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Business benchmarking: Margin and markup

from Qualified Remodeler

Remodelers often misunderstand the terms margin and markup when creating their budget and, as a result, may discover at the end of the year that they have been losing money. Markup describes the percentage they apply to the cost of a job to cover overhead and profit, whereas margin represents the percentage they earn on the selling price of a project. Instead of calculating their own margin and markup, most contractors just adopt numbers from industry specialists. “They tell you what margins people are using, but they don’t teach you how to figure out what margin you need to use,” says Shawn McCadden, remodeling industry consultant and owner of Remodel My Business. “Part of the challenge is it depends on what you put above the line (job costs) and below the line (overhead) in determining what your markup and margin [should] be.” more

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