A General Contractor Markup That Rewards Both Your Team and Your Clients
The markup is one of the most important calculations that contractors make, empowering you to quantify the worth of your time and services and maximize profits. With a well-balanced markup, your construction company can ensure that your business is compensating workers fairly and leaving room for expansion in the future. Correctly calculating the markup is fundamental to ensuring the longevity of your business.
However, you must also account for value to your clients. You don’t want to earn a reputation for unreasonable costs or price gouging with a markup that’s too steep. On the other hand, a markup that is too low will quickly put your company out of business. The key is to strike a perfect balance with a markup that rewards both your team and your clients.
The Importance of Balancing Your General Contractor Markup
Two of the most important figures for your construction business to track and manage closely are your overhead and the profit margin. Fail to balance these figures correctly, and you can end up tightening budgets and hindering your own expansion.
The markup represents the gross profit margin after direct costs, factoring in materials, labor, and operational costs. How you apply your markup to each project is up to you, and may be influenced by the project details. But in general, the average pre-tax net profit for general contractors hovers between 1.4-2.4%, while subcontractors see a higher average between 2.2-3.5%.
Ultimately, clients prefer a steep discount, while your company deserves fair pay for their work. To appease both parties, one strategy is to apply your markups strategically. For example, you can apply discounts to clients’ wishlist items while putting a heavier markup on core construction materials or project features that will require a lot of skilled labor. This helps clients feel like they’re getting a break on their project must-haves but still imburses your team for their effort.
With a well-balanced markup, you can ensure that bother parties are satisfied and continue their business relationship for years to come.
Software Tools to Empower Your Markup Strategy
Want to get the most out of your markup strategy? Then you’ll want the ability to apply markups in a targeted way rather than applying a flat percentage across the board. And since your markup will vary with each project, you will need to work with software that allows for flexibility.
With profit-driving process support and project management solutions from BlackVector, you can enjoy construction-specific bidding and budgeting features designed by industry professionals. The Project Estimator feature in our Pre-Construct module gives you full control over your profit margin with built-in, line-by-line markup capabilities. As a result, you can reward your stakeholders with a good deal where they want it most while ensuring that you have a profitable markup in other project areas.
A comprehensive software solution, Pre-Construct also enables you to create accurate work packages and estimates, request and compare subcontractor bids, track your most valued trade partners, and share information with your entire team using cloud technology. Plus, it is fully integratable with BlackVector’s other modules, so your project data flows seamlessly between each project stage.
Project Management Made Simple with BlackVector
BlackVector is the ultimate project management solution, made by construction experts to meet the unique needs of industry professionals. BlackVector’s proprietary modules streamline your administrative tasks — including your markup strategy — so your team can focus on delivering high-quality work that’s always up to standard and always on time.
Ready to support steady growth through your construction projects? Contact BlackVector today to learn more about our revolutionary project management tool and how it can help take your firm to the next level.
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