I will try to make this short. A friends father buildt a house ,GC tells him 12% is his profit on the job. HO talks to mason finds out his guys are 20 bucks hr. looks at what he is paying the GC and its 30 bucks hr. So it looks like the GC is marking up for each sub and on the total. What is your thought on this?
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What does the contract say?
I wouldn't get too worked up over one man's statement. You may not have gotten the whole truth.
For instance - The mason may be paying his employees $20/hour, but charging the GC $30/hour. That's completely resonable - The GC has to cover his own overhead, markup, insurance, etc.
I don't know any professional masons, carpenters, or plumbers who only bill out $20/hour.
A person who smiles in the face of adversity...probably has a scapegoat.
12% profit was mentioned. No mention of overhead? Gotta be coming from somewhere. If that 12% was profit AND overhead.....well, I couldn't get by on that. Point being that, it's got to come from somewhere. I wouldn't use this one example (the mason) of number's not matching up to judge the whole job.......gotta see the whole picture to understand the real deal.
His profit on the JOB is 12%. Maybe he makes a bit more on the masons but less on the framers or materials. Do not look at it as 12% per item but as a whole.
That's one downside of cost +: the GC makes a greater base if overbudget so the 12% is a greater number when things don't go well. Where's the incentive to meet budget? (This is a rhetorical question. Let's not side track the thread.)
If the job is budgeted/ paid according to aggregate numbers (ie: cost + 12%) show invoices and add 12%. That means the subs (masons) must submit an invoice to get paid, your pal's father will see what the GC was CHARGED, the base will be defined and so determine the amount of the 12%.
Keep in mind, the GC also will submit invoices for his services which will include billable hours and overhead.
F.
The masonary contractor is making $10 per hr on his men......... ?
There's no such word as "masonary".
TKHOLLOWAY, did you ever catch the Woodshed Tavern topic here "Masonary" Contractor. You'll probably appreciate it.
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Google has 2,200,000 hits for masonry and 27,000 hits for masonary, this page is interesting because they also have artefacts and cementry.
It seems to be an archeological site.
SamT
I can dig it<G> Don't worry, we can fix that later!
dont forget workman comp, that cost something
I can dig that, too<G> Don't worry, we can fix that later!
No, there is probably no double dipiing going on there at all.
Hops, it sounds to me like you don't understand or are confusing some terms here. Profit is not the same as Markup or Margin.
Margin is the difference between the "20 bucks hr." that the mason is charging and the 30 bucks hr. that the GC is charging the homeowner/client for it.
Inside of that $10 margin the GC has to recover his costs for three main things
So for every hour that a Mason works the GC might be "figuring" and getting
What sounds insanely low or even criminally low is a masonry sub billing out at $20 per hour!!!????? Reverse engineering that if I figure the Mason Contractor is using a minimum of 10% for OH and 10% for Profit and the Labor Burden on his employees is a minimum of 20% then the actual masons doing the work are making $13.88 per hour! That's border line sweatshop. The nation average for a masons wage (in 2001) was $23.40. Hod Carriers were getting $15.90. And a simple Laborer's average was $13.40.
If the GC is guilty of anything its hiring a sweatshop sub.
Regardless your friends father is getting a killer deal.
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Thanks for the feedback. Just one question , I understand the cost of supervising and the overhead part i.e. the cost of running a business ,but it is adding his profit for each sub and at the end on the total that seemed odd. Not being the sharpest knife in the drawer I could not think of another example of this in the business world. Feel free to enlighten me.
Let's suppose that I hired a masonry sub who billed me 20/hr for his men ( low on the face of it for qualified people) but he would not or could not provide me proof of liability and workers comp insurance. Since I am on the up and up, I have to cover those costs. That's your 50% markup before profit right there.
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