Where Did My Margin Go?

How Builders Can Protect Profit With Smarter Estimates

Ever finished a job, checked your account and thought, “Hang on, where’s that extra cash I was counting on?”
You added twenty percent on top, finished the project, and somehow it still feels like you worked for nothing.

This is where a lot of builders come unstuck. Markup and margin often get mixed up, and most people don’t really know what their overheads are or how much their building estimating services need to cover.

That old rule of thumb, “Add 20 percent and you’ll be right,” doesn’t really work anymore. Here’s why.

Overheads usually chew up about ten percent before you’ve even started. That’s admin help, rent, insurance, software subscriptions, fuel and the coffees that keep you going. Another three percent will go to contingencies because every job throws a curveball. And if you’re not allowing for supervision, you’ve just decided your own time isn’t worth anything.

By the time it’s all said and done, that shiny 20 percent you thought you had is gone. No wonder the bank balance doesn’t match the effort.

Most builders don’t actually know their real overhead number. It’s like a hidden business tax that slowly drains your profit and your motivation.

If you want to change that, start by

• understanding your overheads. The ute doesn’t run on good tunes alone
• separating business costs from project costs
• allowing for your time in supervision
• knowing the difference between markup, which is what you add, and margin, which is what you keep

At Price A Plan we’ve spent almost two decades helping builders see where their profit is really going. Through our quality budget estimates, full quantity take offs and full quantity estimates, we make the numbers clear so you can make better decisions.

From our experience, a healthy residential builder quote should allow around 10 percent for overheads and 15 percent for profit. That’s a 25 percent markup just to stay ahead. Depending on the complexity, some of our estimates go up to 38 percent markup. That’s what it takes to build a profitable and sustainable business.

When you price smarter, you protect your profit. And that’s what lets you put the tools down on Friday and still smile when you check the account on Monday.

HAYDN SIMMONS – DIRECTOR