Homebuilders and suppliers often think profitability issues are a marketing problem, when it's a simple math problem, according to Jeff Prager with Backroom Management. The key to reaching your ideal price — and staying out of the red — is to accurately calculate cost, commission and profit margin.

For example, let's say your cost to build a home is $300,000. And for the sake of easy math, the sales commission paid on that home is 10%. For many, it would make sense to then list the home for $330,000. Yet with a 10% commission, you're paying out $33,000 and are now $3,000 in the red ($300,000-$33,000 = $297,000). 

Similarly, because you actually want to be profitable, let's say you want a 25% profit margin. Simply adding that to your costs puts you in the hole even more. Here's how: 25% of $300,000 is $75,000. Selling the house for $375,000 with a 25% profit goal ($93,750) nets you $281,250 — $18,750 less than your $300,000 cost!

Prager's formula shows that for the above scenario, the home should be listed for $461,538. To find out how he got there, read more...