# markup???



## hrdwrkr (Aug 11, 2015)

thanks a great deal cricket


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## Jaws (Dec 20, 2010)

My site work/equipment operating/demo subs saying is " if it flys, drives, floats, or "screws" i can rent it" 

Mine is if i coordinate, take delivery of, sub or pay for it, i mark it up. If I end up paying your yard guy because your in The Keys, its a change order and i mark it up.


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## Jaws (Dec 20, 2010)

As to the receipts? If its cost plus they get all receipts and invoices, but i mostly do fixed bid. My answer to that is the same as "can i have a breakdown"

No. 

Unless its an allowance item, if its a bid, i turn in my scope of work for the exact dollar/penny amount stated. No less, no more. 

We are very clear on what fixed bids are from the beginning. We dont get push back, or not anymore, i did when i was younger and newer to it. If your getting a lot of push back, change your delivery. Its your rules, as long as you have them in an agreement and are clear on them. 

Often on change orders i will show them the receipts even if they dont ask, some stuff is hard for people to understand.

As long as you are making what you need/want, doesnt matter how you mark it up.


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## TNTRenovate (Aug 19, 2010)

Tinstaafl said:


> If I marked up materials, I'd have to charge and subsequently pay sales tax to the gummint. Bookkeeping already takes up too much time. I make my money on the labor.


Not here. As long as I pay sales tax, I don't have to charge it.


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## TNTRenovate (Aug 19, 2010)

Cricket said:


> hrdwrkr, have you seen our article on this?
> 
> *Pros and Cons of Mark-Up On Materials*


Who wrote the article? Just curious as there is no credit on it.


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## Tinstaafl (Jan 6, 2008)

TNTSERVICES said:


> Not here. As long as I pay sales tax, I don't have to charge it.


Same in PA, as long as you don't collect anything extra for materials. If you do, the governor wants his cut.

Frankly, I've always been surprised they don't nail us for sales tax on labor as well.


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## hrdwrkr (Aug 11, 2015)

thats what im confused about..most people here say they add anywhere from 15 to 40 % after labor time and materials...that means 'one' is making more on the materials than what 'one' spent on materials..which in turn means sales tax??


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## TNTRenovate (Aug 19, 2010)

Tinstaafl said:


> Same in PA, as long as you don't collect anything extra for materials. If you do, the governor wants his cut.
> 
> Frankly, I've always been surprised they don't nail us for sales tax on labor as well.


I can charge extra and still not have to charge any additional sales tax.


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## Admin (Dec 10, 2003)

TNTSERVICES said:


> Who wrote the article? Just curious as there is no credit on it.


We have a team of writers.


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## EthanB (Sep 28, 2011)

hrdwrkr said:


> thats what im confused about..most people here say they add anywhere from 15 to 40 % after labor time and materials...that means 'one' is making more on the materials than what 'one' spent on materials..which in turn means sales tax??


It depends a lot on the material and the state. Most places I've lived you don't have to charge sales tax on materials that you're going to alter and install but you do have to charge sales tax on things that you're reselling as-is and on things that you produce off-site and sell as a good, e.g. cabinets.


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## TNTRenovate (Aug 19, 2010)

Cricket said:


> We have a team of writers.


So no one person wrote that?


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## FrankSmith (Feb 21, 2013)

My take on Markup is that there are two sides to it:

1- Markup helps by making sure that all sales effect the businesses equally. If you sell $1,000 of anything, $400 is above the line and goes to overhead and profit. This puts, a contractor in a position to benefit from the fact that consumer are shopping through them, even if there isn't a lot or any labor. A multiplier is used to make this happen. If a jobs cost is $600 and and the multiple is 1.6666 is sells for $1000. When applying this to a business it is absolutely critical to understand how actual volume compared to target volume effects the business budget. 

2- The flip side is that this system has down falls because it is rigid. It can cause a price to become overly isolated with small jobs or change orders, and as a result seem like price gauging at times. It can also cause a person to be under priced if there material cost are low and they handle the job efficiently. A contractor should always be aware of what the going rate is for similar work.


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## Jaws (Dec 20, 2010)

FrankSmith said:


> My take on Markup is that there are two sides to it:
> 
> 1- Markup helps by making sure that all sales effect the businesses equally. If you sell $1,000 of anything, $400 is above the line and goes to overhead and profit. This puts, a contractor in a position to benefit from the fact that consumer are shopping through them, even if there isn't a lot or any labor. A multiplier is used to make this happen. If a jobs cost is $600 and and the multiple is 1.6666 is sells for $1000. When applying this to a business it is absolutely critical to understand how actual volume compared to target volume effects the business budget.
> 
> 2- The flip side is that this system has down falls because it is rigid. It can cause a price to become overly isolated with small jobs or change orders, and as a result seem like price gauging at times. It can also cause a person to be under priced if there material cost are low and they handle the job efficiently. A contractor should always be aware of what the going rate is for similar work.


I agree to an extent about knowing what stuff is going for, as a GC i always have my ear to the ground. But in reality, it is not important to me anymore AS LONG as I am selling effectively. I know a lot of contractors on a personal level, i was a two term president of my HBA, we talk shop all the time. 

Where i see a big separation isnt in our large projects, but small projects. Both higher and lower, all over the board. Of course not competing with hacks is obvious, but we arent always the highest. I am referring to what you said about leaving money on the table. 

One guy in particular comes to mind, a one man remodeler, does good work, very talented. We both priced a laundry room and bathroom remodel. I had no idea i was even going against anyone, or i wouldnt of bid probably. Anyway, i ended up getting the job. I saw him at the lumber yard after i finished the job and he said i needed to raise my prices, half way joking. He said if i wasnt marking it up atleast *** percent i was robbing myself. I said id keep that in mind and we turned the conversation to something else. 

My percentage was litterally twice the percent he mentioned, and thats not an exaggeration. I didnt need that job by any means, and i didnt cut any corners to get it. The only way i can figure we were less money on that job? I probably have a lot better buying power, but materials arent going to help a whole lot on a 30k job. The big savings was probably that i used my guys only for demo, trenching for plumbing, blocking/light framing, built ins, cabinet and the trim. I even subbed the painting, because my in house painters were busy painting a whole house remodel. So while i made a modest profit on my guys labor, i bet what i paid my subs for the work in there was less than whatever he charges for himself, and he does everything himself. I would bet there is an excellent chance i made more on that job than he would have hoped for, but there is no way to know. I also know i have more overhead, but my over head is spread out over several projects, not on one. 

I understand the sentiment about leaving money on the table, but to me, having a system for pricing work and sticking to it is the best way to be profitable in the long run. Being efficient and getting good pricing at the yard just makes it simpler to make the mark up i want easier to sell. 

On another side of going rate, my tile guy is quite a bit higher than the going rate, but he shows up when he says and the guy actually doing the work, not some scrub.


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## FrankSmith (Feb 21, 2013)

Jaws said:


> I agree to an extent about knowing what stuff is going for, as a GC i always have my ear to the ground. But in reality, it is not important to me anymore AS LONG as I am selling effectively. I know a lot of contractors on a personal level, i was a two term president of my HBA, we talk shop all the time.
> 
> Where i see a big separation isnt in our large projects, but small projects. Both higher and lower, all over the board. Of course not competing with hacks is obvious, but we arent always the highest. I am referring to what you said about leaving money on the table.
> 
> ...


I know what you are saying but here is where I am coming from on that. I went to a call to bid on windows. While I was there the owner mentioned a company that I used to work for had given her a bid for windows. They where white, vinyl replacement windows. My old employer had priced them at $1,100 each for 15 windows. 

I was blown away. I install the same exact windows. They cost $200. The job would take one guy by themselves 3 days. Even at $100 an hour it amounts to $160 a window labor. 

If I bid that job I would have come in at less than half the price. I was sure if I did that, the owner would think I was selling them "cheap" windows. I found my way to the middle and got the job. 

On that job I new what the other bid was. On others I don't, but I know I never want to be less than half of any comparable bid. So I have been biding there ever since. I have closed a higher ratio of windows at this price than the previous price, and windows are by far my most profitable kind of job. I am trying to get to a point where I only do windows, siding, and service work. That is a result of learning where I could sell based on the market, rather then where I could sell based on my cost.


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## Jaws (Dec 20, 2010)

FrankSmith said:


> I know what you are saying but here is where I am coming from on that. I went to a call to bid on windows. While I was there the owner mentioned a company that I used to work for had given her a bid for windows. They where white, vinyl replacement windows. My old employer had priced them at $1,100 each for 15 windows.
> 
> I was blown away. I install the same exact windows. They cost $200. The job would take one guy by themselves 3 days. Even at $100 an hour it amounts to $160 a window labor.
> 
> ...


I see what your saying, its all in what you think is best for business. My thinking is that i am comfortable ar a certain point, and anything past it is gravy. I add onto my mark up for many number of reasons, but generally not because i think someone else is charging more. Im not winning an exuberant number of projects from new inquiries, so my thinking lies in that if my revenue and profits will be better sticking to the plan. Who knows, six months from now i may think that plan sucks :laughing:

I see where your coming from though.

Completely agree about your previous posts points about isolation of mark ups , and the point on understanding projected and actual revenue.


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## SamM (Dec 13, 2009)

FrankSmith said:


> My take on Markup is that there are two sides to it:
> 
> 1- Markup helps by making sure that all sales effect the businesses equally. If you sell $1,000 of anything, $400 is above the line and goes to overhead and profit. This puts, a contractor in a position to benefit from the fact that consumer are shopping through them, even if there isn't a lot or any labor. A multiplier is used to make this happen. If a jobs cost is $600 and and the multiple is 1.6666 is sells for $1000. When applying this to a business it is absolutely critical to understand how actual volume compared to target volume effects the business budget.
> 
> 2- The flip side is that this system has down falls because it is rigid. It can cause a price to become overly isolated with small jobs or change orders, and as a result seem like price gauging at times. It can also cause a person to be under priced if there material cost are low and they handle the job efficiently. A contractor should always be aware of what the going rate is for similar work.


I was just thinking about this the other day. 

It's a bit of a balancing act. For example I do a few painting jobs per year. At my proper markup, if I were to do nothing but painting I'd end up 25% short of the total sales that markup is based on, because they labor cost is high but my material cost is low.

Conversely, I'm looking at a project doing some pvc column wraps. Material cost is very high compared to the labor cost. If I did one project like this a week for the year at my proper markup, I'd end up 237% over the projected sales volume my markup is based on (plus I'd need 50 leads a week to close at that price).

A strict markup system works well with balanced jobs. Smaller jobs with unbalanced labor/material ratios need to be considered a little differently.


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## Jaws (Dec 20, 2010)

Something that comes to mind under the subject of Mark Up is how different contractors define that term. 

For me, General Conditions, Contingency, PITA, ect.... fall under line items. On a small project especially, my time to bid and select/order/spec materials, accessibility, distance from the shop, how much time i will personally invest outside of the work itself holding hands, subs underestimating due to circumstances and my responsibility to them, payment schedules, project management, unforseen conditions i need to account for to avoid nickel and dimeing, ect... , as well as how bad i need the work and the many pitfalls which could turn a simple job into a PITA because of any number of reasons, fall under line items before i apply my mark up for that type of project. 

As i have said many times, a bathroom gets a different mark up than a large project. It also will have more of those line items before the mark up. 

Company cashflow for THAT month the project will take place in the schedule is also taken into account. If it is lower because of stages of larger projects, or because i am waiting for larger jobs to start, the PITA factor goes down :laughing: Monthly cashflow and GP leads to year end net profit.


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## Jaws (Dec 20, 2010)

SamM said:


> A strict markup system works well with balanced jobs. Smaller jobs with unbalanced labor/material ratios need to be considered a little differently.


This is why i havent bought into Mark Up and Profits strict mark up. I use a sliding rule for mark ups and project sizes, and complexity.


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## Calidecks (Nov 19, 2011)

FrankSmith said:


> I know what you are saying but here is where I am coming from on that. I went to a call to bid on windows. While I was there the owner mentioned a company that I used to work for had given her a bid for windows. They where white, vinyl replacement windows. My old employer had priced them at $1,100 each for 15 windows.
> 
> I was blown away. I install the same exact windows. They cost $200. The job would take one guy by themselves 3 days. Even at $100 an hour it amounts to $160 a window labor.
> 
> ...


I haven't sold a job based on my cost in years. As a matter of fact I couldn't really tell you exactly what a deck cost to build, it's not really that important to me. Once I've started using cost to figure out what I make, I'm cutting it too thin. I know at the end of every job how well I did (it's not "I know at the end of the job how BAD I did"). I also have been doing this long enough to know what price point each jobs needs to be at in order to make what I need to make. 

I also learned that dropping my price when I slow down is a problem as well, it seems those are the ones that will wait three months to call right when your hopping. I do realize I could tell them the bid is only good for 30 days, but I don't want to play that game.


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## DaVinciRemodel (Oct 7, 2009)

Just for the record… Seems like you guys go through a lot of brain damage to get to point “B”.


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## SamM (Dec 13, 2009)

Creter said:


> It lays out a good foundation that starts the transition by laying out the groundwork to build your business help you understand that you most likely have not charged enough up to the point of reading that book.
> 
> I will never forget the first project I used the methods on - two baths at the same address, one a custom master bathroom. I multiplied my number by the Markup Factor at the end and looked at that number. I subtracted the two and looked at that number again. Really? Holy  I thought. I also thought, well let's see how this rolls out and I typed up the proposal and contract.
> 
> ...


I only just started actually using a proper markup. 
My first proposal was for a bath reno. 22k. It was the biggest project I'd ever priced. 
Signed no problem. 
Turned out to be a royal pita of a job and even more pita of a customer. But I got paid well so I really didn't care too much.


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## Creter (Oct 13, 2009)

SamM said:


> I only just started actually using a proper markup.
> My first proposal was for a bath reno. 22k. It was the biggest project I'd ever priced.
> Signed no problem.
> Turned out to be a royal pita of a job and even more pita of a customer. But I got paid well so I really didn't care too much.


Feels pretty good, eh?


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## SamM (Dec 13, 2009)

Creter said:


> Feels pretty good, eh?


For sure. I find that earning more takes the stress off, which helps me calm down and do better work (which in turn is worth more...)


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## mrcharles (Sep 27, 2011)

TNTSERVICES said:


> Never had a customer ask for receipts and if I did I would ask the last time they bought a couch did they ask to see what the store paid for it? Do they ask the restaurant to see the bill from their vegetable vendor?
> 
> Here's my price to remodel your bathroom. Here is your allowances and selections. And if you don't like the selections I offer you can provide your own, but like you said, no warranty and any delays caused by provided materials will be billed in days, not hours of delay.




I don't disagree, but if a homeowner asked for me to prove the allowance money on something like tile I would show them the receipt. For tile I provide a material allowance that covers all the tile, bullnose, decos, schluter, etc.... and tell them that the allowance is based on a tile up to $x..... I don't get into figuring it out to every square foot and breaking that out for them. This way I can cover all the extra trim materials that you won't know the cost of until they select the tile but I can still give them a close estimate on the job cost unless they pick some crazy $50 a square foot tile. 

That being said the only time people don't take my word on cost where I have to prove it is in commercial work.


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## sting (Mar 24, 2016)

Good stuff.


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