What markup and margin should I carry on a remodel?
Short answer
Most remodelers run 20 to 35 percent markup on cost, which lands around 17 to 26 percent margin. Know the difference or you will underprice every job.
Markup and margin are not the same number
Markup is what you add to cost. Margin is what's left of the sale price after cost. A 30% markup on a $10,000 cost job gives you a $13,000 price, but that's only a 23% margin, not 30%. Owners who confuse the two consistently underprice.
Your markup has to cover overhead, real profit, and a cushion for the stuff that goes sideways. If you're only covering cost plus a little, you're working for free the day something breaks.
What the number actually needs to fund
Overhead includes your truck, insurance, office time, tools, warranty callbacks, and the weeks you're bidding instead of building. Add that up as a percentage of revenue before you decide your markup, don't guess it.
If your overhead runs 15% of revenue and you want 10% net profit, you need roughly 25% margin minimum, which usually means pricing at 33% markup or higher on cost.
Markup vs margin on a $40,000 remodel
| Hard cost (materials + labor + subs) | $30,000 |
|---|---|
| Markup at 33% | $9,900 |
| Sale price | $39,900 |
| Margin (profit / sale price)$9,900 / $39,900 | 24.8% |
The math: Markup % = (Price - Cost) / Cost. Margin % = (Price - Cost) / Price. Same dollars, different denominator.
Set your markup number once a year
- 1.Add up total annual overhead: office, insurance, vehicles, tools, admin time, callbacks.
- 2.Divide overhead by expected annual job cost volume to get your overhead percentage.
- 3.Decide your target net profit percentage, typically 8 to 15% for remodel work.
- 4.Overhead % + profit % = your minimum markup. Round up, not down.
- 5.Re-check it every year, material and insurance costs move faster than owners update their number.
Where owners get this wrong
- Pricing off what the last guy charged instead of your own cost structure.
- Cutting markup to win a bid without cutting your overhead or profit target to match.
- Forgetting warranty callbacks are a real cost that has to live inside markup.
Ask your version of this question
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Now run it against your numbers.
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