In over 25 years of working with contractors, there is one number that a lot of folks I meet don’t understand – and getting that one number wrong is killing their profits!
What sparked this post was a recent call with Joe – a remodeling contractor. We were barely on the phone for two minutes, when Joe launched into a rant about how he felt he’d been doing all the right things in his business, and yet, his bottom line and bank account were not showing the return for all his hard work!
Maybe you’ve been there too at some point? It’s super frustrating.
Making a profit begins with the markups in your bid
When I asked Joe his strategy for marking up his costs in bidding he replied – “I mark up what I think I can get. I mark up according to what I hear other contractors in my area are marking up, like 10% and 5%, or 15% and 10% on some projects.”
This was part of Joe’s problem. I explained to Joe that unless you have a large company, your overhead percentage is never that low. I know this because in the past 25 years I’ve worked with hundreds of small to mid-sized contractors, and I see their numbers.
I could see the irritated look on Joe’s face as I spoke. “Well, then how the hell do people who only mark up that much on their bids make any money? And how am I supposed to compete against those guys?”
As I asked Joe more questions, I could see he was not clear on the one number I knew was a factor in how he priced his work, and ultimately in the profits, he was or was not making.
Watch today’s video and learn what Joe and I figured out in his business that allowed him to start being more strategic in his bidding, and let him start adding more profits to his bottom line. You can also read more below.