The costs of the job must be marked up enough to create a sales price that will produce the Gross Profit to cover your budgeted Overhead and Net Profit.The most common way to develop a sales price in remodeling is with an across-the-board Markup on Job Costs. This the most common method because it is simple and lets you know what Sales Dollar Volume will produce the Gross Profit you need.

However, there are alternative ways to develop your sales price but remember this rule: Mark up any way you want, as long as you...bring home the Gross Profit bacon!

Across-the-board Markup
Under this method, each dollar of Joe's Job Costs ($210,000) carries the same amount of Gross Profit. The across-the-board Markup is the most widely used system in the industry. It's simple, easy for planning but not flexible.

Joe needs $90,000 in Gross Profit. Thus, he uses a 43% Markup on all Job Costs across-the-board to reach the anticipated Sales Dollar Volume that will provide that Gross Profit.

Differential markup
Joe marks up labor, material and subs each with a different percentage. Usually labor is very heavily burdened with Gross Profit.

To reach the same $300,000 in Sales Dollar Volume, Joe uses a 100% Markup on labor, a 30% Markup on subs and a 10% Markup on materials.

This system will make Joe more expensive on heavy labor jobs and less expensive on light labor jobs.

Labor-based markup.
Joe has 6000 labor hours to sell in a year and needs to obtain $90,000 in gross profit. Each hour of labor must be marked up to carry $15 of overhead: 6000 x 15 = $90,000.

You are in charge of your Markup. Don't take anyone else's Markup. Remember, ProfitFirst!© Make sure it can be monitored at least monthly. And make sure it....
brings home the Gross Profit bacon!