Contractor Talk - Professional Construction and Remodeling Forum banner

1 - 20 of 21 Posts
U

·
Guest
Joined
·
0 Posts
Mike,

I am a general contractor, we do a lot of trades in house, but we also sub a lot. Everything has to be marked up. If the money passes through your books, it effects your insurance and other overhead. If you schedule the sub, you are spending time. If you have good subs this should be your easy money. My subs sell the work to me a bit cheaper than they would to homeowners because they know when I call them it is sold and that they don't have to deal with the homeowner, I do.

Our whole estimating process involves calculating all our labor, material and sub costs to determine OUR cost for the project. We then divide by .80 to get our contract amount.
 

·
Flooring Guru
Joined
·
2,794 Posts
You bet we do!
Contractors do give us a slight discount then if they get their businees on their own, but then we mark up 25%.
If the installers leave town, we will pay another guy to fix whatever. It's peace of mind for our clients.
 

·
Registered
Joined
·
8,573 Posts
I've said this before and people are shocked but... If I am using subs, and they give me a labor price I double that price, add the materials and that's the customer's price.

If they are providing the materials I mark it up as much as the market will bear. Typically I target for 20% but this depends on the size of job and how cheap I am actually getting it.
 

·
Flooring Guru
Joined
·
2,794 Posts
I've said this before and people are shocked but... If I am using subs, and they give me a labor price I double that price, add the materials and that's the customer's price.

As long as you are providing excellent service, it should be o.k.
Your taking a risk with some subs. If the client wants to save money by taking the risk themselves, then so be it.
We marked up 40% in Oregon.
 

·
Registered
Joined
·
3,265 Posts
Mike Finley said:
Do you mark-up subs work?
Yes, always.
Mike Finley said:
If so do you have [an] amount that guides you in this?
I build water mains and sewers for land developers and commercial builders. I was an estimator for others for about 15 years before I hocked everything and took the plunge last year. Now I do my own. There are a couple of things I consider when determining mark-up.

1.) Always - where do I think the market is? What's the greatest amount of profit I can add to the cost of a job and still have a chance of reigning it in? Is there something about the job (time constraints, owner experience, location) that will let me add more profit than I typically would?

2.) What's my exposure to unforeseen expenses (cost over runs) in connection with any given item? If it's not much than I don't have to mark it up as much as I do an item that brings with it more potential for cost over runs.
Examples: 1.) I mark-up labor at a higher rate than I do materials. That's because it's more likely that it'll take me longer than I estimated to install a job than it is likely that I'll have to buy more pipe, manholes or stone than was shown on the plans
2.) I mark-up subs less than labor because a.) Theoretically a sub provides a layer of warranty protection between me and the portion of my contract that he performs. If I did the work with my forces I'd be entirely exposed to the cost of any warranty work. b.) Subs run their own work for the most part. I don't have much of the administrative costs that I'd other wise have if I did the subs portion of the work.

I think the starting point to maximizing profitability in the long run is consistency in estimating cost. You've got to use a system that allows you to estimate the same way from job to job. That's the only way you can get "a feel" for your market.
The next most important thing is getting good construction cost feed back to bench mark your estimates against. That allows you to find cost areas that your either over or under estimating. One thing is for sure, you can't last long if you don't know how to charge at least as much as the work costs you to do it.

Once you've got the cost side down then you get into the black art of pricing adding mark-up). Play with some mark-up schemes and start looking for trends. Where do your margins need to be to get the "typical" job. How high can they be to get that "need you yesterday" job. How low do you have to go to "take" a job that you've just got to have.

Estimating can be both heaven and hell for me. I find it really cool to finish a $750,000 job, get the job cost info all together, and find actual costs within a percent of estimated cost. On the other hand... ;)

Rick
 
U

·
Guest
Joined
·
0 Posts
Rick Newell said:
Once you've got the cost side down then you get into the black art of pricing adding mark-up). Play with some mark-up schemes and start looking for trends. Where do your margins need to be to get the "typical" job. How high can they be to get that "need you yesterday" job. How low do you have to go to "take" a job that you've just got to have.
Rick

Rick,
Do your pricing methods change from job to job based on gut feelings?
 

·
General Contractor
Joined
·
1,035 Posts
Well said Rick - one thing I try and get across to new Field/Office Engineers that work for me - we manage our subcontractors therefore we spend time and energy towards scheduling, checking submittals, executing contracts, checking insurance, etc..etc. We should be paid for that time and energy that makes the job run smoothly.
 

·
Registered
Joined
·
10,471 Posts
Everybody seems to be on target for their respective business's.
I go for the gusto and make as much as I can. Take the unregistered guest and his light. I'll dig the trench, install the conduit and even pull the wires so that when the electrician gets there all that he has to do is make the final connections. When it passes inspection, I'll backfill and sod and charge what he would have.
One Laborfinders guy at $12 per hr. charged out at $56 and Laborfinders does all of the paperwork.
I think that I've got you beat Grumpy. That 366 % profit.
 

·
Registered
Joined
·
3,265 Posts
hatchet said:
we manage our subcontractors therefore we spend time and energy...We should be paid for that time and energy
You're absolutely right. I have to tell you though that if I had a nickel for every minute I spent on the phone with subs this year...I might be able to buy an icecream cone.
My subcontract expenses are a very small percentage of my sales and an even smaller percentage of the work I need to do. I have three or four great subs that I need a handful of times a year (pavement sawing / patching, underground masonry, core drilling, etc.). Usually I spend more time BSing on the phone with them, "catching up" on how they've been, than I do scheduling or otherwise explaining what needs to be done on a job. Material suppliers, on the other hand, are a whole different story.
 

·
Registered
Joined
·
8,573 Posts
Teetor you certianly do have me beat, but my long term goal is to have clean hands. Right now that's not the case but I hope to never see a hammer unless it's in someone else's hands when I am 40+.

Truthfully my body is already shot from the short two years I roofed... it probably has to do with all the dare devil stuff I had done when I was in my teens. Jumping out of trees and off of roofs and fighting daily isn't the brightest of ideas. Or could it be the 8 hours a day 6 days a week I played basketball when I was unemployed about 6 years ago?
 

·
Registered
Joined
·
10,471 Posts
Grumpy, One of my biggest problems is that I actually LIKE to work with my hands and I often jump in on jobs when I really should be doing other things. Some people pay to go to a gym, I get paid for my 'workout' and develop a better relationship with my people. Hang drywall for half a day and you'll find out what kind of shape you're in.
Sounds like we had similar childhoods. I have had a bad back since my early 20's and have found that if I don't exersize it goes out a lot more frequently.

As for the mark-ups, It took some time but I eventually discovered how much other GC's were marking up my work. I also found that I was selling myself short on my own jobs.
 

·
Registered
Joined
·
2,169 Posts
subs i mark 200%

service guys 400%

goods take rec list price add 25% granted i buy below list

freebies?? nah thats the F word
 

·
Registered
Joined
·
481 Posts
We take the subs labor cost. Add in the material cost and double that number. That's the selling cost. We shoot for 46% Gross profit.
To achieve that we need to price everything for 50% for G.O.K

G.O.K.........God only knows

Example

Vinyl siding with all the trim & insulation
Material cost......$200.00 per sq.
Labor costs........$190.00 per sq.
Total L & M.........$390.00 per sq.

We would never sell it for less than $780.00 per sq.

We have been consistantly averaging 46% Gross..............
Do we lose sometimes? YES
Do we make more sometimes? YES
Our overhead is 39% so we need to hit that 46% number to hit our targeted 7% Net goal.
My salary and sales commisions are included in the 39% number.
I say that because a lot of people think that number is high. If you took out my salary and commisions it would be in line.
Again this is just another way of running the business by the numbers. (Numbers NEVER lie)

Next year we will raise it a bit.............I believe the company should make 10% Net
 

·
Celtic's #1 Fan
Joined
·
2,582 Posts
Again this is just another way of running the business by the numbers. (Numbers NEVER lie)
numbers are statistics, statistics can be manipulated. so unfortunately, numbers do lie sometimes.

Here are a couple of great quotes about statistics that tell the truth.

“Statistics are like a bikini. What they reveal is suggestive, but what they conceal is vital.”
I first heard this one when we were trying to get a very wealthy man to pay alot of money for a magazine publishing company. We gave him all the facts, figures, dollars, etc. He looked us dead in the eye, and said that quote. I thought 'damn, no wonder he has the money to actually buy this, I can't baffle him with my BS":blink:


“There are two kinds of statistics: the kind you look up and the kind you make up”

“I've come loaded with statistics, for I've noticed that a man can't prove anything without statistics”

“Definition of Statistics: The science of producing unreliable facts from reliable figures.”
 

·
General Contractor
Joined
·
548 Posts
20% on top of subs bids :thumbup:
 

·
Registered
Joined
·
10,471 Posts
The # of posts get updated. I wonder how many we all had back then?
 
1 - 20 of 21 Posts
Top