Every business is different, every situation is different. We’ve compiled a list of the most common questions we hear, with either a brief answer or a link to an article or product that can answer the question.

I need help, where should I start?
How do I price my jobs?
What’s wrong with a short contract?
How do I find more clients?
How do I turn a lead into a sale?
How do I estimate job costs accurately?
Do you have advice on hiring or managing employees?
What about working with subcontractors (or general contractors)?
How do I find the right business coach for my construction-related company?
What can I do to manage my business better?
What resources do you have for subcontractors or specialty contractors?
How do I start a construction business?
I have a copy of the first book, Markup & Profit: A Contractor’s Guide. How is the revised version, Markup & Profit Revisited different?

I need help, where should I start?

We always recommend starting with the book, Markup & Profit Revisited. If you sell your services to homeowners, we also recommend Profitable Sales, A Contractor’s Guide.

From there, we suggest our online classes, starting with Markup & Profit.

Finally, don’t forget to sign up for our free newsletter.

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How do I price my jobs?

We recommend calculating the correct markup for your business and applying it to your estimated job costs. That will give you a fixed price you can quote your potential client and give them the security of knowing what the job will cost. (An exception can be made for handyman jobs under $2,500, where you can use an hourly rate and a markup on materials.)

We wrote a book on the topic: Markup & Profit; A Contractor’s Guide Revisited. And there’s a category on our website dedicated to Pricing Jobs. You might want to start with our article titled Markup, Margin and Why You Should Care.

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What’s wrong with a short contract?

We receive many calls from contractors who don’t write a detailed contract (or any contract) and have clients who won’t pay their bill. That’s why Michael’s advice is to leave everything out of your contract that you can afford to pay for yourself, twice.

Another mistake many contractors make is not getting a signed Change Work Order (which is a legal extension of your contract if it’s properly written) before making a change. Instead, they present the client with a bill at the end of the job that is much higher than expected and a fight is started.

Our website has a category dealing with contract issues here: Contracts. Start with this article titled The Danger of Short Contracts. Our Fast Track Proposal Writer software makes it easy to quickly generate a detailed contract for every project. At $295, it’s far less expensive than the losses you can take when a client won’t pay.

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How do I find more clients?

By marketing. Continually. You need a website. If you don’t have one already, read our article that outlines how to get started.

But a website is just a start. Your website needs to be optimized and marketed locally. That’s where MyOnlineToolbox comes in, showing you the finer points of getting leads from your website without having to pay a lead generation company for the same leads.

We also have articles about Marketing and Lead Generation.

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How do I turn a lead into a sale?

If you find yourself trying to be the lowest bid on a project in the hope of making the sale, you’re heading down the path of going right out of business. Our book, Profitable Sales, A Contractor’s Guide is focused on residential remodeling and specialty sales.

You can’t just make the sale. The price needs to be high enough to cover all your job costs, pay your overhead expenses, and make a reasonable profit. Without that, you’ll go broke. That’s why sales skills are important. Check out our articles on sales: Sales.

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How do I estimate job costs accurately?

Estimating the cost of a job is a skill, and skills can be learned. We discuss the basics in our article Basics in Estimating. We also have a 12-part course that teaches estimating, available on DVD and online. You can read about it here: Profitable Estimating Training.

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Do you have advice on hiring or managing employees?

Some of our articles on employees are available here: Employees. Whether you have 1 or 200 employees, you need an employee manual. Our Employee Manual includes policies specific to the construction industry and is an excellent starting point for any construction-related business.

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What about working with subcontractors (or general contractors)?

Michael discusses the general/subcontractor relationship often throughout the book Markup & Profit; A Contractor’s Guide Revisited. Articles on the topic are available here: Subcontractor/General Contractor Relationships.

We recommend putting your business relationship down on paper. Check out our Subcontractor Manual.

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How do I find the right business coach for my construction-related company?

We list 13 things to consider here: How Do You Select a Coach?

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What can I do to manage my business better?

There are a lot of responsibilities that go with owning your own general construction business, whether you specialize in remodeling and renovation, building new homes, or commercial work. To be successful, consider these six guidelines:

  1. Recognize that nothing happens until someone sells something – for a profit. You have to make the sale.
    It begins with marketing and letting potential clients know you’re available to provide the service they need. Marketing and advertising are a 24/7/365 proposition. The most important form of advertising today? A website. It’s also the most cost-effective. (If you don’t have a website, we explain the process here.)
  2. When the phone rings, make sure you know what to do.
    Watch Michael’s 6-hour class on sales and marketing. Michael walks you through the ins and outs of taking a lead and closing a sale. It will pay for itself on your next sales call.
  3. Price your jobs so you can pay your job costs, cover your overhead expenses and make a profit.
    Our 6-hour Markup and Profit class is a primer on business management for any construction-related business owner. Read what one contractor said:
    “Michael’s straight-from-the-hip, no nonsense approach was thorough, effective and easy to understand. I saw how to make more money in this one session than I have in all the years I have been involved in the construction business!
    Michael has a passion for what he does, helping people in the building industry look at their field from another perspective and finally be able to make a profit for themselves . . . I urge anyone interested in succeeding at their profession, and not just surviving, to take some time out to pick up a book or watch the tape . . . You will be glad you did!”
  4. Protect yourself and your business; put everything in writing.
    If you have employees, make sure you have an employee manual that spells out the workplace rules. If you work with subcontractors, clearly define your relationship and your expectations with a subcontractor agreement. And, of course, every job needs a detailed, written and signed contract before the job begins.
  5. When the tax man calls, be ready.
    The paperwork side of your business can be a royal pain. With The Organized Contractor, discover simple steps to get organized and keep your office running efficiently.
  6. Don’t wait until it’s too late to get professional help.
    We’ve helped many construction business owners get out of debt, some with debts over $800,000. We’ve also watched successful contractors expand their sales and marketing efforts, resolve employee issues and increase their profits. If you’d like to see your business grow, or need to find your way out of a mountain of debt, give us a call.

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What resources do you have for subcontractors or specialty contractors?

As a specialty contractor, you might be facing the same issues as remodeling and renovation contractors, marketing and selling to homeowners. Or maybe you work solely as a sub to general contractors, which brings a different set of issues. Most likely you do both, with two very different markets and two very different types of customers. Managing your business is a juggling act.

A few construction-related business specialties we’ve worked with:

Air Duct Cleaning, Apartment Management, Architecture, Designing, Backhoe and Drilling, Cabinet Door Replacement, Cabinetry, Carpet Installation, Ceilings, Chimney Services, Cleaning Services, Closet Systems, Concrete, Countertops, Crown and Mouldings, Demolition, Disaster Cleanup, Dock Building, Drywall, Electrical, Excavation, Fencing, Finish Carpentry, Flooring, Framing, Garage Doors, Glass, Handyman, Hardwood Floors, Heating and A/C, Home Inspection, Iron Working, Steel Fabrication, Land Development, Landscaping, Lock & Key, Low Voltage Wiring, Marble and Granite, Marine Construction, Masonry, Mechanical Systems, Metal Framing, Painting, Paving, Pest Management, Plumbing, Pool Installation, Maint., Power washing, Property Maintenance, Pump Service, Refrigeration, Roofing, Security Systems, Septic Systems, Sheet Metal, Sheetrock, Siding, Signage, Sprinkler Systems, Tile Installation, Trenching, Wallpapering, Water Testing, Welding, Well Drilling, Pump Installation, Window Coverings, Window Tinting, Windows and Doors

As you can see, we’ve worked with a wide variety of specialty and subcontractors but one thing is constant.

You have to price your work so you can pay all job costs, cover your overhead expenses and make a profit, or you won’t stay in business.

Regardless of your specialty, the book Markup & Profit; A Contractor’s Guide Revisited applies to your business. Written specifically for the construction industry, it discusses both general and specialty contractors, showing all construction-related business owners how to price their jobs to make sure there is enough money to pay their job costs and overhead expenses, and still make a profit. For more business management information, view Michael’s online classes. Read what one specialty contractor had to say:

Nothing happens until someone sells something, for a profit.

If you’re working directly with homeowners, you need Profitable Sales, A Contractor’s Guide. Written primarily for sales people in a residential setting, the book addresses the unique issues faced when selling to clients in their own home. The real-life situations presented will give you confidence in your sales ability.

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How do I start a construction business?

Many contractors start a construction business with all the skills necessary to do the trade. But when you become a business owner you need more than trade skills. You’re responsible for marketing, estimating, pricing, sales, production, customer relations, employee relations and bookkeeping.

The ideal “Small Business Start-Up” kit for contractors would include:

1. The book, Markup & Profit; A Contractor’s Guide Revisited. Many construction business owners consider this book their business bible.

2. The 6-hour class based on the book. The class covers info in the book, but goes much deeper with many business management issues. You can learn more about the class here.

3. If you will be selling your services in the residential market, we recommend Profitable Sales, A Contractor’s Guide.

4. The Organized Contractor. No one likes dealing with paperwork, but this manual outlines very simply what is required and how to do it efficiently.

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I have a copy of the first book, Markup & Profit: A Contractor’s Guide. How is the revised version, Markup & Profit Revisited different?

The revised edition covers much of the same ground, specifically, how to calculate your markup and price your jobs. There’s a lot of new material, including a discussion on why pricing jobs in construction is different than other businesses. It talks about dealing with unhappy clients, getting through tough times and starting a new business. We’ve addressed the differences between remodeling work, specialty contracting and commercial contracting, and how the book applies to each of them.

Another major change is the way the book is organized. Part of the editing process this time was taking the book apart and reordering topics to make it flow more clearly. We’re confident that reading this revised edition will provide more information and be easier to reference than the first edition. It’s also, for the first time, available as an eBook as well.

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Bill
Bill
September 8, 2020 1:28 pm

I know there’s a lot of stuff that goes in to it.. say a kitchen reno, material/labor included is about 20k. He charged 30k and makes 50% ‘profit’ .ok, fair enough.

Contractor does that same job, same material, but charges 50k.. thats 150% ‘profit’

Is that fair? Job already started, with some money handed out, how do you get yourself out of it without losing money?

Bill
Bill
September 8, 2020 7:38 pm
Reply to  Michael Stone

Michael,

Do you have an email address where I can contact you?

matt seefeldt
matt seefeldt
June 21, 2020 12:51 pm

i have the markup&profit revisited book(a great book and worth the cost) and on the very first page it gives a web address for a few downloadable forms that you use in the book but that address doesn’t bring me to that page are they no longer available?

Devon Stone
June 22, 2020 12:59 pm
Reply to  matt seefeldt

Matt – The forms are still available, you should be redirected to the correct page. Everything to the right of the .com is case-sensitive, so make sure you’re typing it properly. If you still can’t get it to work, send me a note.

Matt Seefeldt
Matt Seefeldt
June 29, 2020 11:07 am
Reply to  Devon Stone

Im still unable to get to the correct page and i made sure it was typed exactly as it shows in the book

Devon Stone
Devon Stone
June 29, 2020 11:18 am
Reply to  Matt Seefeldt

Matt, can you send me an email with the URL you’re using? Not here, send it to devon@markupandprofit.com.

Bob Williams
Bob Williams
September 4, 2019 5:57 am

Hey Michael & Devon,Just wanted to express my thanks for all you have done for me and my business. As a perpetual student I have read your books and refer to the often (as well as refer others to them too), I make use your of contract writing software, been to your classes and even been with you on a couple of your cruises to sponge up as much learning as I can. Your openness may not be as obvious to those who have not interacted with you. But to those of us who have interacted we do not take… Read more »

Kirk Holdegraver
Kirk Holdegraver
July 7, 2019 3:13 pm

Hello, I have a question. I had a remodeling company that ended in 2008 and just started a home improvement business. I’m down sizing my project size to more of a “handyman” type company. When I had my remodeling business I used the original Mark up and profit book to set my numbers and have just recently purchased the revisited edition. Will this work for a one man operation doing almost all work that doesn’t need a permit or sub contractors? I’ve established my numbers from it but I’m already getting push back from potential clients about my price. Any… Read more »

Devon Stone
Devon Stone
July 8, 2019 10:28 am

Kirk – Yes, this works for a one-man operation doing all your own work. There are a few things that can be going on:1 – You’re marketing to the wrong people.2 – Check your presentation – are you selling your services, or worrying about price? A recent newsletter article: https://www.markupandprofit…3 – Check your markup. We discussed this recently as well, the last question on this article: https://www.markupandprofit….4 – If your jobs are real small, consider using time and materials pricing, rather than fixed price. But make sure your hourly rate and markup on materials is high enough to cover your… Read more »

Joseph Srednicki
Joseph Srednicki
August 27, 2018 6:29 pm

HELLO , I’m Joseph , new to the construction management end of the business. Grew up framing and remolding my whole life . Seeking knowledge on starting my own contracting business. what should my first goal as I crate my business strategy.

Mike Ginn
Mike Ginn
January 10, 2019 11:45 am

Marketing

Liza Wheels
Liza Wheels
May 18, 2018 9:20 am

I am trying to work the equations backwards to find my labor cost and totals. I have jobs I have already sold that I am trying find my numbers on (just so I know what I did previously). I have my income and my raw material cost per job. I am using a 1.59 multiplier for my mark up. The number I am looking to find out (correctly) are my material mark up total and labor mark up total leaving what my true cost of labor should have been (correct?). Then from those numbers what my totals were from the… Read more »

Devon Stone
Devon Stone
May 22, 2018 8:45 am
Reply to  Liza Wheels

Liza – I think you’re overthinking. I’m not sure why you need to have a separate markup for material and for labor, it’s easiest to use one markup for all job costs. It looks like you’re looking backwards on jobs already sold? Calculate your markup by looking at your expected annual overhead expenses and projected sales, and use that markup on all sales. Chapter 3 in Markup & Profit Revisited covers this in-depth. (https://shop-markupandprofi

NicholasH
NicholasH
November 22, 2017 1:06 pm

Is the 2012 edition of “revisited” the most current?

Nelson
Nelson
November 1, 2017 8:28 am

I have been doing remodeling for many years, but still kept a full time IT position in NY. I am now solely committed to my business full time. I have purchased the markup and profit book and also went to the class in October in Cherry Hill, NJ. My question is how do we set a realistic goal for estimated total volume sold for the 1st year if we don’t have anything from the previous year. How do we figure out our overhead? My wife is working full-time (in the construction field…admin), and we want to eventually have her work… Read more »

Susan DiIanni
Susan DiIanni
October 3, 2017 6:57 am

We’ve been told to open separate bank accounts for each
job, keeping operating funds separate. Does this mean 1 job per bank account or is there a way to have “sub accounts” within one main bank account? That’s a lot of accounts???

Jake Tudor
Jake Tudor
August 29, 2017 12:49 pm

I just purchased your Markup & Profit book and greatly look forward to reading it. I notice a lot of discussion/questions/comments on residential remodeling and construction. How applicable is Markup & Profit to a small commercial contractor that strictly uses subs?

Devon Stone
Devon Stone
August 30, 2017 10:27 am
Reply to  Jake Tudor

Jake, the principles taught in the book apply to residential and commercial equally. It doesn’t matter if you use subs or have employees doing the work; the numbers work the same. The book is about how to manage your numbers, not the type of jobs you build or how you get them built.

Beth Cogley
Beth Cogley
June 17, 2017 12:48 pm

Ok, I am working my way through your M&P book and I already have a few questions about the formulas in charge 2. For Markup it says “Total Volume Sold ÷ Job Costs.” Is total volume sold the same as total income, or is it “projected annual job costs, overhead and profit needs”? And how do you figure “profit needs”?

Sorry to be such a dunce!

Devon Stone
Devon Stone
August 30, 2017 10:25 am
Reply to  Beth Cogley

Beth, in Chapter 2, Total Volume Sold is a projected figure, it’s what you want/need to sell next year (or whatever time frame you’re looking at). So, it’s sum of your projected annual job costs, overhead and profit needs. But don’t get hung up on that definition, later in that chapter we discuss how to project your sales volume. We discuss “profit needs” later in that chapter under “Setting Your Profit”. Stay with it – if you don’t understand something, make a note and keep going, it might be explained later. There are a lot of ways to look at… Read more »

Chrissy Godfrey
Chrissy Godfrey
May 8, 2017 7:55 am

Hi Michael. I have your book and am trying to figure our overhead expenses. Can you explain what the sales expense is please. Is it commissions paid to sales people or something else? Thanks!

Benjamin Haberman
Benjamin Haberman
October 18, 2016 5:30 am

Michael- is payroll included in overhead? I read a lot of mixed things. Also, what about my self for instance. I am never on the job but work on the back end. How do I factor that in?

Benjamin Haberman
Benjamin Haberman
May 10, 2017 2:03 pm
Reply to  Michael Stone

I read it. GREAT BOOK. going to read again. Will be attending your class when you come close to Philadelphia

kalvin
kalvin
September 27, 2016 6:31 pm

I have purchased the Markup and Profit Book and am having trouble with the Overhead expense Chart . The problem is I cant customize this chart to my business needs so that I can determine my markup. For every 100,000 in yearly sales is what the chart is created by, but what if I only make a little over 100,000 in a year just starting out? How do I get accurate percentages to use if the ones on the chart do not cover my overhead?

Devon Stone
Devon Stone
October 3, 2016 2:10 pm
Reply to  kalvin

If your annual sales are only $100,000, you’re right, some of the high percentage figures are still too low. You’ll need to adjust accordingly, stay as close to the ranges as you can. And work on getting your sales volume up, because it’s difficult to survive long with only $100K in annual sales in remodeling.

kalvin
kalvin
October 3, 2016 7:48 pm
Reply to  Devon Stone

Thank you very much for the reply, I understand that I have to adjust my percentages but I seem to find the book rather confusing. What I mean is on page 41 it states that I need to set a salary for myself based on my specific needs and being that I’m a start up, I should pull income from all sources to make up my salary which also should be 8 percent of sales. On page 46 however, it calls this same 8 percent my net profit? but if this is so then why on page 223 does the… Read more »

Devon Stone
Devon Stone
October 4, 2016 8:20 am
Reply to  kalvin

Owner’s salary is overhead. Your business should also aim for an 8% net profit. Net profit and salary are two different things as we clearly state on page 223. The only confusion is because you’re making a wrong assumption on page 46 – nowhere do we state that the 8% net profit is owner’s salary. Bigger issue – you need to focus on building your business, not fussing with your numbers. You’ll never be able to draw enough salary to support yourself and make a net profit unless your sales increase, and that will only happen when you start marketing… Read more »

Day Hilborn
Day Hilborn
July 20, 2016 12:55 pm

How can I apply overhead to a project in order to see profit and loss?

Weeknd at Froggy's  #FrogSquad
Weeknd at Froggy's #FrogSquad
June 2, 2016 8:35 am

Me and one other guy are looking to start are own construction company. I will just be the two of us doing the work at first. What is the best company structure for us? LLC or S-Corp?

HS
HS
July 14, 2016 9:19 am

If you don’t know the answer to this question, I suggest not opening a business
.

Devon Stone
Devon Stone
July 22, 2016 10:47 am

Company structure is both a legal issue and an accounting issue, and it depends on the laws in your state. It’s not something we can advise on. Both are commonly used in construction.

avromero
avromero
July 26, 2016 8:52 am

it would be the LLC

Doug Schotland
Doug Schotland
April 23, 2016 7:46 pm

I am enjoying your estimating course immensely, and I have a question about material allowances. Let’s say you give a customer a $750 allowance for a kitchen sink faucet. He goes shopping and finds a faucet that he likes, which a local retailer sells for $750. You buy that faucet for the job and mark it up by, say, 1.5. Therefore, the cost to the customer is $1125. How do you handle this transaction without sharing your markup or creating suspicion? Thanks in advance.

Devon Stone
Devon Stone
April 25, 2016 5:12 pm
Reply to  Doug Schotland

Doug, thank you for the kind words about Profitable Estimating Training.

When you write a fixed price contract, the fixed price includes any needed material allowances. The fixed price also includes all markup. You don’t add any additional markup to the materials when purchased. If they choose a $750 faucet with a $750 allowance, you’re even. If they choose a $1,000 faucet with a $750 allowance, they owe you $250.

Handling allowances is included in our Markup and Profit book. (http://www.markupandprofit…..

Devon Stone
Devon Stone
April 25, 2016 5:12 pm
Reply to  Doug Schotland

Doug, thank you for the kind words about Profitable Estimating Training.

When you write a fixed price contract, the fixed price includes any needed material allowances. The fixed price also includes all markup. You don’t add any additional markup to the materials when purchased. If they choose a $750 faucet with a $750 allowance, you’re even. If they choose a $1,000 faucet with a $750 allowance, they owe you $250.

Handling allowances is included in our Markup and Profit book. (http://www.markupandprofit…..

Joseph Paul
Joseph Paul
December 22, 2015 4:04 am

For the last three yrs my Company has done 300k in sales. I have 2 employees and myself. I am stuck in the rut of being to physically involved in my day to day operations to take advantage of new opportunities that are knocking on my door. How do I take my company to the next level and are my REAL next steps???

Rich
Rich
July 28, 2015 8:23 am

I am looking for a software to manage my business Shower doors and windows anyone have good recommendation?

Joseph  M. Fernandez
Joseph M. Fernandez
October 20, 2014 5:16 am

what should i be adding onto my subcontractors price?

Devon Stone
Devon Stone
April 25, 2016 5:17 pm

Joseph, I apologize, your question should have been answered long ago!

You need to calculate your markup based on your overhead expenses and profit needs. That markup is applied to all of your job costs for a particular project, including subcontractor prices.

Some will argue that you shouldn’t use your full markup on subcontractor quotes. We think you should, and discuss that in this newsletter article – http://www.markupandprofit….

Emmanuel
Emmanuel
October 26, 2017 10:09 am
Reply to  Devon Stone

which percentage should i give to my contructors and myself

Emmanuel
Emmanuel
October 26, 2017 10:14 am
Reply to  Emmanuel

what off i win a contract of 99000000 which percentage goes to my subcontractors and my own workers under me myself

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