I am about to embark on my largest project yet: A second story addition, about 1300 ft2. I am wondering what mark-up I should charge. I intend to sub out most of the work, except flooring and trim. I would like to be paid a flat fee, and have the sub’s and material costs passed directly onto the customer – this is to protect me from unforeseen costs. Though I have calculated an extensive bid, I just don’t know what % I should charge for my time, overhead and profit.
Thanks,
Gawain
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Replies
Well, that depends entirely on what your time is worth, and no one here can answer that question for you.
Have you determined what it costs you to be in business by the hour, day, week, and month, including overhead, taxes, salary, etc.? Have you estimated how much of your time will be required to complete this project? If you can answer those two questions, the answer to your original question should be readily apparent. If you can't answer those questions and you plan on listening to an anonymous internet source to determine what you should charge, plan on donning an orange apron soon and repeating the phrase "Liquid Nails is in aisle 7" around 100 times a day.
Sorry to sound harsh, but you've really got to do some homework here. Also, while passing along the sub costs to the owner sounds good in theory, you run the risk of a few problems. Who pays for repairing defective work? Who's warrantying the work? Who's responsible to pay the sub when the owner decides the work isn't what he expected, or the price is too high, or the job took too long, or whatever else the owner can dream up?
Bob
Good advice, but Liquid nails are on isle 12, next to caulk... <!----><!----><!---->
I have figured up my overhead, and done a rough estimate of my time. I'm more concerned with how I present this to the customer. I am looking to do a cost-plus-a-fee contract after reading Fine Homebuilding Spring 2006 (Houses annual issue). It's tempting to just tack on a percentage of the total, but what percentage?<!----><!---->
Thanks,
Gawain
(overhead + profit ) / time to complete = rate
total rate x time = your $
cost plus ( your $ ) = total
( your $ ) / total = %
and the devil is in the detailsMike Smith Rhode Island : Design / Build / Repair / Restore
Yes, it's tempting to "just tack on a percentage", but that serves neither the customer or you.
If you work on a % of the cost of the job, what incentive do you have to control the subs to keep the costs in check? Why should the customer pay you more for supervising their job just because they decide to spend $100k on kitchen cabinets instead of $50k? What if you base your % on what your estimate says the project will cost, and then the customer spends much less, but the project still takes the same amount of time to complete? Your rate is effectively reduced in this case.
Either propose a fixed fee for a fixed project scope and duration, or provide an hourly rate for your time. with an estimate of how much time you'll be dedicating to the job. To do it any other way is going to end up cheating someone- it's just a question of who.
Bob
Thanks for the great posts! I was thinking of a fixed fee based on a percentage of the total estimated price. I have most estimates in from the subs, but there is the factor of tying onto the old work that is hard to price. By using the cost-plus-a-fee contract, I'd eliminate some of the risk involved with large remodels. I can get the new construction costs figured, but there's just too much hanging out there with tying into the old.
If cost of the addition exceeds the estimate, then I don't get hosed, and the owner hopefully gets lower costs because I won't have to pad the estimate to cover the unforeseen costs. If my estimate is $140,000 before my costs, then the first question my customer is going to ask is how much am I making? I'm trying to figure out what an acceptable % is. I am thinking of 15%. Thoughts?
Gawain
how many months of work ?
3 ?
what happens if it goes to 5 ?.. same fee .. but now you are making almost half per weeek of what you thought
cost-plus-fixed fee is pretty fair.. but if you blow the time line you'll be hurting
Mike Smith Rhode Island : Design / Build / Repair / Restore
If my estimate is $140,000 before my costs, then the first question my customer is going to ask is how much am I making?
If the HO asks you how much your making you need to tactfully tell him thats none of his business. I hope your not planning on telling him that figure.
Doug
What you are describing sounds more like a position as a project manager. So you should be charging an hourly rate. If you are side-stepping any and all risk by passing things offf to the owner, you desereve no profit.
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1/3 for the cost + 1/3 for the company + 1/3 for youMike Smith Rhode Island : Design / Build / Repair / Restore
This being my first "big job" that doesn't sound like such a bad idea.
OK now, part of what they are paying you for is to manage the risk on their behalf.I can't think of a remo job that has any more risk in it than a second storey addup, especially if they will be living there while the work happens. Timing and co-ordination are the big keys here. That and extremely dependable subs. You don't want to have the demo crew de-roof it and then the framers not show up for a week.Good luck
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
If you are side-stepping any and all risk by passing things offf to the owner, you desereve no profit
Deseve NO PROFIT?!!!!!
That's crazy talk. There is always risk and there should always be profit.
blue
Whatever...See the IF at the beginning of my sentence.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
100%
Gawain,
In my experience (as green as I am) there is no cut and dry to remodelling. carefully estimating and getting prices from subs is a great start. next you need to figure how often you will need to be on the job to meet a sub, set up a sub, get materials for a sub, etc. Then you need to assume that when the time comes for the sub to hand you a bill, there will be an extra or two. (almost always is). Then you need to figure the customer is going to need to talk to you several times a week (all hours of the day and even night). then there is all of the odd jobs that no one else is claiming resposibility (generally small but they add up). then there is the final cleaning, the punch work, etc.
assume the worst , price it well, risk losing the job. I really should listen to my own advice. I'm successfull about half the time at this. the cost plus is a good way but they are going to want a ball park at the very least. Also make sure that hidden conditions are not reflected in the contract and will be viewed as a change order. people are tough, you need to be too. I'm still trying to get tougher on people myself. It's not easy. Good luck
Jason
"it aint the work I mind,
It's the feeling of falling further behind."
Bozini Latini
there a conractor in town, he is the highest price, almost double everybody else. But he always comes in on time and under budget. although his budget is inflated. He has enough in budget to add help in moment notice. He does such good work, stand behind it, never change order, people dont question the price. Although its an inflated price.
I work for a home builder with a similar reputaion with the exception that they do exceptional work. I would say it's acceptable work but others do better and charge less. Yet they get the jobs because when a customer hires them , they know it will be done on time, on budget, and with excellent customer service.
It works."it aint the work I mind,
It's the feeling of falling further behind."Bozini Latini