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Discussion Starter · #1 ·
just checking to see which system some of you prefer and why, Michael Stone's 'gross volume mark-up, or Gerstel's Capacity based markup. BTW i'm only using their names to differentiate the two systems..
 

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I use the loaded labor rate, but that's because I almost never supply materials except for consumables like drill bits, screws, finish nails, glue, etc. 99% of what I provide is labor.
 

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Loaded Labor! Been burned too many times on C/O's.

Cabinet change from $60k to $45k - I lose $2250.
Appliance change from $35k to $19k - I lose $2400.

If they keep going, I'm working for wages! :no:

Loaded Labor :thumbsup: and get paid for every minute :thumbsup:
 

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Who is Gerstel? The only place I've heard about Capacity based markup was on a thread here, but I think that was a guy named Hayes.

I like the capacity based markup. Makes more sense to me personally.
 

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Loaded Labor! Been burned too many times on C/O's.

Cabinet change from $60k to $45k - I lose $2250.
Appliance change from $35k to $19k - I lose $2400.

If they keep going, I'm working for wages! :no:

Loaded Labor :thumbsup: and get paid for every minute :thumbsup:

That's quite correct in my view to. Gross volume markup is insane.
 

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I try to keep everything to a single line price. No labor or material break out. If the customer makes a change that has credits then they get credited the price of the item. I still get my "markup"
 

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Gerstel doesn't really nail down a process where you end up with a loaded, or burdened, labor rate. At least in the 1998 edition, he doesn't. He does go through a process where you calculate out overhead and come up with a weekly or monthly overhead number, which if you take it a few steps further you end up with the burdened labor rate.

We do the burdened labor rate method. Stone's method may work for a GC, but not for us.

We have a base rate that, no matter what happens in a year, it covers overhead. There might be a swing here and there in overhead costs, but that "noise" always falls below the level of the base rate.

We actually have a breakeven rate, and a base rate, and a T&M rate, and a contract rate. The breakeven rate is the one that will fluctuate with conditions throughout the year, and it's calculated exactly like Gerstel, plus the few extra steps. But it always floats below the base rate number, which is an even number we use in estimating projects. It's just easier to do the math when it's an even number. Then there's the T&M rate, which is 10-15% higher than the base rate, to cover profit on specialty trade wage fluctuations (helper versus welder, etc). Then there's the contract rate, which is the base rate times the contract markup. When we put bids in, it's a lump sum at contract rates, and we don't call out labor versus material. It is what it is, and we give no detail. But in the bid we do provide T&M rates for labor and equipment, so the client knows what we charge for change orders.
 

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Discussion Starter · #9 ·
I never give break outs. I'm a sub. I list the work to be done, and give a price.
I've been using the loaded labor rate, b/c I find it more reasonable and simple. However, I'm experimenting with Gross Volume Markup system. I spoke with Jerrald Hayes about Capacity Based Markup, he had a great argument. I'm certain if i sat in a room with Mike Stone he would have a great argument as well. Guess it's a matter of figuring what works for ME, as the rest of you have done.
 
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