit do I want to make each year? If you spend $100,000 each year on overhead, what must your sales be at a 15% gross mar- gin to break even? The answer is $666,666 or 100,000/.15. Now how much net profit mar- gin above overhead do you want to make each year? Let’s say it's 10%. If your cost of goods sold is $566,666 the sales price must be $755,555 to produce a 25% gross margin that will pay your $100,000 overhead and give you a net profit margin of $88,888 for the year. Here’s one more thing to think about. Let’s say you forget to install expansion joints in two jobs and they fail and you’re required to replace them at a cost to you of $50,000. How much more work must you sell and perform at a 25% gross margin to breakeven on that loss? $50,000/.25 = $200,000 more or an additional 26% more work than your normal annual vol- ume – and you don’t even make anything for it; you just replaced the $50,000 loss. It pays to do it right the first time. Let’s work smart and seek to be more profitable in 2018 by setting up a system of consistent estimat- ing procedures – even if you’re doing them on the kitchen table – and make sure we price them with the correct margins to make a reasonable profit. NTCA University has several estimating courses in development – look for them in 2018! Keep on tiling! Martin Howard, NTCA President Committee member, ANSI A108 Mhoward@davidallen.com PRESIDENT'S LETTER ––––––––––––––––––––––––––––––––––––––––––––––––– 18 TileLetter | February 2018