Page 12 - 2018 National Home Improvement

2018 National Home Improvement Estimator, All Rights Reserved Page 8

Many successful home improvement contractors find they can stay in business if hard costs are 59
percent of selling price. Hard costs include material expense, subcontract costs and labor (including
taxes and insurance). The other 41 percent of selling price ("margin") compensates the sales staff,
covers overhead, supervision and contingency, and should yield a modest profit. From Figure 1-1, you
can see that markup on hard costs has to be 70 percent to yield a margin of 41 percent.

To put this formula to work in your home improvement company, add 70 percent to your hard costs to
find the selling price. Of course, some jobs need more markup and others can get by on less. A smaller
job with more risk done for a demanding client may require greater markup. A larger job done mostly by
subcontractors can usually carry a smaller markup.

Home improvement contractors have all the overhead of any business: office rent, telephone, owner's
salary, office salaries, legal and accounting expense, insurance, auto and truck expense, and more. But
unlike other contractors, home improvement specialists routinely deal with high risk from both the
unknown and the unknowable – at least until work actually begins. Since most of what you didn't or
couldn't anticipate will inflate your costs, you're assuming significant risk. That's why markups for home
improvement work have to be higher than for new construction.

Naturally, competition dictates markup. If you're not getting enough work at 70 percent markup, maybe
70 percent is too much for your area. But remember that you shouldn't have to bid remodeling work on a
level playing field. New construction usually goes to the lowest responsible bidder. A creative salesman
who follows the recommendations in this book has an advantage over lowball bidders who rely on price
alone to sell their services.

This Book Works Two Ways
Inside the back cover of this book you’ll find a software download certificate. To access the download,
follow the instructions printed there. The download includes the National Estimator, an easy-to-use
estimating program with all the cost estimates in this book.

The software will run on PCs using Windows XP, Vista, 7, 8, or 10 operating systems.

When the National Estimator program has been installed, click Help on the menu bar to see a list of
topics that will get you up and running. Or, go online to www.costbook.com and click the ShowMe
tutorial link to view an interactive tutorial for National Estimator.

If you have trouble using National Estimator, we'll be glad to help, and we don't charge you for it. Free
telephone assistance is available from 8 a.m. until 5 p.m. Pacific time Monday through Friday (except
holidays). Call 760-438-7828, Ext 2.