Replies

1. 
   Guest_ | Jan 05, 1999 12:47pm | #1

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   Overhead is estimated to be 15% under normal circumstances. Profit is usually around 10%.

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   Guest_ | Jan 05, 1999 07:49pm | #2

   *I saw on another remodeling website where you should figure costs and mark it up 40%. I tend to try and use 30 to 35%, the 15 and 10 is about a 27% final markup. I have gone has high as 40 and as low as 10 to 15%, depending on a wide variety of circumstances. I have sub for guys who I found out who marked my price up 50% and gotten the work. I guess I have only muddied the water, I will try and get the other site for you.

1. 
   Guest_ | Jan 05, 1999 08:02pm | #3

   *Check out http://www.remodeling.hw.net, they have an article called "The Margin Wars". Great Site for business stuff.

1. 
   Guest_ | Jan 05, 1999 10:42pm | #4

   *You are marking up to make money...a profit. Markup depends on how much profit you want and is based on your cost of doing business. Simply put, Mark-up-Overhead=Profit. Shoot for at least 3% An example would be if you determined your direct costs for a job to be $3000. You marked up 40% or $1200. So your selling price is $4200. 1200/4200=28%. My overhead runs about 25% (14% sounds low to me but everyone is different) So, that means I made 3% which is acceptable. Bottom line is until you know your overhead you dont know if you are making money..so, you are off to a good start. Good Luck!!Dave

2. 
   Dan_ | Jan 05, 1999 11:12pm | #5

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   Thanks J.D. and Dave,
   How do you guys handle your own wages if you're like me and do your own work?
   Thanks again,
   Dan

3. 
   Guest_ | Jan 07, 1999 12:33am | #6

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   Holy moly, Batman! What am I missing, here. You're telling us you're content to make $150 on a $4200 job? Are your own wages included in the $3K direct costs or in the $1050 overhead? Or..God forbid...in the $150?

   Then there's the burning question "is markup figured on a percentage of cost or a percentage of the desired price?" - .....40% of cost is not 40% of the selling price. Also, what is overhead and what is considered a direct cost? I try to prorate vehicle expense and call it a direct cost, while you may include it in overhead.

   A very successful plumbing contractor turned consultant in our area preaches finding your final selling price by saying "what percentage of my selling price do I want left after all the bills or portions of bills that relate to this project are paid?"

   In other words, let's say you want to 20% of your selling price to be in addition to all your costs for the project. Add all your direct and indirect costs together - labor, taxes, your own labor, materials, all overhead, etc - let's say they come to $4150. By definition, this is 80% of your selling costs. Now....and this is the hard part.....divide $4150 by .8 (that's 8/10) - your selling price is $5187.50

   You'll have to determine the percentages based on your own costs and the market you deal with, but, as one business consultant put it, "you can do more community good with obscene profits, than you can by making just enough to barely pay your bills".

   Comments, anyone?

   My dad told me when I went into this business "you buy it for $1.00, you sell it for $6.00 - 6 percent profit is enough for anyone!!

1. 
   Guest_ | Jan 07, 1999 01:42am | #7

   *Everything, including subcontractor prices should be marked up 50% (at least) to reach gross profit of 33.3%. Example: add 50% to total labor and 50% to material costs. Therefore your final figure consists of 2/3 costs and 1/3 (33.3%) gross profit. You are not doing yourself or your clients any favors by not marking up subcontractor costs because you won't make enough to cover overhead. You will be responsible for the subs quality of work and if you don't mark it up you won't be around to handle any problems. Usually you develop a relationship with subs and what they charge you is not as much as if they had to deal directly with the homeowner. If you are doing everything from the ground up (say a bath remodel) and the homeowner is picking out tubs, sinks etc. I have found that trying to markup fixture prices is not worth the hassle. Most plumbers figure THEIR profit on fixture markup. I let the homeowner pick out fixtures on their own time at one of the big box stores and build my charges into the pickup/installation only. I like the concept of "what do you want left over" previously mentioned. Don't forget that the "left over" figure should be figured POST TAX. Finally, don't forget the standard ADDITIONAL 30% markup required for those high maintenance clients that hang all over you while the work goes on...if they want to learn TUITION is required. Thor

4. 
   Dan_ | Jan 08, 1999 05:14am | #8

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   Allaround,

   Thanks for the response.

   No, I'm not hoping to make $150.00 on a $4200.00 job. I'm simply telling you what my overhead is; 14%. I'm also making a wage on my labor ( I do my own work) and I charge another percentage for profit.

   It's interesting to see the different methods we use and the different margins we command.

   Thanks to all who responded. If anyone has any other input feel free to put your 2 cents in(not literally).

   Dan

5. 
   Dan_ | Jan 09, 1999 03:14am | #9

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   Was hoping I could get some help with my calculations for overhead and profit.I do remodeling work and from literature I've read there seems to be a wide disparity in these numbers.
   My gross receipts are around $100,000.00 and I've figured my indirect costs(overhead) at about 14% if I include a wage for my time in the office and time out seeing customers. I should also include a percentage for profit. Any thoughts?

6. 
   Guest_ | Jan 09, 1999 03:14am | #10

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   Dan,
   Wages, I thought I was doing this for the art. I drive my wife crazy, but wages are what's price-materials-dumpfee-Uncle Sams share. It really is loose, when I need money for her I usually can come up with some. I guess it is a lousy system, but I seem to be the last to get paid.