# Mark Up vs Margin



## A&E Exteriors (Aug 14, 2009)

So, good friend of mines mother in law has a leaking flat roof in another state. 

She has terminal cancer and the Dr.'s have given her 6 to 12 months to live. Her son's buddy gave a price to redo the 8 sq flat section in EPDM so I'm sure he knows the family is loaded and she is dying.

The quote was thought to be high so my friend had me look over the quote. Guy has 5 guys for 3 days to do the job. Flag #1 to me after looking at the pics. Easy job, no penetrations, only tricky part is tying into the mansard walls, but that still is no major deal, original roof so it's 1 layer. 1 roofer and 2 laborers can do this in 2 1/2 days. 

Well, I am at home looking over the line items, as I have been asked if I'd be willing to go do this job with them. 

A couple line items caught my eye, his total for materials on the job is $3,746 probably about right....

Labor is a couple bucks under 3 grand, also not bad...

Here are the kickers....
Delivery $400 come on man, seriously? Delivery is $30, and if you do ANY volume it's free

And the real humdinger....
Overhead... $4,080.00.
GTFO! You sir are an ass hole. 

These are the guys that give us a bad name and make it so people think we are gouging, crap really pissed me off. 


I know all our prices are one off in the sense that we have different operational costs, but this is straight gouging a rich, dying, old woman.


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## Jaws (Dec 20, 2010)

So a 40% mark up?


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## A&E Exteriors (Aug 14, 2009)

Roughly


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## EricBrancard (Jun 8, 2012)

I don't know enough about the project to make any real judgement here. But sometimes companies that actually know how to make a profit and stay in business while others limp by may seem to be charging too much. If me ten years ago realized what me know does, I probably would have doubled or tripled my prices then.


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## A&E Exteriors (Aug 14, 2009)

EricBrancard said:


> I don't know enough about the project to make any real judgement here. But sometimes companies that actually know how to make a profit and stay in business while others limp by may seem to be charging too much. If me ten years ago realized what me know does, I probably would have doubled or tripled my prices then.


According to his sheet the overhead portion printed on. The form is $240.00, so at 3 days that would be $720, or if it is per sq it would be $1,920, this is gouging


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## Jaws (Dec 20, 2010)

A&E Exteriors said:


> According to his sheet the overhead portion printed on. The form is $240.00, so at 3 days that would be $720, or if it is per sq it would be $1,920, this is gouging


I dont know enough about the project either, to make any judgement. I do know a lot of exterior companies are at 30-40% mark up. Many are probably higher. 

If he is getting it everyday, thats his business. He IS showing his numbers, so the client has the choice to decide if its too high. It seems strange he put it under overhead, imo. Or is O&P?


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## TaylorMadeAB (Nov 11, 2014)

I just find it strange that he would have a line item for overhead


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## griz (Nov 26, 2009)

A&E Exteriors said:


> According to his sheet the overhead portion printed on. The form is $240.00, so at 3 days that would be $720, or if it is per sq it would be $1,920, this is gouging


or pricing the job so the client does not want it....

or you shoot out a wild price because you are busy with the thought that if you get it you'll figure out a way to do it.


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## Windwash (Dec 23, 2007)

I'm not sure what the problem is. They asked him for a price and he gave them one and they can take it or leave it. He may be very busy or have lots of overhead or may just like making lots of money. He isn't required to do the job for minimum profit because she is sick.


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## A&E Exteriors (Aug 14, 2009)

Jaws said:


> I dont know enough about the project either, to make any judgement. I do know a lot of exterior companies are at 30-40% mark up. Many are probably higher.
> 
> If he is getting it everyday, thats his business. He IS showing his numbers, so the client has the choice to decide if its too high. It seems strange he put it under overhead, imo. Or is O&P?


Probably o&p and he is leaving out the profit description. I told my friend I'd be between 8 and 10 based on the pics. I'm surprised as well him listing the overhead straight out like he did. The $400 delivery is out of line as well.


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## A&E Exteriors (Aug 14, 2009)

Windwash said:


> I'm not sure what the problem is. They asked him for a price and he gave them one and they can take it or leave it. He may be very busy or have lots of overhead or may just like making lots of money. He isn't required to do the job for minimum profit because she is sick.


No one said that, he seems to be plucking a number out of the air because he knows she is loaded. Like I said to my friend, it wasn't exorbitantly high but I was sure we could save her some money


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## A&E Exteriors (Aug 14, 2009)

griz said:


> or pricing the job so the client does not want it....
> 
> or you shoot out a wild price because you are busy with the thought that if you get it you'll figure out a way to do it.


She wants it done, her garage ceiling is falling down.

I can not be convinced that this guy isn't trying to gouge a loaded old woman


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## The salesman (Dec 23, 2015)

$3800 in material for 8 squares is crazy high. Steal that job son!!!!


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## WarnerConstInc. (Jan 30, 2008)

Then put a couple tarps on it, that should last her.


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## A&E Exteriors (Aug 14, 2009)

Here is another line item, trash bags, $20...is this not considered an overhead item, a consumeable something you keep around


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## The salesman (Dec 23, 2015)

WarnerConstInc. said:


> Then put a couple tarps on it, that should last her.


Where is your Christmas spirit


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## Jaws (Dec 20, 2010)

Think about it this way-

He is supplying 15 days of labor, 3 guys for 5 days, for less than 200 a day. I dont know what he pays his guys, but i know what WC & GL costs for roofing in Texas, plus vehicle (s) , its maintinance, fuel, payment and insurance. Tools, trailers, maybe a shop. Plus the overhead costs for an employee, unproductive time through out the year, maybe vacation/holidays, cell phone to get ahold of them, accountant, taxes, continuing ed, advertising ect....... maybe he is basing his mark up on that. For all we know he hopes to clear 10% net net after the year is up. 

Hard to tell from my big recliner chair in Texas


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## The salesman (Dec 23, 2015)

If this is your good friend make a couple calls in her behalf.


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## EricBrancard (Jun 8, 2012)

A&E Exteriors said:


> Probably o&p and he is leaving out the profit description. I told my friend I'd be between 8 and 10 based on the pics. I'm surprised as well him listing the overhead straight out like he did. The $400 delivery is out of line as well.


So if you'd be between $8k-$10k and he's coming in at just under $11k, how is he taking advantage of someone or gouging? It's not like you're at 8-10 and he came in at $30k.


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## A&E Exteriors (Aug 14, 2009)

Jaws said:


> Think about it this way-
> 
> He is supplying 15 days of labor, 3 guys for 5 days, for less than 200 a day. I dont know what he pays his guys, but i know what WC & GL costs for roofing in Texas, plus vehicle (s) , its maintinance, fuel, payment and insurance. Tools, trailers, maybe a shop. Plus the overhead costs for an employee, unproductive time through out the year, maybe vacation/holidays, cell phone to get ahold of them, accountant, taxes, continuing ed, advertising ect....... maybe he is basing his mark up on that. For all we know he hopes to clear 10% net net after the year is up.
> 
> Hard to tell from my big recliner chair in Texas


Hey, I'm all about making a profit, just not gouging someone. There is no fing way it is going to take 5 guys 3 days, plus 2 guys half a day to stock it, and 2 guys half a day to drip it. 3 guys 2 1/2 days done. If they can't do it, they shouldn't be doing flats


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## A&E Exteriors (Aug 14, 2009)

lawndart said:


> I was thinking the same thing. This place is funny. We get a post like this one and others complaining about unlicensed hacks charging half the price. We don't know the other companies overhead and shouldn't automatically assume he's ripping the woman off just because he was adding items into his proposal that shouldn't have been there IMO.


I assume he is gouging for reasons I stated already, his random line items as well as the amount of time he is saying it will take to do the job....no way it takes 136 man hours to do the job




lawndart said:


> This is why I give a proposal without breaking it down by line item. Plenty of opportunity for the homeowner and friends to question pricing. This thread is a perfect example.


I don't break it down much either rather write a nice detailed scope of work, farthest I break it down is phases or specific parts. IE, I did a porch job this spring and I had roof repair, demo/ framjng, then soffitt/ facia/ rehang gutter


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## BamBamm5144 (Jul 12, 2008)

Jaws said:


> Close. Gross margin is around 36% based on your numbers.


That's what I calculated. Seems right on the money.

The issue is a lot of roofers bid jobs like this.

Materials 1k
Labor 1k
I want to make $500 on the job.
Total project price $2500.00

20% margin but job takes two days.

Here are the numbers of a job I just signed.

Materials $2718.14
Labor & Disposal $2460.00 
My gross is 35%.


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## lawndart (Dec 3, 2006)

I'm not a roofer, so I can't accurately figure expenses, but if Bam and Jaws say there is a 36% gross profit margin in the original quote, I think the original price should've been higher.


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## A&E Exteriors (Aug 14, 2009)

BamBamm5144 said:


> That's what I calculated. Seems right on the money.
> 
> The issue is a lot of roofers bid jobs like this.
> 
> ...


And with your 35% on this job you would be $9,486.45...2.500 less than this guy and pretty much right on the money in my eyes


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## Builders Inc. (Feb 24, 2015)

BamBamm5144 said:


> That's what I calculated. Seems right on the money.
> 
> The issue is a lot of roofers bid jobs like this.
> 
> ...



Yep. Markup vs margin. I like the percentage thing. You make more. And each job shares its own percentage of profit and overhead. 


Sent from my iPhone using Tapatalk


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## slowsol (Aug 27, 2005)

A&E Exteriors said:


> Also says stone ballast on roof. I did not see any stone on the pic I was shown. If that is the case and there is stone on it, his price is right, but like I said, looked like straight rubber to me



Wouldn't it be funny if you agreed to do it for what you feel is right then got there and realized you didn't really understand the complete scope based on just pictures. Then had to go back and tell them the first guy's price was actually the right one? 


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## A&E Exteriors (Aug 14, 2009)

slowsol said:


> Wouldn't it be funny if you agreed to do it for what you feel is right then got there and realized you didn't really understand the complete scope based on just pictures. Then had to go back and tell them the first guy's price was actually the right one?
> 
> 
> Sent from my iPhone using Tapatalk


I know not to get myself into that situation. My friend is flying down there Saturday to get a closer look, will send me a video inspection of a couple questions I have. And I will... if I can make the necessary arrangements in my schedule here...go on a per day rate, they will handle the materials and additional labor.

I'm not as much of a fool as I portray myself to be


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## A&E Exteriors (Aug 14, 2009)

I actually expressed that exact statement to my friend yesterday. I'd hate to go down there, look at it and say oh ****, we'll it all makes sense now


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## BamBamm5144 (Jul 12, 2008)

A&E Exteriors said:


> And with your 35% on this job you would be $9,486.45...2.500 less than this guy and pretty much right on the money in my eyes


No, you said his costs are around 7800 I thought. 

7800 is 66% of that 11,700 number or whatever it was. I forgot the exacts.


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## Mordekyle (May 20, 2014)

Does a dying woman really care about money? 


If she does, might she not prefer to give some of her money (which she can't take with her) to a family friend, rather than a stranger, for completing a necessary task?

If she is loaded, wouldn't she certainly prefer to think of other things, rather than a line item costing an insubstantial (to her) amount? I f I were dying, would I care about a $35 overdraft fee or an 18% gratuity added onto a dinner I bought for friends? I would hope not. 

Methinks she shouldn't care. If she shouldn't, either should OP.
Estimate is fine. She can take it or leave it.




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## A&E Exteriors (Aug 14, 2009)

BamBamm5144 said:


> No, you said his costs are around 7800 I thought.
> 
> 7800 is 66% of that 11,700 number or whatever it was. I forgot the exacts.


Marerials, delivery, permit, labor 7,027.00, now add 35% (2,459.45)
Gives you $9,486.45


His quote is for 11,926.


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## 91782 (Sep 6, 2012)

A&E Exteriors said:


> Marerials, delivery, permit, labor 7,027.00, now add 35% (2,459.45)
> Gives you $9,486.45
> 
> 
> His quote is for 11,926.


40% margin:
7,027.00/.60 = 11711.67

35% margin:
7,027.00/.65 = 10810.77

http://ghostleg.com/blog/2009/08/losing-money-calculating-margins-wrong/


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## WarnerConstInc. (Jan 30, 2008)

I didn't want to be the one to.....


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## digiconsoo (Apr 23, 2012)

A&E Exteriors said:


> Marerials, delivery, permit, labor 7,027.00, now add 35% (2,459.45)
> Gives you $9,486.45
> 
> 
> His quote is for 11,926.


A&E,

This is what customers try to do to contractors all the time - figure out how much money they're making, and then judge as to whether they are worthy to make that much.

Capitalism has taken care of that - no one is forced to do business with anyone..........

I mean, unless you are a Christian owned bakery.


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## CompleteW&D (May 28, 2011)

BamBamm5144 said:


> That's what I calculated. Seems right on the money.
> 
> The issue is a lot of roofers bid jobs like this.
> 
> ...


Wait a minute.... you back in the game again? :blink:


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## WarnerConstInc. (Jan 30, 2008)

CompleteW&D said:


> Wait a minute.... you back in the game again? :blink:


He quit quitting


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## CompleteW&D (May 28, 2011)

SmallTownGuy said:


> 40% margin:
> 7,027.00/.60 = 11711.67
> 
> 35% margin:
> ...


Actually.... it would be 7027.00/*.65* = 10,810.77 :whistling

I knew what you meant though.... just bustin' your chops.


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## Jaws (Dec 20, 2010)

Where my out of my rear numbers came from my big chair in Tejas-

OP- 

Materials- 3,746.00
Labor- 2,999.00 ( he said just under 3k)
Delivery- 400
Overhead- 4,080

11,225x .36 or there abouts is around 4,080.00. Actually between .36 and .37. Thats a 36% gross margin. 

The other numbers I didnt see i guess.


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## A&E Exteriors (Aug 14, 2009)

Now I am confused, how does a 58% markup equal a 36% margin.


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## A&E Exteriors (Aug 14, 2009)

SmallTownGuy said:


> 40% margin:
> 7,027.00/.60 = 11711.67
> 
> 35% margin:
> ...


My brain hurts now


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## digiconsoo (Apr 23, 2012)

A&E Exteriors said:


> Now I am confused, how does a 58% markup equal a 36% margin.


http://www.accountingtools.com/ques...the-difference-between-margin-and-markup.html


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## 91782 (Sep 6, 2012)

A&E Exteriors said:


> My brain hurts now


Again:
http://ghostleg.com/blog/2009/08/losing-money-calculating-margins-wrong/


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## CompleteW&D (May 28, 2011)

A&E Exteriors said:


> Now I am confused, how does a 58% markup equal a 36% margin.


Mark up and margins are quite different. Most business work off of margins. The ones who don't tend to make less $$$ than they should.

Let's say you have a total materials and labor cost of $1,000 and you want to make 20%. By your logic, you simply add 20% to your costs and you're good to go, right? $1,000 X 20% (mark up) = $1,200. 

But in all actuality, when you divide your "profit" ($200) by what you sold the job for.... $1,200 you get a profit *margin* of only 16.7%. So in essence you did NOT make 20% like you thought you were going to. 

So, if you TRULY want to make a 20% PROFIT margin.... you DIVIDE your costs by .80. $1,000 / .80 = $1,250. So in order to actually make a 20% profit margin, you would have needed to sell the job at $1,250 not $1,200.


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## CompleteW&D (May 28, 2011)

Follow up.... A mark up is simply that, a mark up. It has got nothing at all to do with _*profit margins.*_


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## A&E Exteriors (Aug 14, 2009)

digiconsoo said:


> http://www.accountingtools.com/ques...the-difference-between-margin-and-markup.html


Well, that is still confusing but somewhat starting to get it.
Somewhere about the middle is 58% markup.







And in this case, being overhead is slightly over 1/3 the job 36-37%ish makes a little more sense. ...

Dam, markup vs margin, multiplication vs division cost me $31.76 on a small job I did the other day.


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## A&E Exteriors (Aug 14, 2009)

SmallTownGuy said:


> Again:
> http://ghostleg.com/blog/2009/08/losing-money-calculating-margins-wrong/


Yeah I read it, the other one makes a little more sense, just a little though


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## A&E Exteriors (Aug 14, 2009)

Dam, ran his numbers, now I can explain the overhead amount.


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## 91782 (Sep 6, 2012)

A remodeler buys cabinets, then marks them up 50 percent.

A grocery chain buys a dozen eggs and marks them up 50 percent.


The remodeling industry as a whole, works at approx 20% margin.

The retail grocery industry operates at approx 1.2% margin.


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## 91782 (Sep 6, 2012)

The important thing A&E, is to start working with the methods shown in either article on your own bids, and to remember that business succeeds or fails by meeting its margins - not markups.


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## A&E Exteriors (Aug 14, 2009)

WarnerConstInc. said:


> I didn't want to be the one to.....


Maybe you should have been the one too.....would maybe make you seem like you are actually be helpful instead of just a dick all the time


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## digiconsoo (Apr 23, 2012)

A&E Exteriors said:


> Dam, ran his numbers, now I can explain the overhead amount.


Well, can we agree that the title of this thread which is attacking his character, may be unwarranted?


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## A&E Exteriors (Aug 14, 2009)

Yes we can, too late for me to change it but any mods can feel free. Maybe markup vs margin


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## A&E Exteriors (Aug 14, 2009)

Now I get to call my friend and explain all that I have learned today and we can go from there.


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## TaylorMadeAB (Nov 11, 2014)

Are you guys marking up materials and then adding your margins on top?


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## Roofcheck (Dec 27, 2011)

Is this Contractortalk or some DIY? We don't talk pricing on this forum, and tearing into another contractors bid from states away is none of your business, nor is it any of ours.


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## VinylHanger (Jul 14, 2011)

I do a margin on labor and a separate margin on materials. That allows me to figure in an oops factor if I think either one is a bit iffy.


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## BamBamm5144 (Jul 12, 2008)

The thread title change confused me. I'm glad the confusion for straightened out.


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## brhokel606 (Mar 7, 2014)

Ok, I know numbers are not supposed to be talked about but I am kind of having a oh sh!t moment after reading this...

I am usually right around the 50% maybe as much as 55% on most of my jobs and thought this was kind of standard but now I am not sure and wondering how some guys do it for 30 to 35%? 

I am also wondering if I am gouging customers??? I realize that it is also based on what the customer perceives but I don't want to br that guy either.


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## youngbuck (Mar 17, 2010)

Frankly the guys numbers are in line, if not a little low. We have a higher margin on our projects, and will end up at the end of the year with about an 18% net profit. 
I do not understand why anyone would think that the bid was outrageous or was gouging the lady. 
It seems like a reasonable price to me, especially if the company has a good reputation.
Get a couple more bids from reputable companies and you will see if it is way out of line. Just because you can do it for a cheaper price doesn't mean the guy was gouging. 
I would prefer to be on the high end of the pricing spectrum. Roofing is a difficult trade, an expensive one if you are running it legit. Price accordingly and make a good living.


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## overanalyze (Dec 28, 2010)

The only thing I see wrong with his quote is he was to detailed on his breakdown. You got hung up on the delivery charge and overhead fee. If you just saw a detailed scope with a lump sum total would you be as concerned?


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