Calculator

Quick Estimate Markup

If you want to make 20% profit, you have to add 25% to your estimate. Don’t under bid your estimates! Use the calculator below to quickly and accurately calculate your markup for each estimate.

Below the calculator we’ll show one example of how to use the calculator to grow your business.

If you aren’t sure what to type in, click the ‘contact’ button and fill out the form. We’ll reach out to help as soon as we can!

Quick Estimate Markup Calculator

Below the calculator, we’ll include a more detailed description of what numbers to type into each blank and one possible way to use the calculator to grow your business.

To learn more about the formulas behind the calculator, take a look at this Indeed article about ‘How to Calculate Markup’.

Quick Estimate Markup Calculator
How much will it cost to complete the project?
Materials and Labor
$
How much do you need to build in for each of the following? (Recommended or industry standard markups are input by default)
Profit
%
Overhead
%
Marketing
%
Only include sales commission if you have a sales rep you need to pay.
Sales Commission
%

Quick Estimate Markup

How to use the calculator

This calculator will help you quickly find the total contract price for your estimates without having to worry whether you’ll have any profit left over at the end of the project. 

The important thing to remember is that a 20% markup is NOT the same as 20% profit. 

The Blanks

Materials and Labor

Type in the total estimate for the bare minimum cost to complete the project and break even. Calculate this number how you would normally calculate your estimates.

For example, if  we were estimating a bathroom vanity installation, I would estimate my minimum cost to include materials (vanity, vanity top, faucet, vanity knobs, P-trap, screws, teflon tape, plumbers putty, silicone, etc.), and labor (estimated hours x hourly cost).

Everything else from this point on will be calculated in addition to the breakeven cost.

Profit

How much do you want to make? How much can you reasonably charge? Generally, contractors make 10-20% profit on each project. 

Overhead

This is your fixed monthly costs that don’t change regardless how many contracts you sell. Your warehouse, bills and vehicle payment are all considered overhead. Typically, if you’re running a lean business, your overhead will be less than 5%, but we recommend that all contractors build in at least 5% just in case. 

Marketing

Many local contractors do not spend money on marketing, so they don’t charge for marketing. That makes sense. However, if you want to start marketing, you should start charging for it in every estimate. 

Generally, larger contractors will spend 15-25% of their total yearly revenue on marketing. That means they build in 15-25% for marketing on every estimate they write. And you should too.

The default setting is 20% as that is the industry standard.

Sales Commission

If you have someone estimating and closing contracts for you (or if you want to pay yourself for doing it), make sure to include a commission for your sales rep. Typical commissions are 10%. For smaller projects, you may need to increase it to 15%, and for larger projects you may only need to pay 5% commission. Either way, the default setting at 10% is a good start.

Total Esimate

This is the total price of the estimate that you send to your customer. At this price, you will cover the cost of the project, all of the business expenses you typed in, AND you’ll have some left over profit at the end.

If the pricing seems too high, don’t worry. There’s a step-by-step guide below on how to gradually increase your pricing.

Just remember, if you think you’re expensive, there’s probably someone out there selling it for significantly more. When I sold tub/shower renovations, I thought $6,000 was expensive until a larger company moved to town and started charging $20k minimum just for the shower. 

One way to grow your business with the calculator

It’s not as simple as just charging more, so here’s our step-by-step recommendation for how to gradually increase your prices and make more money.

Don't change anything yet

Take a couple estimates and type them into the calculator to see what number pops out. Then, see how close you are to that number. For example, if you’re estimating $1,000, and the calculator says you should charge $1,500, you’re pretty close!

DO NOT IMMEDIATELY START CHARGING MORE

Do NOT immediately change your pricing to match the calculator. Instead, slowly increase your pricing in the order they appear on the calculator.

Make small changes every month

Rapid price changes can make it difficult to predict how it will impact your business. It could go really well and your business could take off, or it could make sales come to a halt. Smaller changes on a monthly basis are easier to predict and easier to successfully implement.

Step 1: Build a Backlog

Every month, add 3-5% to your profit and check your performance at the end of the month. Look at the number of estimates, sales, and profit to make sure that the price increase made a positive impact.

If your business made more money, keep adding each month until you’re at 20-25% profit. Then move on to step 2.

If the small increase in price hurt your business, there are many other factors to adjust to make sure your business is moving in the right direction. If this is the case, feel free to send us a contact form with any questions your have, and we’ll do our best to help!

Example

XYZ Contractor is using these numbers for estimating:

Profit: 10%

Overhead: 0

Marketing: 0

Sales Commission: 0

Each month, he should add 3-5% to profit and check his numbers at the month. If he added 5% to profit, and he made 5% more that month, then he should add another 5% the next month.

Step 2: Increase Profit

Every month, add 3-5% to your profit and check your performance at the end of the month. Look at the number of estimates, sales, and profit to make sure that the price increase made a positive impact.

If your business made more money, keep adding each month until you’re at 20-25% profit. Then move on to step 2.

If the small increase in price hurt your business, there are many other factors to adjust to make sure your business is moving in the right direction. If this is the case, feel free to send us a contact form with any questions your have, and we’ll do our best to help!

Example

XYZ Contractor is using these numbers for estimating:

Profit: 10%

Overhead: 0

Marketing: 0

Sales Commission: 0

Each month, he should add 3-5% to profit and check his numbers at the month. If he added 5% to profit, and he made 5% more that month, then he should add another 5% the next month.

Step 3: Shift to Overhead

Once you have enough profit, shift some of that markup into overhead. Once your overhead is completely paid for by the markup on your estimates, move to step 3.

Example

XYZ Contractor used these numbers last month:

Profit: 25%

Overhead: 0

Marketing: 0

Sales Commission: 0

Adding all of his overhead costs together, it’s about 7% of his total sales per year. So, he’ll shift 7% of the profit markup into overhead. He’ll start using these numbers for the next month:

Profit: 18%

Overhead: 7%

Marketing: 0

Sales Commission: 0

Keep in mind that his pricing did not increase, he just shifted which category the money was in.

Now that his overhead is paid for, he can move to step 3.

Step 4: Build Profit Back Up

Again, build your profit back to 20-25% with small monthly changes of 3-5%. If you continue to see positive results, keep going. If you start seeing sales slow down, pause until you can get them back up.

Example

XYZ Contractor added 3-5% to profit each month until it looked like this:

Profit: 25%

Overhead: 7%

Marketing: 0

Sales Commission: 0

Step 5: Shift 10% to Marketing

Just like when we shifted markup to overhead, we’re going to do the same for marketing. The only difference is, you have to actively spend the money, with the markup being your monthly budget.

You could do your own marketing and spend all of your budget on ads, or you could hire someone to do marketing for you. You could use that budget to print flyers, buy yard signs, or put your logo on your truck. Anything that will help you attract new customers is a great way to use your new marketing budget.

Example

XYZ Contractor used these numbers last month:

Profit: 25%

Overhead: 7%

Marketing: 0

Sales Commission: 0

After shifting 5% to marketing, this is what it’ll look like:

Profit: 15%

Overhead: 7%

Marketing: 10%

Sales Commission: 0

If he’s selling a total of $10k per month, his new marketing budget will be $1,000. 

Step 6: Hold Until You Have to Hire

This is a great place to be. Your business is making enough money and getting enough leads that you can comfortably operate! Congrats!

Keep reaching out to leads, selling contracts, and installing until you can’t keep up with the work. Then, start hiring for someone to help you on the job. The additional cost of the new hire would go into your materials and labor calculation without changing any of the markup percentages. This stage also usually takes a while. Hiring, onboarding, and training are not very quick processes, so you may be on this step for a while. 

Once you have a reliable helper, move on to step 6.

Step 7: Build Up Profit Again

You know the drill! Take a couple months to get your profit back to where it needs to be!

Example

XYZ Contractor used these numbers while hiring a helper:

Profit: 15%

Overhead: 7%

Marketing: 10%

Sales Commission: 0

Over the next few months, he’ll build his profit back up again:

Profit: 25%

Overhead: 7%

Marketing: 10%

Sales Commission: 0

Step 8: Hire a Lead Installer

This will likely be one of the longest steps. Not because it is the most complicated, but because finding someone with the skills and the work ethic to trust them with your business is a difficult process.

In this step, you are looking for someone to replace you on the jobsite. You should find someone with 10 years of experience, work ethic, customer service and communication skills. This is practically a unicorn, but there are a few out there. 

Once you find them, you need to work with them for long enough to know that they will do fantastic work even if you aren’t on the jobsite. If you found the right person, this may not take more than a few months. Show them everything about what you do, how you do it, and how you treat your customers.

Over time, start doing less and less, but continue to watch your team work. How do they handle the day-to-day? How do they treat your customers? How do they handle stress? How do they work around problems? If your lead learns and adjusts over time, he’s your guy. But, if he runs into the same problem over and over again, or if he’s not treating your customers with respect, start looking for new applicants. 

The hardest part of this is that you have to know for a fact that you can trust your installers to do the same thing you would in any given situation. Maybe you can’t expect it to be 100% of the time, because you’ll never find someone who will be exactly like you. But 80% is a decent expectation.

Example

While hiring for a team lead, make sure to operate at a comfortable profit. This will be a longer phase, so work from a mindset of plenty, not scarcity.

Profit: 25%

Overhead: 7%

Marketing: 10%

Sales Commission: 0

Step 9: Increase Marketing and Build Profit

One of the worst situations you can be in is to hire a team and then not have enough work for them. It will put you in survival mode, making positive leadership and sales nearly impossible. It will also raise doubts in your team’s mind about whether or not this job will be consistent and full-time. Once you start hiring, your number one priority should be booking more work for them. To make sure that happens, add another 5-10% to your marketing budget and work your profit back up over a couple of months. 

More marketing, more leads, more sales, more installs, consistent work, happy team.

Example

XYZ Contractor shifts 10% to marketing to make sure his team always has work.

Profit: 15%

Overhead: 7%

Marketing: 20%

Sales Commission: 0

Build profit back to a comfortable level:

Profit: 25%

Overhead: 7%

Marketing: 20%

Sales Commission: 0

Step 10: Focus on Sales

Now that you have a full-time install team, focus on sales. Start taking time away from the jobsite to visit new customers and write estimates. It might help to do this gradually over time to make sure both you and your team can adjust management and communication as needed. With your marketing budget increased to 15-20%, you’ll have plenty of customers asking for estimates, it’ll just be a question of how much time you have to go see them.

Your goal is to get to be a full-time estimator. If you aren’t getting enough leads, work on improving your marketing. 20% should be enough to keep you running around town like crazy just to meet every customer that reaches out. Bare minimum should be 1 estimate per day, but hopefully you can get 3-4 estimates done every single day. Just based on sheer numbers, you’ll sell 

Step 11: Increase Your Backlog

Now that you have your install team and your sales team (you) in place, build out your backlog. Sell enough to guarantee consistent work for at least 3-6 months for you and your team. This does several things. First, it allows you to have some consistency in terms of schedule, revenue, and profit. Consistency means predictability and stability, which is gold for a local contractor. Second, it helps customers perceive you as a more reliable and trusted contractor. If you sell a project and say you can start tomorrow, the customer may not say anything to you, but they’ll definitely be questioning why you can start so soon or why no one else is hiring you. If you tell them the earliest you can start is in 6 months, they’ll subconsciously think that if everyone is hiring you, you must do great work.

Most importantly, it almost eliminates the scarcity mindset, allowing you to make great decisions for your business, and greasing the wheel to help you business grow.

Step 12: Hire a Second Team

At this point, your business is a numbers game. Granted, it was always a numbers game, but now you have enough numbers to hedge your bets. Once you are consistently booked out at least 6 months and you are consistently selling more and more projects every day, start hiring for a second install team. Same process as the first, but this time, you won’t be doing the training, your team will. This is why it is super important to properly train your first install team. They will have a direct impact on the long-term health of your business. 

This time, instead of hiring a helper and then a lead, hire a lead first to give him more time to learn the business, customer service, and general day-to-day. Then, right before you send him out on his on jobs, hire a helper. Easy enough right? You’ve already done it once before, just copy and paste!

Step 13: Improve Marketing

Looking ahead to the next step, your goal is to hire a full-time salesperson or estimator. So, you need to make sure you’re getting enough leads and estimate appointments to justify hiring a full-time salesperson. If each estimate takes you an hour in the home and an hour to write up and send, then you’ll need 3-4 leads every single day. If you’re not getting that volume of leads, then your marketing will need to be optimized. Try different channels, target audiences, messaging, offers, etc. to make the most of every marketing dollar you’re spending. Once you are working full-time on sales appointments, you’re ready to hire a salesperson.

Step 14: Hire a Salesperson

Even though I said you’re ready to hire a salesperson, there’s still a lot of work to do before then. Hiring your first estimator will not even remotely resemble what it was like hiring your first installer. Why? Because you have to build your sales process from the ground up. That means you have to decide how exactly you want your salesperson to do their job, how they will price their estimates, and how you want them to sell. We’ll post resources to help you with this at some point down the road. Until then, you can always reach out to us for one-on-one advising.

Then, once you have all that figured out, you can start hiring.

Step 15: Just Keep Going

At this point, your one-man business has become a profit generating machine. You have gone from doing everything yourself to building a team around you. Now, you only have two jobs; keep the ball rolling, and find a way to make it roll faster!

Enjoy!

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