"Markup" is the amount that you add to the cost of materials, labor, subcontracts, equipment, and other costs that go into a construction job. If you do not add markup to your costs, then you will be working for free, and you will go out of business. So, markup is how much you get paid for doing the work you do.

ContractorTools calculates markup as a percentage of job costs, and it provides three different categories for markup: "Overhead", "Profit", and "Contingency".

Overhead is what it costs to operate your business. This includes things like office staff, rent, utilities, transportation, advertising, etc.

Profit is what your business "earns" for doing the work. Technically, "overhead" is just part of what it costs to do business, so if you don't add markup for profit, you will still be working for free.

Contingency is what you might add as "padding" in case things don't go well. I'm sure you can think of examples of this, so we don't need to go into that here, but if you start out with some padding built into the job, at least you might not lose money if things don't go well. Also, if there's a reason you want to be extra competitive in bidding a job, and you're sure everything will go according to plan, then you can remove the contingency markup in order to lower your estimate.

Important: Markup vs Margin

Please note that ContractorTools calculates "markup" as opposed to "margin". There is an important difference. 

  • "Markup" is calculated as a percentage of cost.
    For example, if a job costs = $100, then a 20% markup would be $20, and the price would be $120.

  • "Margin" is calculated as a percentage of price.
    For example, if a job costs = $100, then a 20% margin would be $25, and the price would be $125.

If the margin is calculated based on the price, and the price is based on the margin, how can you calculate the margin if you don't know the price? 

The margin can be calculated without knowing the price, but the formula is a bit complicated:  

  • Price = Cost / (1 – Margin Percentage)

  • Margin = Price - Cost

This calculation is not easy to do in your head. This is why ContractorTools uses markup instead of margin

This can be confusing. So, just remember...
If you want a margin of:  |  Set the markup to:
               10%                    |                 11.1%
               15%                    |                 17.6%
               20%                   |                 25%
               25%                   |                 33.3%
               30%                   |                 42.9%
               40%                   |                 66.7%
               50%                   |                 100%

Setting Markups

ContractorTools can be set up to automatically add markups to your job costs for each of these categories: Overhead, Profit, and Contingency.

Here is how these are set:

1) All jobs are created by copying from a job template. You can set your default markups in your job templates so that these are copied into new jobs as you create them. To set the markups in job templates, go to the ContractorTools home screen, tap on Job Templates, select the job template, then tap on Job Info. Prompts for the markups for Overhead, Profit, and Contingency will be in the lower part of the screen. The setting you enter here will apply to all jobs that you create by copying from this job template.

2) Once you have created a job, you can change the markups for that individual job. To change the markups for an individual job, select the job and tap on Job Info. Prompts for the markups for Overhead, Profit, and Contingency will be in the lower part of the screen. The setting you enter here will only apply to this individual job.

3) If you want to only change the markups for an individual item in a job estimate, select the item (in the Estimate screen), scroll to the bottom of the item information screen and tap on Overrides, then tap on Markup. Here you will find prompts for the markups for Overhead, Profit, and Contingency. The setting you enter here will only apply to this individual item.

Displaying Markups In Customer Documents

Typically, you will not want to display markup amounts in estimates and invoices that you present to your customers, so, by default, these are not set to be displayed in ContractorTools.

You can, however, set your documents to display markups if necessary. This would be necessary in the case of a "cost plus" job, where you want to show your customers your costs and your markups.

So to control whether the customer documents show your costs and markups, tap on "Settings" in the lower left corner while viewing a document (Estimate or Invoice). Then tap "Edit Template". Then scroll down to the prompt for Markup. This will be off by default, so tap it to turn it on. The document will now display your costs and markups.

For more information about using Markups, please see this video: 

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