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Discussion Starter #1
Hi,
I live in CA, what is the fair profit margin as a licensed finish carpentry I have to make?
In case of bidding a job with General Contractor and in case of private customer.

Thank you
 

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Profit margin is whatever you can charge over and above expenses. On some projects that I do, this can be as much as 700%. Normally it is around 500%.
I doubt that you will get away with this in trim. Find out what others in your trade a charging and go with the flow.
GC's will never pay what a private customer does. They normally mark your work up 35%
 

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Some GC's will argue 15% ontop of labor and materials is fair. That's one of the reasons I stay away from new construction. If you are the onwer of the company, the salesman, and the installer I suppose you can make money at 15%.

How's this for markup? My cost to install 7 windows today is: $1,380 out the door. The customer's cost was: $2975. That's more than 50% and I wasn't the lowest bidder.

I have found 15% to be typical of new construction and 30% to be typical for residential remodeling when dealing direct with the end consumer. 30% is my minimum markup. I wouldn't even dream of attempting a job, new construction or otherwise, for less than 30. 10 for me, 10 for the salesman, 10 for the company. When I am the salesman I get 20.
 

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Discussion Starter #4
fair profit margin

Thank you all for the quick response.
I really like what Teetorbilt said, but it never worked with me, 500% means I multiply my material and cost by 5. 16 cabinets with hardware and labor cost me 3900 that means I charge 19,500.00 this never ganawork with me since I’ve tried multiply by 2.5 and lost a at lease 2 bids.
In regards to Grumpy reply, its really hard to go even with 30% specially now we have the gas price per gallon average $2,75 ( my truck cost me $120 per week). 30% is $1,170.00 not even close to 40 hours of work, over head and tax.
My outcome after deep thinking I will go for 75% that makes it a bit reasonable.
Thank you all for your input.
 

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Seems like the terms overhead, profit and markup are getting confused.

It looks like you are wanting a gross markup figure instead of profit. I'd say you need to come up with your true overhead number. Then, come up with a markup that will get you the profit margin you're looking for..
 

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Discussion Starter #6
Now it’s really got confusing, all that time I thought the markup is the same definition as profit.
Is there is any fair formula to make it easy to calculate overhead plus markup in California (Carpentry) market place?
Thank you
 

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trekr said:
...profit and markup are getting confused...
When I comma dis country, alla I own was pair of pants.

Now I hava da trucks, da trailers, a newa house, a boat, anda da Lincoln Towna car.

Adda alla that up...

Subtacta da pants,

thatsa you profit! :Thumbs:
 

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I'd recommend investing in a book or two. "Markup and Profit" by Michael Stone would be a start.

Most important is getting your overhead down. This is everything that it costs your business to run: advertising, salaries, insurance, rent, vehicle, phones, tools, legal and many others.

Formula is basically (in dollars): Total volume built/Job costs=Markup

Job cost=total built-overhead-profit
 

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trekr said:
I'd recommend investing in a book or two. "Markup and Profit" by Michael Stone would be a start.

Most important is getting your overhead down. This is everything that it costs your business to run: advertising, salaries, insurance, rent, vehicle, phones, tools, legal and many others.

Formula is basically (in dollars): Total volume built/Job costs=Markup

Job cost=total built-overhead-profit
Yes, Stones book is a good one for some markup formulas. As a painting contractor after job cost, overhead, markup, my projected yearly net profit is 8-13%, for a paint contracting business in this area that is doing well. This ofcourse after my salary, and my wifes salary which is all included in my overhead.
 

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monlover said:
In regards to Grumpy reply, its really hard to go even with 30%
Charge whatever you need to charge to survive and thrive. Don't listen to any of our numbers. Choose your own numbers. DOn't lower your price because someone elses price is lower.

I don't think profit and markup are geting confused. Markup INCLUDES profit as well as overhead.
 

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I don't think profit and markup are geting confused. Markup INCLUDES profit as well as overhead
My reading above regarding the 30% profit margin not working because of higher gas prices led me to believe that he was looking for markup, not profit margin-- because as quoted above, markup reflects overhead and profit. Also, I meant overhead should be accurately calculated-- not "down" necessarily.
 

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Overhead

This is my companies specialty, understanding your overhead. First rule, don't worry about what the compitition or going rate is. Determine your own. There are many ways to do this, I won't choose one over the other although I highly recommend you google search articles by Irv Chasen. Once you determine your costs, then see how you compete with the going rate. If you are to high, learn to be a great saleman and sell your knowledge and skill. If you can't sell, learn ways to cut your costs to lower your rates. If you don't think you can cut your costs you'd be suprised that most companies with the help of professionals can easily cut their costs by 20% (i.e. with the help of a communications analyst we cut our phone bill and seperate cell phone bill by 40%). The savings paid for the analyst in 6 monthes. Look for ways to raise production. If none of these work for your situation acknowledge that you can't compete in that particular arena and move on. Must read, any of the Emyth books and "From Good To Great"

Good luck
E.
http://www.yourcostcenter.com/
 

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mikesewell said:
When I comma dis country, alla I own was pair of pants.

Now I hava da trucks, da trailers, a newa house, a boat, anda da Lincoln Towna car.

Adda alla that up...

Subtacta da pants,

thatsa you profit! :Thumbs:
:cheesygri :cheesygri ROFLMAO

Don't mean to side track the thread, but that's funny Mike, can you say that with an authentic Sicilian accent? And follow it up with "I'ma gonna make yousa offer ya can't refuse" Of course you need to be wearin' a real nice pin stripe suit when ya do it to get the desire effect. :cheesygri
 

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Grumpy said:
Markup INCLUDES profit as well as overhead.
For me (a very small contractor) overhead is just another estimatable cost that gets considered like any other 'time based' cost. It gets apportioned to each job estimate based on project duration. For me to estimate OH as a % of the sales price would be ludicrous as it swings wildly from job to job depending on a number of factors. I've always been of the mindset that gross profit means little or nothing and continue to be perplexed by the widespread approach to overhead like its some ethereal appariton that can't be captured and clearly examined. I can't imagine doing business without KNOWING what my $overhead$ costs were.
 

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PipeGuy said:
For me (a very small contractor) overhead is just another estimatable cost that gets considered like any other 'time based' cost. It gets apportioned to each job estimate based on project duration. For me to estimate OH as a % of the sales price would be ludicrous as it swings wildly from job to job depending on a number of factors. I've always been of the mindset that gross profit means little or nothing and continue to be perplexed by the widespread approach to overhead like its some ethereal appariton that can't be captured and clearly examined. I can't imagine doing business without KNOWING what my $overhead$ costs were.
Pipe,
I too am a small contractor, but your OH should be fairly stable. The job cost ofcourse are going to vary greatly. Your yearly projected OH should be figured in to every price you give.

Gross profit means little...ok I'll give you that, to a point. But without net profit your company will stagnate and eventually die.
 

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housedocs said:
...that's funny Mike, can you say that with an authentic Sicilian accent?...
HEY!!! Wassa matter for you? Shuddup and mixa da mud!

Hope nobody takes offense. :eek: My father had me work with the masons when I was a kid. :cheesygri

All of the questions that I asked them were answered by stupid little stories. 20 years later, I discovered that the stories weren't so stupid after all. This story about accounting is one of my favorites.

One day my girlfriend didn't show up to visit me. The boss asked me, "HEY Mike! Wheresa you slizbag?"

ROF.
 

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Kinda off topic, but interesting tidbit about markup:
(I'm in the wrong business)

Did you ever wonder how much it costs a drug company for
the
> active ingredient in prescription medications? Some people think it
must
> cost a lot, since many drugs sell for more than $2.00 per tablet. We
did a
> search of offshore chemical synthesizers that supply the active ingredients
> found in drugs approved by the FDA. As we have revealed in past
issues of
> Life Extension, a significant percentage of drugs sold in the United States
> contain active ingredients made in other countries. In our independent
> investigation of how much profit drug companies really make, we
obtained the
> actual price of active ingredients used in some of the most popular
drugs
> sold in America. The chart below speaks for itself.
>
> Celebrex 100 mg
> Cost of general active ingredients: $0.60 Percent markup: 21,712%
>
> Claritin 10 mg Consumer Price (100 tablets): $215.17
> Cost of general active ingredients: $0.71
> Percent markup: 30,306%
>
> Keflex 250 mg
> Consumer Price (100 tablets): $157.39
> Cost of general active ingredients: $1.88
> Percent markup: 8,372%
>
> Lipitor 20 mg
> Consumer Price (100 tablets): $272.37
> Cost of general active ingredients: $5.80
> Percent markup: 4,696%
>
> Norvasec 10 mg
> Consumer price (100 tablets): $188.29
> Cost of general active ingredients: $0.14
> Percent markup: 134,493%
>
> Paxil 20 mg
> Consumer price (100 tablets): $220.27
> Cost of general active ingredients: $7.60
> Percent markup: 2,898%
>
> Prevacid 30 mg :Consumer price (100 tablets): $44.77
> Cost of general active ingredients: $1.01
> Percent markup: 34,136%
>
>
> Prilosec 20 mg
> Consumer price (100 tablets): $360.97
> Cost of general active ingredients $0.52
> Percent markup: 69,417%
>
>
> Prozac 20 mg
> Consumer price (100 tablets) : $247.47
> Cost of general active ingredients: $0.11
> Percent markup: 224,973%
>
> Tenormin 50 mg
> Consumer price (100 tablets): $104.47
> Cost of general active ingredients: $0.13
> Percent markup: 80,362%
>
>
> Vasotec 10 mg
> Consumer price (100 tablets): $102.37
> Cost of general active ingredients: $0.20
> Percent markup: 51,185%
>
>
> Xanax 1 mg
> Consumer price (100 tablets) : $136.79
> Cost of general active ingredients: $0.024
> Percent markup: 569,958%
>
>
> Zestril 20 mg
> Consumer price (100 tablets) $89.89
> Cost of general active ingredients $3.20
> Percent markup: 2,809%
>
>
> Zithromax 600 m
> Consumer price (100 tablets): $1,482.19
> Cost of general active ingredients: $18.78
> Percent markup: 7,892%
>
>
> Zocor 40 mg
> Consumer price (100 tablets): $350.27
> Cost of general active ingredients: $8.63
> Percent markup: 4,059%
>
> Zoloft 50 mg
> Consumer price: $206.87
> Cost of general active ingredients: $1.75
> Percent markup: 11,821%
 

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Mon, (I like that, reminds me of the Bahamas, mon.) 20K still sounds cheap. Are you trying to compete with HD? Their top of the line is still plywood, check out the Thomasville. It's cheap, production crap.
 

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PipeGuy said:
For me (a very small contractor) overhead is just another estimatable cost that gets considered like any other 'time based' cost. It gets apportioned to each job estimate based on project duration. For me to estimate OH as a % of the sales price would be ludicrous as it swings wildly from job to job depending on a number of factors.
I agree with you, but after all is said and done and the job is complete I do a profit loss analysis on each and every job to see where I am coming in.

PipeGuy said:
I can't imagine doing business without KNOWING what my $overhead$ costs were.
AMEN!

And when I said that same thing myself (see past post about 2005 budget) I was ripped apart by a few more experienced fellows, who thought my idea was ridiculious.
 

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Pro, does that take into effect the millions and millions they spend on research, testing, FDA approval. They make a considerable investments banking on the success of their drugs. Then lose more when it gets recalled for giving you something worse than you had.


I like to go over jobs after their coplete to guage my profit. Everything down to time,miles,supllies,down-time,yada yada yada plus my regular business expenses, insurance, etc. That way I can look at a job and come up with a good quote. If I see I'm getting killed on something I make adjustments next time. If I'm doing something for tyhe first time I generally charge more.

Don
 
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