Kent Eberle
Eberle Remodeling
Sacramento, Calif.
Big50 1995
After 21 years in business, it is a rare occasion when potential clients ask about our markup. When they do, I tell them that we shoot for a 10% profit on every project and that sometimes we achieve the 10% and sometimes we don't. Along with that, I tell them we have overhead costs that are required for us to stay in business. I also mention that costs will be fairly equal among similar professional remodeling companies — we all have similar costs of doing business, assuming we are operating ethically and professionally.
If clients are going to nitpick and pry into something they know little or nothing about, then what else are they going to pick apart once the project is under way? Educating clients about products and the process of remodeling is a difficult and time-consuming endeavor in its own right. Attempting to educate them on how your business runs is a wasted effort. My advice would be to do yourself a favor and walk away from the client who is too curious about how you run your business. Their focus won't parallel with yours, if price is their focus.
Bill Mallon
Total Living Construction
Springfield, Va.
Big50 2005
We're never asked that question because we are so straightforward about our costs and margins. When we give customers a proposal, we back it up with an attached five-or six-page spreadsheet showing a detailed breakout of our direct job costs. The proposal cover sheet shows this dollar amount, the added amount for overhead and profit, and the final price.
We have always done this because we recognize that by nature people desire to make informed decisions, especially in the D.C. metro area, where so many individuals are involved in budgetary decisions in their professional lives. They just seem to have a need to know.
When we review the spreadsheets, I suggest to the customer that the dollars for most functions appear small and sometimes insignificant, but in fact they may add up to a large number. They find this information helpful and have expressed their appreciation for our straightforward approach.
It has been my experience over the last 20 years that when a homeowner is comfortable with the numbers, they automatically become less anxious about the project.
Greg Harth
Harth Builders
Spring House, Pa.
Big50 2004
When we work on a time-and-materials basis — usually less than 5% of the time —our boilerplate contract discloses that we charge a flat rate of $65 per man-hour for labor and that we mark up materials 30% above cost.
We don't disclose our markup on fixed-price contracts, and about the only time the question comes up is when the client makes a selection that exceeds their allowance. In such cases, we often find it difficult to use our standard fixed-price markup because some clients consider it excessive — particularly accountants and engineers, who seem to be the most cost-conscious. So we use a markup of 30%, with the understanding that we will credit the markup back to the client if they run under an allowance elsewhere.
For instance, if we had given an allowance for Corian counters and the client decided to use granite, which generally costs more, we would bill them 30% over our cost for the granite, minus the Corian allowance. But if they had a $300 sink allowance and chose a $200 sink, we would give them a $100 credit plus 30%, or $130. This doesn't happen often, as selections generally exceed allowances. But when it does, we want to be fair to our clients.
Mark Lewis
Pro/Craft Painting and Contracting
Gurnee, Ill.
Big50 2005
I don't think that I or any of our sales or estimating staff have ever been asked this question, but if I were, I wouldn't have a problem answering because I know that we are right in line with other professionals. And regardless of what the prospect may think, that's the number we need to get.
Most of our prospective clients seem to think that we're either a good value for our price or that we're way too expensive. If it's the latter, it means we have the wrong prospects. In either case, the markup isn't the critical factor.