Let us talk about markup...
Ok a topic that will vary from contractor to contractor but in speaking with various manufacturers, they all seem to think that marking up material is a flawed method of determining a price. They have all said to me "you make your money on labor". While how I arive at my price is none of their business it did get me thinking, since these guys were all commercial manufacturers...
Ok, here is how I currently do it. I figure my base labor let's say take your cost per hour and I double it to cover for WC, GL, and burdens. Insurance and Burdens only account for approximately 78% so there is some padding.
Then I figure my materials and tax and delivery and any equipment rental etc...
I add all those numbers up and then mark that number up. Yes labor gets marked up twice. The markup % is irrelevant. I'm mpre concerned with the method used.
Due to the increased cost of materials this year, and since we are marking up those materials, I have also noticed our profit go up on each job. I am also seeing that on the jobs with high end or expensive materials, we simply are not getting.
Am I to think that I should take my material equipment etc and pass that cost along to the customer with no markup? Am I then to think that I should then increase, perhaps double, my markup on labor.
At the end of the day I need to achieve a certain ammount of gross profit regardless of how I arrive at that number. But for the commercial boys I was really interested in how you markup your jobs.
Ok a topic that will vary from contractor to contractor but in speaking with various manufacturers, they all seem to think that marking up material is a flawed method of determining a price. They have all said to me "you make your money on labor". While how I arive at my price is none of their business it did get me thinking, since these guys were all commercial manufacturers...
Ok, here is how I currently do it. I figure my base labor let's say take your cost per hour and I double it to cover for WC, GL, and burdens. Insurance and Burdens only account for approximately 78% so there is some padding.
Then I figure my materials and tax and delivery and any equipment rental etc...
I add all those numbers up and then mark that number up. Yes labor gets marked up twice. The markup % is irrelevant. I'm mpre concerned with the method used.
Due to the increased cost of materials this year, and since we are marking up those materials, I have also noticed our profit go up on each job. I am also seeing that on the jobs with high end or expensive materials, we simply are not getting.
Am I to think that I should take my material equipment etc and pass that cost along to the customer with no markup? Am I then to think that I should then increase, perhaps double, my markup on labor.
At the end of the day I need to achieve a certain ammount of gross profit regardless of how I arrive at that number. But for the commercial boys I was really interested in how you markup your jobs.