True trade mark up
To all those that may read this and I do not want to seem like a genius but I have even explained this to accountant's. This was actually taught to me by my dad who ran a plumbing service business. The Reeves journal which is a professional plumbing trade journal set forth mark ups and how they work...ask any CPA and they will explain it to you.....Mark up is usually based upon the sale price...gross sale price, ( I am using this to explain to another contractor is does not make money)...for example if my price to do the job is $100 and I want 10% profit and I have 15% overhead then my cost is $75.00 dollars to do the job...here is where most contractors make the fatal mistake they want 10% profit and they do it on their cost....$75.00 which is $7.50 and not $10..(they are then actually making 7 1/2% profit defined in accounting terms....) and the same for overhead...most would charge $11.25 for the over head or 15% of the $75.00 dollar cost....Standard in construction is 15% and 10% for the average joe....contracting but varies a great deal with product service etc....I charge 99 cents for a penny washer....so and thus I charge $125 for a $100 part ....it is what the market will bear, what is feasible , what are your long term goals, etc....
The mistake most people make in business is they do not have an accountant, * not a bookkeeper* tell them what they should figure...based upon historical data that is out there in the industry by the loads....seek professional advice....let the painter paint, the plumber plumb and the accountant count the beans....you won't end up like that guy with the shopping cart...my dad called him "the low bidder" there is always a low bidder and it is usually because he made a mistake....Contracting is not easy and it is not easy to make money....lots of low bidders, scammers,...not liscencesed etc.
by the way I do have a degree in accounting...but decided being a owner/plumber was better....go figure...
Jerry