# Question about Profit Margins for Siding and Window Replacement?



## Real World

Not sure if this is the right section to post this question, but if not then I'll ask in advance for a moderator to move to the proper section.

I'd like to get some estimates on the *% markup or Gross margins *for siding and window replacement. No roofing, period.

Example: 3,000 sq ft home, 2 story.

The neighborhoods I will be marketing to have a household income of $125,000 year. Upper middle class. Typical home cost $350,000.

*Assume you are using only subcontractors,* you are the GC with no employees.

Typical job is Tyvek, Dowboard, and your standard dutch lap siding and maybe a few window replacements.

After all my expenses, permits, dumpsters, etc... what would be the high end of percentage markups?

I'm not looking for exact pricing, *just an estimate on what a typical markup would be in you want your bid to be in the highest 25% of bids.*

Thanks,

Real World


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## BamBamm5144

Sort of confused, around this location 40-55% would put you near the high end.


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## Real World

BamBamm5144 said:


> Sort of confused, around this location 40-55% would put you near the high end.


Ok, that's sounds like the same info other contractors are telling me who work the higher end of the spectrum.

I helped a friend of mine last year with his marketing and he told me his typical markup was 50-60%, which honestly shocked me.

Just so I have this right, if my total cost was $7,000 and my markup was 50% you're saying the job would be priced at $10,500?

Thanks.


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## KAP

*"I'm not looking for exact pricing, just an estimate on what a typical markup would be in you want your bid to be in the highest 25% of bids."*

I don't understand... you are looking to base your mark-up on someone elses business model?

I can tell you that the mark-up will vary drastically from one market to another. What one in Alabama marks up will be that much different than someone in NY...

If you want to get an idea of your market conditions, you would get more germane info by telling people where your market is located... 

Don't think it is a real accurate way to do business... For example... YOUR costs are your costs, and from what I've read of your posts, I would guess that your marketing budget exceeds the average, so by definition, your GROSS profit margins are going to vary from someone posting here who may rely on referrals...

Best of luck... 8^)


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## BamBamm5144

Real World said:


> Ok, that's sounds like the same info other contractors are telling me who work the higher end of the spectrum.
> 
> I helped a friend of mine last year with his marketing and he told me his typical markup was 50-60%, which honestly shocked me.
> 
> Just so I have this right, if my total cost was $7,000 and my markup was 50% you're saying the job would be priced at $10,500?
> 
> Thanks.


Last roof we finished was a shy over 10k. My materials ended up being more than expected at 4K, however my labor was much less than expected only coming in at $1100 including burdens.

Since I mainly do roofing work, I try to price everything at percentages since it is much easier and I am in and out pretty quickly. I have been recently moving percentages around so I can try to accomplish what I would like to this year but for now I try to keep materials at 35%, labor including burdens at 25% and the rest being overhead and profit.


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## Real World

KAP said:


> *"I'm not looking for exact pricing, just an estimate on what a typical markup would be in you want your bid to be in the highest 25% of bids."*
> 
> *I don't understand... you are looking to base your mark-up on someone elses business model?
> 
> *I can tell you that the mark-up will vary drastically from one market to another. What one in Alabama marks up will be that much different than someone in NY...
> 
> If you want to get an idea of your market conditions, you would get more germane info by telling people where your market is located...
> 
> Don't think it is a real accurate way to do business... For example... YOUR costs are your costs, and from what I've read of your posts, I would guess that your marketing budget exceeds the average, so by definition, your GROSS profit margins are going to vary from someone posting here who may rely on referrals...
> 
> Best of luck... 8^)


No, I have my own marketing and sales funnel, I'm not concerned about business models.

I wanted to know if this was typical with the example I gave. I see so many people complaining about profits and margins so I wanted some feedback.

I'm a service contractor but considering entering the siding business. I'm a former homebuilder but due to the housing market I have left that arena for now. 

I partnered with a friend of mine in a service business back in 2007 and we've built a nice business over the last five years.

With that said, for now we don't want to grow the service business. We have 9 techs and that's enough problems to deal with on a daily basis, or should I say "daily grind."

I want to start my own business with no partner. My specialty is marketing, even though I'm a homebuilder. I am very good at getting leads. 

My plan is to initially work the leads myself, do the takeoffs, bid the job from A to Z and find out what's good and bad about this business.

If it works out, then I would like to hire a skilled contractor who is also a salesmen. I would handle and pre-screen the leads, then he would take it from there.

I helped a friend of mine last year with his marketing his siding business. We revamped his lead generation model and now he has a constant supply of leads.

Recently he just landed a job. His total cost is $6,500 and his bid was $11,785.00

That's an 80% markup!

I said "holy ****" you can make that much on a simple siding job? Why is everyone bitching about the bad economy?

He bids high, only lands one of every 3-4 bids. But last year was his best year ever in 15 years. Last year he netted $200,000, his previous best year was a $150,000.

No employees (all work subcontracted), just him and his SUV driving aruound drinking coffee meeting with homeowners.

That defiinitely opened my eyes that maybe their is an opportunity here.

I am still working on my "due dilligence" so right now I'm asking questions and collecting data.

Thanks for your feedback.

Real World


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## Real World

BamBamm5144 said:


> Last roof we finished was a shy over 10k. My materials ended up being more than expected at *4K*, however my labor was much less than expected only coming in at *$1100* including burdens.
> 
> Since I mainly do roofing work, I try to price everything at percentages since it is much easier and I am in and out pretty quickly. I have been recently moving percentages around so I can try to accomplish what I would like to this year but for now I try to keep materials at 35%, labor including burdens at 25% and the rest being overhead and profit.


Those numbers seem real nice to me. :thumbup:

That's a 96%+ markup.

$5,100 + 96% markup = $10,000

Is that what you're telling me, cause that ain't 40%.

BTW, everyone keeps telling me about all the problems with roofing and insurance cost, risk, etc... any truth to that?

Thanks,

Real World


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## KAP

The only thing I would caution you on is using other pricing models to develop your own...

Take BamBamm5144 and your friend. Assume they were your subs. Their costs and needed profit margin are not going to change all that much, so really their only play is with their marketing budget (assuming they have one) or lowering their NET profit because you are bringing the business. But at the same time, you are going to want to make YOUR GROSS mark-up. 

So trying to compare a subs pricing structure and mark-up percentage to yours really doesn't work... that's where I thought you were going, but it now sounds more like you are looking at for building a pricing model...

Best of luck... 8^)


P.S. - BTW, taking the numbers at face value, you can now see the wide variation between subs... 80% vs. 96%...


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## VinylHanger

It all depends on your area. The jackasses that ride around in their SUV's get a quick kick out the door in our area. Folks expect to see a guy who actually knows what they are selling and will be a part of the job.


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## skillman

Whats the top secret on where you plan on working in the real word.


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## BamBamm5144

Real World said:


> Those numbers seem real nice to me. :thumbup:
> 
> That's a 96%+ markup.
> 
> $5,100 + 96% markup = $10,000
> 
> Is that what you're telling me, cause that ain't 40%.
> 
> BTW, everyone keeps telling me about all the problems with roofing and insurance cost, risk, etc... any truth to that?
> 
> Thanks,
> 
> Real World



This is not the normal the case by any means. Everything went very smooth on this job, including the tear off. It was a very easy house to roof. My labor should have been $2400 as I estimated it out to be but I got lucky. I was also on the job site the whole time, so if I were to actually include my wages on the job I would be more at $1500.

Speaking of insurance costs, yes it is terrible. My work comp bill is $1400 a month and I got an audit that ended up being 6k. My insurance is a little less than $600 a month.

If I were to mark up 40% on what I expected this job to be, it would have cost $8960.00.

I don't work off of mark ups though, I work off of square feet. That's why it doesn't really do me any good to do that.


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## Real World

KAP said:


> The only thing I would caution you on is using other pricing models to develop your own...
> 
> Take BamBamm5144 and your friend. Assume they were your subs. Their costs and needed profit margin are not going to change all that much, so really their only play is with their marketing budget (assuming they have one) or lowering their NET profit because you are bringing the business. But at the same time, you are going to want to make YOUR GROSS mark-up.
> 
> So trying to compare a subs pricing structure and mark-up percentage to yours really doesn't work... that's where I thought you were going, but it now sounds more like you are looking at for building a pricing model...
> 
> Best of luck... 8^)
> 
> 
> P.S. - BTW, taking the numbers at face value, you can now see the wide variation between subs... 80% vs. 96%...


Thanks for your feedback. Yes, I've hired 100's of subs over the years, good and bad. Heard every sad story in the book. Fake lien waivers, no insurance, etc...

I've been looking around and finding subs won't be an issue. I pay fast and offer steady work. I'm also not going with the cheapest guy in town. I'm willing to pay more out of profits to avoid headaches.

I don't think I've ever had a sub with a marketing budget, lol.

I'd rather focus on Lead Generation, make a little less profit by having reliable subs. 

It appears to me that siding/roofing contractors make a nice profit markup, the problem seems to be in Lead generation. If that's true, then I've eliminated my biggest problem.

BTW, that job my friend landed for almost $12,000, he told me the highest bid was $17,000. Wow. Cost was $6,500 and that guy marks it up to $17,000?

That's a 200% markup. Either he was greedy, stupid, didn't need the work, or he bid it wrong. My buddy knocked that job out with his subs in less than 2 days. Mostly siding replacement and I think 2 very small windows. $5,300 profit, not bad for a few meetings and a few hours of work.

Real World


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## Real World

VinylHanger said:


> It all depends on your area. The jackasses that ride around in their SUV's get a quick kick out the door in our area. Folks expect to see a guy who actually knows what they are selling and will be a part of the job.


My friend hung siding for many years but stopped doing physical work about 7 years ago.

He rides around in a Chevy Tahoe (I think) and dresses casually with a worklike shirt and jacket.

He's very knoweldgeable about windows, roofing and siding. Getting respect from homeowners isn't an issue.

He does everything by the book in regards to insurance, surety bonds, permits, etc...

Are there some jackasses out there winging it, I'm sure there are.

I guarantee there are guys just like him in your area.

Real World


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## KAP

Real World,

*"BTW, that job my friend landed for almost $12,000, he told me the highest bid was $17,000. Wow. Cost was $6,500 and that guy marks it up to $17,000?"*

You are assuming the guy who wanted $17K's costs were $6500...


BamBamm5144,

*"This is not the normal the case by any means. Everything went very smooth on this job, including the tear off. It was a very easy house to roof. My labor should have been $2400 as I estimated it out to be but I got lucky. I was also on the job site the whole time, so if I were to actually include my wages on the job I would be more at $1500."*

This is normally none of my business, but might be instructive... what did you do with the difference in labor? Did you add it to capital reserves or cash out?...


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## Real World

BamBamm5144 said:


> This is not the normal the case by any means. Everything went very smooth on this job, including the tear off. It was a very easy house to roof. My labor should have been $2400 as I estimated it out to be but I got lucky. I was also on the job site the whole time, so if I were to actually include my wages on the job I would be more at $1500.
> 
> Speaking of insurance costs, yes it is terrible. My work comp bill is $1400 a month and I got an audit that ended up being 6k. My insurance is a little less than $600 a month.
> 
> *If I were to mark up 40% on what I expected this job to be, it would have cost $8960.00.
> *
> I don't work off of mark ups though, I work off of square feet. That's why it doesn't really do me any good to do that.


If I use your numbers, material was $4,000, labor estimate was $2,400. Total is $6,400 + 40% = $8,960.

So how did you come up with $10,000+

That's almost a 60% markup.

Real World


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## Real World

KAP said:


> Real World,
> 
> *"BTW, that job my friend landed for almost $12,000, he told me the highest bid was $17,000. Wow. Cost was $6,500 and that guy marks it up to $17,000?"*
> 
> *You are assuming the guy who wanted $17K's costs were $6500...
> 
> *


No, I didn't assume I knew his cost at all. I was just stating there was a difference of $5,000 in pricing, an additional 100% markup.

It seemed way out of line for such an easy job.

Real World


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## BamBamm5144

Real World said:


> If I use your numbers, material was $4,000, labor estimate was $2,400. Total is $6,400 + 40% = $8,960.
> 
> So how did you come up with $10,000+
> 
> That's almost a 60% markup.
> 
> Real World


As I said, I don't measure by percentages, it is by square feet. My materials cost me X per square as well as labor. $10,085 / 2783 (square feet) is my cost per square foot. Now I actually figure this out the other way by multiplying my sq ft number times the sq ft of the home.

I only check percentages after the job to make sure I am in the vicinity of where I need to be. If it is more, I need to figure out where I need to adjust.


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## BamBamm5144

KAP said:


> This is normally none of my business, but might be instructive... what did you do with the difference in labor? Did you add it to capital reserves or cash out?...


I haven't decided yet. Normally I put it a separate account to draw off of when jobs go over budget but since it's a new year I may use it to purchase some new equipment.


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## HomeSealed

One of the keys is what KAP was alluding to: Not everyone's costs are the same, especially once you consider overhead. I have $10k per month in overhead, another guy working out of his truck may have $1k, while the $9mil showrooom down the street may approach 6-figures. A 50% markup is going to produce a pretty wide range of bids from those 3 companies. 
There are companies here who charge over $1000 per window (and the same per sq of siding) when their direct cost (labor and materials) is probably $300. The thing is, that may or may not mean that they have an insane markup, because they have a tremendous amount of overhead.
You can look at that and say, WOW!, I could charge that much and make way more profit, but that is wrong. The reason that they can charge that much is because of the credibility that comes with their business. You can't go from 0-100mph without all of the speeds in-between.


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## Real World

HomeSealed said:


> One of the keys is what KAP was alluding to: Not everyone's costs are the same, especially once you consider overhead. I have $10k per month in overhead, another guy working out of his truck may have $1k, while the $9mil showrooom down the street may approach 6-figures. A 50% markup is going to produce a pretty wide range of bids from those 3 companies.
> There are companies here who charge over $1000 per window (and the same per sq of siding) when their direct cost (labor and materials) is probably $300. The thing is, that may or may not mean that they have an insane markup, because they have a tremendous amount of overhead.
> You can look at that and say, WOW!, I could charge that much and make way more profit, but that is wrong. The reason that they can charge that much is because of the credibility that comes with their business. You can't go from 0-100mph without all of the speeds in-between.


Thanks, I understood what you were saying. However, I did know who the top bid was and he is not a contractor with a showroom or anything like that.

I know that in the past I have bid jobs extremely high hoping I didn't get them because I was already backed up with work. Back in the day when business was plentiful.

Every once in a while someone would say "ok" when can we start. I'd say to myself, did this person get one bid from anyone else?

I also realize that homeowners will pay more if you are positioned correctly. A guy working out of a '89 Red Ford Van will not be able to get the same price as a local builder who may have a showroom, staff, trained staff, experience, reputation, etc...

Thanks.


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