In our rush to be competitive, we may be doing ourselves and our companies a disservice. Are you underbidding your jobs hoping to make it up in volume? If so, this could bankrupt your company! Consider a couple of these basics based on my Beyond Break Even article.
Knowing how much you have to mark up a project to JUST breakeven is the essential first step.
Find out how to calculate the correct percentage in my article. Once you know you have marked up enough to breakeven, you then need to mark up enough to make a profit.
These days there is a lot of conversation around how much is the right percentage to show on bids for markup. While it probably feels like a bit of “smoke and mirrors” to get a bid accepted with markup’s that are acceptable to the client AND you, there is a simply way to approach this. Start listing overhead costs in the general requirements section of your bid. Break out costs for things like project accounting, project management, job phone, vehicle expenses, insurance, temporary utilities; etc. The more you can list out costs on the bid that you normally charge to overhead, the less you have to show as markup for overhead, thus avoiding the uncomfortable conversation around markup percentages.
One final note – before submitting a bid to a client, check your gross profit margin on the project and make sure you are meeting your company profit margin goals on the job BEFORE you submit it.
Why? That’s how you “Plan for Profits!” It also allows you to have the clarity to choose from an informed place just how much you can cut your prices before you start losing money.
Here is to More Profits, Time & Fun!