FHB Logo Facebook LinkedIn Email Pinterest Twitter X Instagram Tiktok YouTube Plus Icon Close Icon Navigation Search Icon Navigation Search Icon Arrow Down Icon Video Guide Icon Article Guide Icon Modal Close Icon Guide Search Icon Skip to content
Subscribe
Log In
  • How-To
  • Design
  • Tools & Materials
  • Restoration
  • Videos
  • Blogs
  • Forum
  • Magazine
  • Members
  • FHB House
  • Podcast
Log In

Discussion Forum

Discussion Forum

Charging for overhead

| Posted in Business on June 16, 2003 06:38am

Need some advice on the mechanics/methods of charging for overhead & profit & such.  Up to now all my jobs have been fixed price lump sum bids, with everything rolled in.  I have broken out the cost of a couple of items, and frequently break the bid up into sections, but the actual cost has always been buried.  Now I’m faced with a different (for me) type of project.  Client is a well-to-do HO having their second place renovated, and she is happily visiting different showrooms selecting stuff and getting prices.  Let me interject that I get the feeling that they fully intend for me to make a buck, and they don’t expect me to work for free.  So, for example, when she goes to the hardwood floor store and finds what she likes and the sales guy says it’s $15/sf installed by their crew, what’s next?  Except for the appliances and furniture, I imagine that I will be buying all the material and subs.  So do I go back to the floor place and tell them that I heard the price he quoted, now what’s my price?  Or do I show that number on the flooring line, and show some % at the bottom for my fee, or what works best?  And how ndo you word it when you present the proposal to the HO and there’s a nice markup at the bottom? 

 

Do it right, or do it twice.

Reply
  • X
  • facebook
  • linkedin
  • pinterest
  • email
  • add to favorites Log in or Sign up to save your favorite articles

Replies

  1. RalphWicklund | Jun 16, 2003 07:09am | #1

    I don't think you need to place all your cards on the table for the customer to pick and choose the ones they like. Your bottom line is not their business.

    Nothing wrong with negotiating a discount or contractors price with a supplier and the retail price you know will give you a head start on pricing. If flooring is not your forte then you should sub it out for speed and liability. Unexperienced, you could lose much of your profit due to mistakes. Also, if you are taking the time to purchase her selections then by all means you have an expense to charge. Not only the time involved but a percentage for the overhead and profit of the job. Otherwise the customer would not need you. A little shopping around could also get you a better price for the same material from another supplier.

    The customer may know the price of certain portions of the job and you may feel comfortable to include those prices as an allowance item but as I said above, your job costs are not limited to those items she has shopped and you must include them in your total price. It's SOP (according to many contractors) to mark up subs and material costs. You ARE coordinating the whole shebang so BE COMPENSATED and do what you're comfortable with - give a lump sum - with the allowance items she has chosen

    1. FastEddie1 | Jun 16, 2003 07:13am | #2

      Ok Ralph, so I give  a proposal that says total project cost $50k which includes the oak floor from ABC and the cabinets you selected from XYZ and all other costs to complete the project?

      Do it right, or do it twice.

      1. RalphWicklund | Jun 17, 2003 07:41am | #3

        That's the general idea.

        1. georgeolivergo | Jun 17, 2003 09:36am | #4

          I was also wondering about this in relation to how the company I work for breaks it down; we have two 'ways' of recovering OH and profit:

          the estimate is broken up into sections with lump sum prices for each phase; the "labor rate" is given, but of course this labor rate includes a substantial amount of OH...

          then the whole estimate is 'marked up' with a percent for 'OH & P'. I don't know the exact numbers but looking at our labor rate, it seems like this 'OH & P' really is a pure profit markup.

          if the client chooses the subs shouldn't there be some kind of disclaimer about the GC not being fully responsible for installation/warranty/etc.?

          best, GO

          1. ideamaker | Jun 17, 2003 04:18pm | #5

            Sounds like they are asking you to do Construction Management, vs GC.  ALL my customers shop.  I explore a "to the trade" price if I know the limits of the shopping, but if I don't I go another route. All that shopping and negotiating could make you nuts, especially if you have long-term relationships with subs and the products they use. Sometimes if I feel strongly that they have headded in the wrong direction, I tell them that directly. For example if they are leaning toward a sub who has a bad rep, or a product that I think won't hold up, and I tell them that I will only be responsible for co-ordinating the selection into the scope of the work. They seldom go that route after I say that. Seems they want to shop, but don't want the responsibility of purchase! Alternatively I explain the difference between my CM vs GC contracts, and tell them they could save themselves some money with CM IF everything goes right... but if it goes wrong, it all could cost them more.  Usually that works.  I just always try to be really clear about how much I'm making, and how much others make and materials cost. I pass along all invoices to the client as a NET cost and my money comes straight to me. This way the client has no way to complain about double dipping - which in my neck of the woods is a HUGE no-no, and will cost you referrals in the end. My business is 95% referrals, so I have no desire to go there!

          2. FastEddie1 | Jun 17, 2003 08:43pm | #6

            if I know the limits of the shopping  Don't understand "limits".  In this case, she is not looking at subs per se, but picking out the floor and wall tile, the special wood for the floor, cabinets etc, and I have to assume it would be impractical for me to go to another outlet and try to find the same products.  San Antonio is a big-small town, with not a lot of up scale outlets, so I suspedct that there's only one place in town that carries a given brand of cabinet or whatever.  I'll probably go back to the outlets after she makes her selections and work on a trade discount...wonder if I can trade my mother-in-law...?Do it right, or do it twice.

          3. ideamaker | Jun 17, 2003 10:01pm | #7

            "limits" maybe read "extent"?

            I see - if you suspect you know where she is going you might try calling before she gets there ( too late, huh?) and working with one salesperson, and then trying to get her to work with YOUR salesperson. That way you could lock in your profit in her price.  I am on the east coast - I guess what's customary in one part of the country may not be in another. We have a lot of sources for things with competing products - my clients usually ask "who do you know at ABC flooring..." before they start.

            Good luck with your project - sounds like it might be a nice house to build if you can work out this kink before you start.

          4. FastEddie1 | Jun 17, 2003 10:26pm | #8

            trying to get her to work with YOUR salesperson.  Not really...the places she shops are too expensive for my projects, so I don't have any contacts at 'her' places.  So I'll go back after the fact...actually I need to work with the salesperson on details anyway, minor stuff like dimensions, you know, make sure it will fit in the room...hey, it looks good, it has to fit...

            It's a remodel so we have to work within the shell of the house.  It's going to be fun...I hope; and profitable...I hope even more!

            Do it right, or do it twice.

            Edited 6/17/2003 3:28:32 PM ET by ELCID72

  2. rjc48 | Jul 14, 2003 04:30am | #9

    Sorry that I got into this a little late, but for the record, this is what I do.

    I have contracts that are fixed price and I have a number of customers that prefer a cost plus arrangement.  If it is cost plus, I have them sign a contract that lays everything out up front - the rate for labour ($42.50 per hour each man), materials and sub-contract at cost, but with a 10% overhead and profit calculated on the material and subs.

    Seems to work fine and everyone knows where they stand.

    (I still prefer to work on a fixed price basis though)

Log in or create an account to post a comment.

Sign up Log in

Become a member and get full access to FineHomebuilding.com

Video Shorts

Categories

  • Business
  • Code Questions
  • Construction Techniques
  • Energy, Heating & Insulation
  • General Discussion
  • Help/Work Wanted
  • Photo Gallery
  • Reader Classified
  • Tools for Home Building

Discussion Forum

Recent Posts and Replies

  • |
  • |
  • |
  • |
  • |
  • |
View More Create Post

Up Next

Video Shorts

Featured Story

Making the Move to Multifamily

A high-performance single-family home builder shares tips from his early experience with two apartment buildings.

Featured Video

How to Install Exterior Window Trim

Learn how to measure, cut, and build window casing made of cellular PVC, solid wood, poly-ash boards, or any common molding material. Plus, get tips for a clean and solid installation.

Related Stories

  • Podcast Episode 692: Introduction to Trade Work, Embodied Carbon, and Envelope Improvements
  • FHB Podcast Segment: Embodied Greenhouse Gas Emissions and the Building Codes
  • Old Boots Learn New Tricks
  • Install Denim Insulation Like a Pro

Highlights

Fine Homebuilding All Access
Fine Homebuilding Podcast
Tool Tech
Plus, get an extra 20% off with code GIFT20

"I have learned so much thanks to the searchable articles on the FHB website. I can confidently say that I expect to be a life-long subscriber." - M.K.

Get home building tips, offers, and expert advice in your inbox

Signing you up...

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
See all newsletters
See all newsletters

Fine Homebuilding Magazine

  • Issue 332 - July 2025
    • Custom Built-ins With Job-Site Tools
    • Fight House Fires Through Design
    • Making the Move to Multifamily
  • Issue 331 - June 2025
    • A More Resilient Roof
    • Tool Test: You Need a Drywall Sander
    • Ducted vs. Ductless Heat Pumps
  • Issue 330 - April/May 2025
    • Deck Details for Durability
    • FAQs on HPWHs
    • 10 Tips for a Long-Lasting Paint Job
  • Issue 329 - Feb/Mar 2025
    • Smart Foundation for a Small Addition
    • A Kominka Comes West
    • Making Small Kitchens Work
  • Issue 328 - Dec/Jan 2025
    • How a Pro Replaces Columns
    • Passive House 3.0
    • Tool Test: Compact Line Lasers

Fine Home Building

Newsletter Sign-up

  • Fine Homebuilding

    Home building tips, offers, and expert advice in your inbox.

  • Green Building Advisor

    Building science and energy efficiency advice, plus special offers, in your inbox.

  • Old House Journal

    Repair, renovation, and restoration tips, plus special offers, in your inbox.

Signing you up...

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
See all newsletters

Follow

  • Fine Homebuilding

    Dig into cutting-edge approaches and decades of proven solutions with total access to our experts and tradespeople.

    Start Free Trial Now
    • Facebook
    • Instagram
    • X
    • LinkedIn
  • GBA Prime

    Get instant access to the latest developments in green building, research, and reports from the field.

    Start Free Trial Now
    • Facebook
    • YouTube
  • Old House Journal

    Learn how to restore, repair, update, and decorate your home.

    Subscribe Now
    • Facebook
    • Instagram
    • X
  • Fine Homebuilding

    Dig into cutting-edge approaches and decades of proven solutions with total access to our experts and tradespeople.

    Start Free Trial Now
    • Facebook
    • Instagram
    • X
    • LinkedIn
  • GBA Prime

    Get instant access to the latest developments in green building, research, and reports from the field.

    Start Free Trial Now
    • Facebook
    • YouTube
  • Old House Journal

    Learn how to restore, repair, update, and decorate your home.

    Subscribe Now
    • Facebook
    • Instagram
    • X

Membership & Magazine

  • Online Archive
  • Start Free Trial
  • Magazine Subscription
  • Magazine Renewal
  • Gift a Subscription
  • Customer Support
  • Privacy Preferences
  • About
  • Contact
  • Advertise
  • Careers
  • Terms of Use
  • Site Map
  • Do not sell or share my information
  • Privacy Policy
  • Accessibility
  • California Privacy Rights

© 2025 Active Interest Media. All rights reserved.

Fine Homebuilding receives a commission for items purchased through links on this site, including Amazon Associates and other affiliate advertising programs.

  • Home Group
  • Antique Trader
  • Arts & Crafts Homes
  • Bank Note Reporter
  • Cabin Life
  • Cuisine at Home
  • Fine Gardening
  • Fine Woodworking
  • Green Building Advisor
  • Garden Gate
  • Horticulture
  • Keep Craft Alive
  • Log Home Living
  • Military Trader/Vehicles
  • Numismatic News
  • Numismaster
  • Old Cars Weekly
  • Old House Journal
  • Period Homes
  • Popular Woodworking
  • Script
  • ShopNotes
  • Sports Collectors Digest
  • Threads
  • Timber Home Living
  • Traditional Building
  • Woodsmith
  • World Coin News
  • Writer's Digest
Active Interest Media logo
X
X
This is a dialog window which overlays the main content of the page. The modal window is a 'site map' of the most critical areas of the site. Pressing the Escape (ESC) button will close the modal and bring you back to where you were on the page.

Main Menu

  • How-To
  • Design
  • Tools & Materials
  • Video
  • Blogs
  • Forum
  • Project Guides
  • Reader Projects
  • Magazine
  • Members
  • FHB House

Podcasts

  • FHB Podcast
  • ProTalk

Webinars

  • Upcoming and On-Demand

Podcasts

  • FHB Podcast
  • ProTalk

Webinars

  • Upcoming and On-Demand

Popular Topics

  • Kitchens
  • Business
  • Bedrooms
  • Roofs
  • Architecture and Design
  • Green Building
  • Decks
  • Framing
  • Safety
  • Remodeling
  • Bathrooms
  • Windows
  • Tilework
  • Ceilings
  • HVAC

Magazine

  • Current Issue
  • Past Issues
  • Magazine Index
  • Subscribe
  • Online Archive
  • Author Guidelines

All Access

  • Member Home
  • Start Free Trial
  • Gift Membership

Online Learning

  • Courses
  • Project Guides
  • Reader Projects
  • Podcast

More

  • FHB Ambassadors
  • FHB House
  • Customer Support

Account

  • Log In
  • Join

Newsletter

Get home building tips, offers, and expert advice in your inbox

Signing you up...

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
See all newsletters
See all newsletters

Follow

  • X
  • YouTube
  • instagram
  • facebook
  • pinterest
  • Tiktok

Join All Access

Become a member and get instant access to thousands of videos, how-tos, tool reviews, and design features.

Start Your Free Trial

Subscribe

FHB Magazine

Start your subscription today and save up to 70%

Subscribe

Enjoy unlimited access to Fine Homebuilding. Join Now

Already a member? Log in

We hope you’ve enjoyed your free articles. To keep reading, become a member today.

Get complete site access to expert advice, how-to videos, Code Check, and more, plus the print magazine.

Start your FREE trial

Already a member? Log in

Privacy Policy Update

We use cookies, pixels, script and other tracking technologies to analyze and improve our service, to improve and personalize content, and for advertising to you. We also share information about your use of our site with third-party social media, advertising and analytics partners. You can view our Privacy Policy here and our Terms of Use here.

Cookies

Analytics

These cookies help us track site metrics to improve our sites and provide a better user experience.

Advertising/Social Media

These cookies are used to serve advertisements aligned with your interests.

Essential

These cookies are required to provide basic functions like page navigation and access to secure areas of the website.

Delete My Data

Delete all cookies and associated data