Construction Profit and Markup

It is your moral responsibility to charge your customers the absolute highest amount possible and to always accept the highest paying work.

Your time is valuable. You are a smart and talented individual working to make sure that California’s homes and businesses are up to snuff and meeting the demands of the users. If you don’t charge enough how will you pay for your equipment, material and and labor? But charging whats necessary to get by isn’t enough. You need to charge the maximum because your time is valuable and special. You have earned that money through your own experience and hard work. You should be reinvesting that money to better yourself. If you aren’t taking those profits and using them for your own benefit then you are hurting everyone else in the economy by reducing your future potential to be of service or merely missing out on your earned right to some relaxation. Nobody is more qualified than you to spend that money!!

Even more important it’s always best to accept the highest paying work. The person who offers the most money earned that money by helping other people. This good Samaritan, laden with money, has been working hard to offer their services to others and relying on the fact that in turn someone would be there to help them in their time of need. If you are out helping someone at a reduced rate your hurting yourself, your hurting the economy and your unjustly enriching the poor person who doesn’t have any money because they are too selfish and lazy to help anyone else!




But how should you figure your profit and overhead?

It depends on the job and the type of company you are involved with for example;


With a larger company you typically charge set rates based on time/material or unit pricing. If for example you or another employee goes out to run and meet the customer a few extra times its really not a big deal as long as the company pays you your wages and the company makes the minimum percentage for the job.

Large companies typically aim for profit percentages. For example they may sign an 5 million dollar contract with a goal of a 5% profit margin after all expenses and overhead are paid. Now if that same company bids a $5,000.00 job they might aim for $2,000.00 profit. With a smaller company profits must be higher and more secure. If the larger company that normally does multi-million dollar work does a job for $30,000.00 and accidentally only makes $3,000.00 there is no real effect on anyone personal life. If a small contractor works all month only to make $3,000.00 he might find himself in a very bad position.

When it comes to material markup I don’t use a fixed percentage. Why? Because sure enough someone will ask me to go pick up a $5 item and expect me to mark it up a certain amount. This would work at a big company where these transaction are all washed together but for a small contractor spending 3 hours driving back and forth for a quarter doesn’t make sense. Its always best to give combo bids including both materials and labor or to charge for time plus material.

As a general rule of thumb I always charge the going market rate or more so no matter what I can have someone else fill in for me in case I can’t complete the work for some emergency reason.




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