Markup and Profit
A typical formula for a contractors markup to apply to all your construction jobs, according to the book Markup & Profit: A Contactor's Guide is: Markup = Total Volume Sold divided by job costs. This is supposedly a time-tested formula that's been proven again and again.
To establish an effective markup, you need to combine your job costs, your overhead and your profit into one final figure called "Sales Price" or "Volume Sold".
Use that figure to come up with a markup that's right for your business. Then use the markup number you arrive at. The trick is to use the number that you arrive at on all jobs -- if you want to make a profit and stay in business.
To find out more, check out the book. It tells how to understand markup, write contracts, how to establish markup, sliding scale markup, problems to watch out for in markup and much more.
You can find it here. http://craftsman-book.com/products/index.php?main_page=cbc_product_book_info&cPath=4&products_id=117
6 comments:
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Thanks again for being here!
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This one is trickly. We see our competitors charging double or triple over what we do all of the time. Get at least three estimates and check references. Don't pay until job is done. Protect yourself, there are a lot of scam artists out there.
Markup and profit is one of the hardest rules of business to adhere to -- especially in a slow construction market, when each contractor is trying to outbid the other to get the job, and put food on the table.
Sometimes we slash our overhead and profit in order to get the winning bid, only to regret it later when we find that the money we actually made is barely above minimum wage.
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