I’ve read articles and heard seminars on generally accepted P & O mark-up on remodeling and renovations (usually in the 30% -35% range) but it never addresses at what price levels that mark-up is appropriate for. Do you use the same mark-up for a $25,000 job as a $100,000? What about a $250,000 or even $500,000? I’m expecting plans soon for two jobs, one about $200,000 + and another is expected to be over $500,000. I don’t want to shortchange myself, on the other hand I must be competitive as I’ll be bidding against other, larger generals. These jobs are in the upscale suburbs of a very large midwestern city. Any suggestions or input from experience would be appreciated.
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Look at it this way...
35% markup for EACH dollar is 35 cents.
Now, what difference does it make if the end cost is $10k, or $100k? The markup is still 35%. Markup is NOT your profit margin. Markup is what the client pays above and beyond your costs.
You'll make more money on the larger, more expensive jobs, but it will cost you a lot more to do them, and the time and hassle level is WAY above the lower costing jobs. You are not only investing your time and money, but you are taking a much larger risk. The higher the risk, and the more time and money involved, the bigger the dollar amount at the end.
Percentage wise, it's all the same.
More people will surely chome in here, and this could get interesting.
James DuHamel
J & M Home Maintenance Service
"Southeast Texas"
While James has a good point, I'll disagree with him in part.
A small three hundred dollar job will take me as much time to prep for (sometimes much more) as preping for spending the day on a four month long three hundred thousan dollar remodel.
A remodel takes a lot more communications time with the client than a spec tract house built new.
A repair of a screen door for the little old widow lady takes more time than doing the same for a real estate rental agent who just says, doit! here's the adress.
My insurance is built into my labor rate and most of my jobs are time and materials, with the markup on materials.
I can get by with 15% on big new jobs, but I'm starting an interior treatment this week that is a special stuff, I spent nearly fifty hours on design and communications. The markup on it will be 100% on both labor and materials on a firm bid contract.
Most jobs 25% works pretty good for me but like I said, my insurance costs are built in to labor charges already. That is my biggest overhead charge.
Piffin,
I agree with a lot of what you are saying regarding LOWER end repair type jobs, and lower end remodels. The original post was asking about high end remodels and renovations with $25k at the EXTREME LOW end of the spectrum.
I fully understand what you are saying about the pricing and markups of a one or two day job, but when we are talking about several months at the same location, with several subs and crews, then the markup should remain pretty consistent. In other words, I wouldn't lower the markup on a $500k project versus a $300k project.
I think the original intent in the question was should the markup get smaller as the price goes up, with the projects being in the $200k to $500k range. In my opinion, it should not. It should remain consistent.
I do know that builders usually make a much smaller percentage on a completed project than a remodeler or repair company. James DuHamel
J & M Home Maintenance Service
"Southeast Texas"
On large, $100,000.00 and up projects, I have a 15% to 20% markup on labor rates. Locally or readily available materials get a 10% to 15% markup, and hard to find or highly custom items get a 50% to 100% markup. On smaller jobs those markups go up another 10% to 15% because it takes more of my time away from the bigger jobs to work up an estimate, line up materials and subs, and schedule a crew to be there. Just my .02. TCW Specialists in Custom Remodeling.
I also cover most overhead in my labor rate, plus about 30% markup. This puts me at the high end in my market, but not the highest. On materials , local market starts to cringe beyond about 15%. Often even lower, since local supply houses will give just about anybody off the street a so called "contractor discount". Tough to charge over retail when they can buy it themselves for 10% off. When customer wants to pull this, I increase labor rate 10% or so to cover, and use their materials with a smile, happy to oblige. Do some very custom stuff with unique materials, then markup is based on aquisition time, and customer relationship. ###holes get 100% markup, nice folks maybe 20-25%. The old saying is true," You can catch more fies with honey, than........
Brudoggie