Cost-Plus Contracts
By Michael StoneWhy cost plus and time & material contracts should be avoided, for both contractors and building owners.
Your Price is Too High
By Michael Stone“Your price is too high” means you haven’t done your job as a salesperson.
“Transparency” or Proprietary Information?
By Michael StoneSomeone once said, “No man’s business is safe while the legislature is in session.” Here is another example.
Transparency
By Michael StoneTransparency, as I understand it, is opening your books to your potential clients and showing them all the numbers pertaining to a job you are quoting.
Owners Supplying Their Own Materials
By Michael StoneShould you let a client furnish their own materials?
Pricing Too Low
By Michael StoneIt is a fact of life that when you sell construction-related services, you’ll have clients tell you that your price is too high. Bless their hearts. They have no idea what would be a fair price for the work they want done, they just know that your price is too high.
Hiring A Contractor: Truth vs. Myths
By Michael StoneSome advice on hiring a contractor is just plain wrong.
Pricing Handyman and Service Work
By Michael StoneThere are two schools of thought on pricing handyman projects and service work: T&M or flat rate pricing. They both have advantages and disadvantages.
Guidelines for Success
By Michael StoneGuidelines to a more successful construction-related business.
How to Calculate Markup
By Michael StoneWhen I teach a class or webinar, sometimes I wonder if my listeners understand what I’m trying to say. After reading some of the questions that came in during a recent webinar, I realized I missed the mark.
Time and Material Woes
By Michael StoneTime and Material contracts are full of risk, especially on larger jobs.
When Business Returns
By Michael StoneAt some point this health crisis will slow down and go away. When it does, there’s a good chance we’ll be doing some things differently. But some things won’t change.
Lowball Pricing in Construction
By Michael StoneIt’s not unusual to find a contractor who sells by deliberately underpricing or underbidding jobs and making up the difference with change work orders.
Is Cost-Plus the Solution to Underpriced Jobs?
By Michael StoneBoth fixed-price and cost-plus contracts carry risk. Is cost-plus the solution?
Increasing Your Markup
By Michael StoneLike many of you, I read industry magazines to keep up on new ideas. Much of what I read is good, but a recent article titled “Strategies for Increasing Your Markup” requires a comment.
A Guaranteed Price
By Michael StoneWhen selling construction services, quoting a guaranteed price protects homeowners from the price increases that happen with a too low price.
There is No Industry Standard
By Michael StoneDon’t take any job where the client tells you how much you can charge for your work.
Underbidding a Job
By Michael Stone“I’m a contractor and underbid a house. I’m almost done and just figured that out. I can’t afford this loss. What can I do besides bankruptcy?”
Customer Furnished Materials
By Michael StoneA recent note said, "The client wants to furnish all the materials. They are going to give me the money to go buy the materials, should I add my markup on the materials?"
Price Your Construction Jobs Correctly
By Michael StoneIf you are tired of starving because you have enough work but don’t have the money to pay your bills, heed these words.
Cost-Plus, Cost+, Time and Materials, T & M
By Michael StoneA coaching client was working with a potential customer who wanted a remodeling job on a cost-plus basis instead of a fixed fee contract.
Is My Contractor Overcharging Me?
By Michael StoneWe have had two e-mails in the past week from homeowners asking about the “Industry Standard” for pricing, wondering if their contractor is overcharging them.
OH&P in Construction – Using Figures Wrong Hurts Your Business
By Michael StoneAdding overhead and profit to job costs to calculate sales price is a mistake. Contractors should use a markup calculated for their construction business.
Using a Variable Markup to calculate Construction Job Price
By Michael StoneA young lady told me her husband is using a variable markup on jobs. He marks up labor 3 or 3.5 times and materials 1.5 times. He adds 10% to subcontractor quotes …
Is It Gouging or a Fair Price?
By Michael StoneAn earlier post of ours is getting a few homeowners riled up. The post discusses homeowners who have contacted us, unhappy about the prices their contractor is charging.
Labor Rate for Construction
By Michael StoneI’m frequently asked for the “industry standard” rate per hour for various types of work. There isn’t an industry standard markup, and there isn’t an industry standard hourly labor rate.
Markup vs Margin
By Michael StoneThere’s a lot of confusion over using markup vs margin to price jobs.
Using Gross Margin Correctly
By Michael StoneYesterday markup – today gross margin. Let's look at using your gross margin to calculate the correct sales price for your work.
A Bait and Switch Scam?
By Michael StoneLast weekend I passed a billboard on the side of the road. It loudly declared, "We will build your new home for $32 a square foot."
Markup or Margin . . . Which is Better?
By Michael StoneAre markup and margin interchangeable? Is a 1.55 markup the same as a 55% gross margin?
Price Fixing in Construction
By Michael StoneDuring a recent survey, comments were made about price fixing. They referenced the Sherman Antitrust Act and association warnings about the appearance of price fixing.
Selling On Price Alone
By Michael StoneI was reminded again recently of the need for in-house training on what it takes to pay the bills in a construction related company.
Recover Overhead and Profit in your Labor Rate
By Michael StoneThere are four basic ways to charge for construction services. These are fixed fee or lump sum pricing, Time & Material pricing, Cost Plus, and using an hourly rate.
How Much Should a Contractor Charge?
By Michael StoneMany of our website visitors aren’t contractors, they’re clients looking for help with a Cost Plus project gone wrong, or wondering if their contractor is overcharging.
It’s Your Business
By Michael StoneA contractor on the east coast was frustrated with how he was being treated by architects. For starters, they were requesting a list of all his subcontractors.
Pricing Jobs Right
By Michael StoneNot charging enough for your work is the major reason construction companies fail. Here are some of the mistakes contractors make when pricing their jobs.
Adjusting Your Markup Based on the Job
By Michael StoneMany contractors use a variable markup or margin to price jobs. They believe that in the construction industry you have to reduce the price to get the job.
Race to the Bottom, or “How Low Can I Price This Job?”
By Michael StoneCutting your price to get a job is a money losing approach. Over time, you won’t be making a profit and you’re only working yourself into debt.
Markup Materials Only?
By Michael StoneIn a perfect world, estimated costs will match actual job costs. At the end of a perfect year, total job costs will equal projected job costs. It’s not a perfect world.
When Should You Cut Your Markup?
By Michael StoneAs the economy slowly improves, we are being asked to revisit issues we haven’t discussed for many years.
The Games People Play
By Michael StoneWhy would a developer ask for a cost plus quote to replace a fixed price quote? Because he wants the very same work done at a lower price.
Another Myth: Lower Your Markup for Larger Jobs
By Michael Stone“I am working on designing a few jobs with the job costs starting around $125,000 and up. What is your opinion on markup when the job costs are getting bigger? I want to make sure I am staying competitive.”
Markup on Subs
By Michael StoneA lot of contractors don’t believe they need to use their full markup on subcontractor quotes. Let me explain why that can be a mistake.
When Your Client Sets the Price
By Michael StoneWhen your client wants a lower price, something has to change. It shouldn’t be just your price.
Bidding or Selling?
By Michael StoneAre you bidding on jobs, or are you selling them? There’s a difference.
Adjusting Your Markup
By Michael StoneIn Markup & Profit Revisited, we explain how to calculate your markup. We’re often asked if you can adjust your markup based on the length of the job.
Your Labor Rate and Your Markup
By Michael StoneUsing the wrong labor rate, or using someone else’s markup when you don’t know their assumptions, is one of the biggest mistakes we see and the difference can be thousands of dollars.
Don’t Be This Contractor
By Michael StonePlease don’t be this contractor. Please don’t be that homeowner.
Markup Worries
By Michael StoneRemember, you’re in business to provide a service and make a profit doing it.
Pricing Small Jobs
By Michael StoneIt’s hard to remember what you’re worth, especially if you’re spending time on jobs that cost you money.
I Don’t Need Any Leads!
By Michael Stone“I have more work than I can do. I tell new leads to call me after the first of the year.”
Pricing Without Plans
By Michael StoneIt’s important to remember you aren’t in business to drive around and give out numbers. If you’re a specialty contractor, you also aren’t in business to provide numbers to architects or general contractors.
Can You Be Both Competitive and Profitable?
By Michael StoneYou can be competitive, or you can be profitable. You can’t be both.
An Opinion on Itemized Estimates
By Michael StoneA building owner challenges our statement that contractors shouldn’t itemize their estimates.
Markup or Margin: Be Logical
By Michael StoneIf they tell you the formula to use will make you more profit, that’s baloney. It’s the numbers you use that determines your profit.
Transparency – Or Maybe Not
By Michael StoneIs transparency the way to go when selling? Be careful who you listen to.
Justifying Your Price
By Michael StoneIf your lawyer believes you have to justify your pricing just because someone doesn’t want to pay their bill, it’s time to find another lawyer.
Single Discipline Leads, Referral Fees
By Michael StoneThe note stated, “Because I’m the middle man, my subcontractor loses out a potential project.” That’s true, and it’s one reason you shouldn’t get into the position of being a middle man.
Profit and Loss and Markup
By Michael StoneWhen your books are set up properly, it’s easy to calculate your markup, and it’s also easy to compare your actual results to your estimates.
Overhead and Profit on Change Orders
By Michael StoneYou shouldn’t sign a contract that stipulates what you can charge, even if it’s just on the change orders.
Pricing Mistakes
By Michael StoneEveryone, and I do mean everyone, who has ever compiled an estimate has made a math error that put knots in their stomach once it was realized.
Transparency and Partnerships
By Michael StoneWhat do you do when your partner is listening to someone who knows nothing about construction, but still thinks they knows what’s best?
Contract Language That Puts You at Risk
By Michael StoneOver the years, I’ve seen contract language evolve, shifting more and more responsibility to general and specialty contractors.
Taxes and Profit and Markup
By Michael StoneMichael addresses a few different questions we’ve heard recently, primarily dealing with taxes and profit and calculating your markup.
Overhead Differences: New Homes and Remodeling
By Michael StoneA construction company building both new homes and remodeling needs to calculate a separate markup for each type of work.
Why Do You Need To Make A Profit?
By Michael StoneDon’t confuse profit with salary or hourly wages. Making a profit isn’t optional: Your business needs profit to survive.
Let’s Discuss an Acceptable Hourly Rate . . .
By Michael StoneThis note is a painfully perfect example of why you shouldn’t provide details on your pricing.
Payment Methods
By Michael StoneI don’t think writing a check is old fashioned, but there are so many advantages to using a credit or debit card that it’s become the preferred payment method for many.
Charging a Fair Price
By Michael StoneYou can be the most ethical person in the world and if you aren’t charging enough for your work, you stand a good chance of cheating someone else.
How Do You Measure Success in Construction?
By Michael StoneOur goal is to help contractors build more profitable businesses, but how do you measure success? How do you know your pricing will result in a profit?
Should I Change My Markup If I’m Not Making Sales?
By Michael StoneShould you change your markup method if you aren’t making sales? Don’t spend hours fiddling with numbers; invest the time in your sales skills.
Renegotiating the Price
By Michael StoneHow should you respond when a client wants to change the price AFTER the job has started?
Value Your Work
By Michael StoneYour work is vital; rather than worrying about your price, recognize and sell the value you bring to a project.
Advice for a New Contractor
By Michael StoneMichael shares a note from a new remodeling firm, asking questions that are often asked by new business owners.
How to Have a Profitable Construction Business
By Michael StoneYou can’t focus on being competitive if you want to be profitable. You have to focus on profitability.
Everyone Gets Paid
By Michael StoneOver the years I’ve heard from many wives or significant others who were tired of living with no money and essentially no future for the business.
Don’t Negotiate Your Price
By Michael StoneDon’t let your clients dictate or negotiate the price of your work.
Transparency Has Risks
By Michael StoneIf you believe in transparency with your clients, this note is an example of what can go wrong.
The Cost of Being Lowest Bid
By Michael StoneWhy would a serious construction-related business owner want to be the lowest bid on a project?
What’s the Average Price?
By Michael StoneHave you ever been asked for the average cost per square foot? We know there is no average price, there isn’t even an average job.
Mistakes Cost Money
By Michael StoneI want to share a reminder of how little mistakes in your construction company can easily grow into big problems.