{"id":100730,"date":"2021-05-13T08:29:10","date_gmt":"2021-05-13T12:29:10","guid":{"rendered":"https:\/\/sjcivil.com\/?p=100730"},"modified":"2024-04-01T06:52:39","modified_gmt":"2024-04-01T10:52:39","slug":"lose-the-guilt-mark-it-up","status":"publish","type":"post","link":"https:\/\/sjcivil.com\/lose-the-guilt-mark-it-up\/","title":{"rendered":"Lose the Guilt \u2013 Mark it Up!"},"content":{"rendered":"<h3 id=\"h-executive-summary\"><strong>Executive Summary<\/strong><\/h3>\n<p>Contractors deserve to be profitable. It\u2019s necessary for business survival. A perceived exorbitant markup should not be fretted over. Mark it up!<\/p>\n<p><iframe loading=\"lazy\" style=\"border-radius: 12px;\" src=\"https:\/\/open.spotify.com\/embed\/episode\/13q5PvOT5oUvfLYlhKgfoV?utm_source=generator\" width=\"100%\" height=\"152\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<h3 id=\"h-the-disclaimer\"><strong>The \u201cdisclaimer\u201d.<\/strong><\/h3>\n<p>Profit is markup is fee here. Be advised this article assumes that profit and markup and fee are one in the same. There is definitely a difference: here\u2019s an explanation of profit versus markup: [QR]\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-medium wp-image-101946 aligncenter\" src=\"https:\/\/sjcivil.com\/wp-content\/uploads\/2021\/05\/qr-11-300x300.png\" alt=\"\" width=\"300\" height=\"300\" \/><\/p>\n<h3 id=\"h-low-bid-wins\"><strong>Low bid wins.<\/strong><\/h3>\n<p>At time of bid, under many procurement mechanisms, low bid wins. And part of the process in developing a bid is the fee, or markup. To be low bidder you may have had to drop fee to as small a number as possible. This \u201cI got as low as possible on bid day\u201d then becomes a catalyst for maximizing markup during the project.<\/p>\n<h3 id=\"h-look-at-the-whole\"><strong>Look at the Whole<\/strong><\/h3>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-medium wp-image-101945 aligncenter\" src=\"https:\/\/sjcivil.com\/wp-content\/uploads\/2021\/05\/john-ruddock-0YVJKLtTAMc-unsplash-200x300.jpg\" alt=\"\" width=\"200\" height=\"300\" \/><\/p>\n<p>Most contractors will make a global decision that, say, \u201cI want to make 6.5% profit on this job overall.\u201d In a unit-priced bid, it is likely that the profit spread out over the fifty bid items will not be consistent. For example, if you markup the job overall at 6.5%, it is likely that every bid item on your project will not carry this 6.5% markup. Some bid items are done at or below cost while others may be at double the job fee, or 100% over, or even 200% over the job fee.\u201d These adjustments in unit prices are a function of cash flow (early items in the job are marked up higher in an attempt to get cash positive) or quantity discrepancy (items expected to go over their bid quantity are marked up while items expected to fall short of their bid quantity are bid closer to cost or even under cost).<\/p>\n<h3 id=\"h-life-isn-t-fair\"><strong>Life isn\u2019t fair.<\/strong><\/h3>\n<p>The hard truth about assigning fee is that most owners probably want a contractor to make a fee, but these owners really want the contractor to make the most minimal fee which will allow for survival. Well, surviving isn\u2019t thriving. And 99 out of 100 businesses would probably answer that \u201cI\u2019m in business to thrive, not just survive, so I\u2019d welcome a healthier fee which allows stable cash flow and healthy cash accumulation for growing my company.\u201d<\/p>\n<h3 id=\"h-so-bottom-line-me-please\"><strong>So, bottom line me please.<\/strong><\/h3>\n<p>The bottom line is that as a contractor there are two main reasons that you shouldn\u2019t feel guilty when charging an excessive fee: (1) owners will usually do absolutely everything to minimize your fee when possible and (2) 1.4% to 2.4% is not thriving. Take every opportunity to increase fee and leave your guilt in the rear-view mirror.<\/p>\n<figure class=\"wp-block-pullquote\">\n<blockquote class=\"has-text-color has-vivid-cyan-blue-color\"><p>According to the Construction Financial Management Association (<a href=\"http:\/\/www.cfma.org\/\" target=\"_blank\" rel=\"noreferrer noopener\">www.cfma.org<\/a>), the average pre-tax net profit for general contractors is between\u00a0<strong>1.4 and 2.4 percent<\/strong>\u00a0and for subcontractors between\u00a0<strong>2.2 to 3.5 percent<\/strong>.<\/p>\n<p><cite><em>Above excerpt from:\u00a0<a href=\"https:\/\/www.constructionbusinessowner.com\/business-management\/9-numbers-you-need-keep-your-company-profitable#:~:text=According%20to%20the%20Construction%20Financial,between%202.2%20to%203.5%20percent.\" target=\"_blank\" rel=\"noreferrer noopener\">https:\/\/www.constructionbusinessowner.com\/business-management\/9-numbers-you-need-keep-your-company- profitable#:~:text=According%20to%20the%20Construction%20Financial, between%202.2%20to%203.5%20percent.<\/a><\/em><\/cite><\/p><\/blockquote>\n<\/figure>\n<h3 id=\"h-my-story\"><strong>My Story<\/strong><\/h3>\n<p>I recently was talking with a friend whose client was feeling guilty about marking up a line item on a bid \u201ctoo much\u201d. The thought was that a $20,000 markup on a subcontractor service was more money than was needed in order to assist the sub \u2013 the markup he needed to cover the cost of the subcontractor assistance was going to be about $1,000. He thought that the fair number was only this $1,000. This is especially nonsense because, again, bidding a job is about the global project markup \u2013 this anecdote has to do with the component of the global fee this specific bid item received. To lessen the fee here would reduce the overall project fee (unless your increased the fee on other bid items).<\/p>\n<p>I also had a personal experience in my business (early on in my business\u2026this behavior stopped after getting punched in the gut once or twice or a hundred times) in which I felt guilty for marking up some work too much. That sort of feeling goes away when you have to win jobs at 0% to 3% and then owners fix your markup structure on changed work during the job. Or you lose some entitlement battles and get paid zero for clearly (in your mind) extra work outside of the scope of the contract.<\/p>\n<p>The bottom line (part two) \u2013 make money, and as much of it, when you can. There\u2019ll be plenty of time you\u2019ll have to \u201cdonate\u201d your services. It\u2019s the handsome profits on other projects that must backfill the philanthropic actions you took because you \u201cfelt guilty\u201d or made a business decision to work pro bono!<\/p>\n<h4 id=\"h-work-safe\"><strong>Work Safe!<\/strong><\/h4>\n<div class=\"bootstrap-yop yop-poll-mc\">\n<div class=\"basic-yop-poll-container\" data-id=\"6\" data-temp=\"basic\" data-skin=\"minimal\" data-cscheme=\"black\" data-cap=\"0\" data-access=\"guest\" data-tid=\"\" data-uid=\"edc7a351626decd622e86a51e6ace845\" data-pid=\"5763\" data-resdet=\"percentages\" data-show-results-to=\"guest\" data-show-results-moment=\"after-vote\" data-show-results-only=\"false\" data-show-message=\"true\" data-show-results-as=\"bar\" data-sort-results-by=\"as-defined\" data-sort-results-rule=\"asc\" data-is-ended=\"0\" data-gdpr=\"no\" data-gdpr-sol=\"consent\" data-css=\".basic-yop-poll-container[data-uid] .basic-vote { text-align: center; }\" data-counter=\"0\" data-load-with=\"1\" data-notification-section=\"top\">\n<div class=\"row\">\n<div class=\"col-md-12\">\n<div class=\"basic-inner\">\n<form class=\"basic-form\">\n<div class=\"basic-elements\">\n<div class=\"basic-element basic-question basic-question-text-vertical\" data-id=\"6\" data-uid=\"1b8ff9b61445bc3dcf80c5f6e9ee2574\" data-type=\"question\" data-question-type=\"text\" data-min=\"1\" data-max=\"1\" data-display=\"vertical\" data-colnum=\"\" data-display-others=\"no\" data-others-color=\"\" data-others=\"\">\n<div class=\"basic-question-title\">\n<h5>Is it ethical to charge an &#8220;exorbitant&#8221; fee to a client?<\/h5>\n<\/div>\n<ul class=\"basic-answers\">\n<li class=\"basic-answer\" data-id=\"21\" data-type=\"text\" data-vn=\"1\" data-color=\"#000000\" data-make-link=\"no\" data-link=\"\">\n<div class=\"basic-answer-content basic-text-vertical\"><label class=\"basic-answer-label\" for=\"answer[21]\"><input id=\"answer[21]\" autocomplete=\"off\" name=\"answer[6]\" type=\"radio\" value=\"21\" \/><span class=\"basic-text\">A.\u00a0 Nope, I take it when I can get it.<\/span><\/label><\/div>\n<\/li>\n<li class=\"basic-answer\" data-id=\"22\" data-type=\"text\" data-vn=\"2\" data-color=\"#000000\" data-make-link=\"no\" data-link=\"\">\n<div class=\"basic-answer-content basic-text-vertical\"><label class=\"basic-answer-label\" for=\"answer[22]\"><input id=\"answer[22]\" autocomplete=\"off\" name=\"answer[6]\" type=\"radio\" value=\"22\" \/><span class=\"basic-text\">B.\u00a0 Yes, what&#8217;s fair is a reasonable\u00a0profit.<\/span><\/label><\/div>\n<\/li>\n<li class=\"basic-answer\" data-id=\"23\" data-type=\"text\" data-vn=\"5\" data-color=\"#000000\" data-make-link=\"no\" data-link=\"\">\n<div class=\"basic-answer-content basic-text-vertical\"><label class=\"basic-answer-label\" for=\"answer[23]\"><input id=\"answer[23]\" autocomplete=\"off\" name=\"answer[6]\" type=\"radio\" value=\"23\" \/><span class=\"basic-text\">C.\u00a0 It really depends\u00a0on the work &#8211; the fee is calculated according to risk.<\/span><\/label><\/div>\n<\/li>\n<li class=\"basic-answer\" data-id=\"24\" data-type=\"text\" data-vn=\"3\" data-color=\"#000000\" data-make-link=\"no\" data-link=\"\">\n<div class=\"basic-answer-content basic-text-vertical\"><label class=\"basic-answer-label\" for=\"answer[24]\"><input id=\"answer[24]\" autocomplete=\"off\" name=\"answer[6]\" type=\"radio\" value=\"24\" \/><span class=\"basic-text\">D.\u00a0 It&#8217;s America baby, capitalism!\u00a0 Maximize profits.<\/span><\/label><\/div>\n<\/li>\n<li class=\"basic-answer\" data-id=\"25\" data-type=\"text\" data-vn=\"0\" data-color=\"#000000\" data-make-link=\"no\" data-link=\"\">\n<div class=\"basic-answer-content basic-text-vertical\"><label class=\"basic-answer-label\" for=\"answer[25]\"><input id=\"answer[25]\" autocomplete=\"off\" name=\"answer[6]\" type=\"radio\" value=\"25\" \/><span class=\"basic-text\">E.\u00a0 I build for the good of mankind and have an unlimited back account.<\/span><\/label><\/div>\n<\/li>\n<\/ul>\n<\/div>\n<div class=\"clearfix\"><\/div>\n<\/div>\n<div class=\"basic-vote\"><a class=\"button basic-vote-button\" href=\"https:\/\/sjcivil.com\/lose-the-guilt-mark-it-up\/#\">Vote<\/a><\/div>\n<div><\/div>\n<div><\/div>\n<div><div class=\"su-button-center\"><a href=\"https:\/\/sjcivil.com\/wp-content\/uploads\/2021\/05\/2021.05.06-Lose-the-Guilt.pdf\" class=\"su-button su-button-style-flat\" style=\"color:#FFFFFF;background-color:#293a57;border-color:#212f46;border-radius:12px;-moz-border-radius:12px;-webkit-border-radius:12px\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"color:#FFFFFF;padding:0px 30px;font-size:22px;line-height:44px;border-color:#6a768a;border-radius:12px;-moz-border-radius:12px;-webkit-border-radius:12px;text-shadow:none;-moz-text-shadow:none;-webkit-text-shadow:none\"> Download The PDF<\/span><\/a><\/div><\/div>\n<\/form>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<span class=\"et_bloom_bottom_trigger\"><\/span>","protected":false},"excerpt":{"rendered":"<p>Executive Summary Contractors deserve to be profitable. It\u2019s necessary for business survival. A perceived exorbitant markup should not be fretted over. Mark it up! The \u201cdisclaimer\u201d. Profit is markup is fee here. Be advised this article assumes that profit and markup and fee are one in the same. There is definitely a difference: here\u2019s an [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":104688,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","iawp_total_views":0,"footnotes":""},"categories":[553,50,596,234,41,831,38],"tags":[869,870,871,360],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v22.5 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Lose the Guilt \u2013 Mark it Up!<\/title>\n<meta name=\"description\" content=\"Contractors deserve to be profitable. It\u2019s necessary for business survival. 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