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USE THIS MENU TO LOCATE MORE TIPS FOR EVERYDAY MATH
- Establish a Profit - decide how much you want to put in your pocket after you pay yourself a fair market salary. Why would you take the risk of owning a company if all you do is make a salary? In this example we will use 10% as the profit you want to make.
- Identify Overhead Expenses - go through last years bills and calculate what it cost to run a job (this is your project Overhead). Next, look at what it cost to operate your business. What does it cost to run an office and pay your managers, secretaries, book keepers ect...? Convert this to a percentage of what your revenue was for that particular year. For example: if your overhead was $120,000 and your revenue was $800,000, your overhead represents 15% of your revenue.
- Compute projected gross profit-
10% Profit + 15% Overhead = 25% Gross Profit.
100-25% = 75%
You should divide all project "cost" by .75 to determine your estimate.
Example: You are preparing a bid for a remodeling job. The materials and labor will "cost" you $68,000. To accurately prepare the bid, divide 68,000 by .75 = $90,666. This is what you contract amount should be.
Guide for identifying your target "Margin" to markup your job cost
130K Divided by 30K = .23 (23%)
Markup and gross profit are often mixed up. Markup is the factor you apply to your estimated job cost to decide what your customers cost will be.
For Example: You estimate the cost to do a job is $1000,000 and you want to mark it up 30%. You determine the contract you will agree to will be in the amount of $130K.
Did you really make 30%? No. Gross profit is computed by subtracting the cost of sales (Material, labor, tools etc.) from your contract price. The "profit" percentage is equal to gross profit divided by the contract price.
MARKUP VS. GROSS PROFIT
Tape Measures indicate whole numbers in inches and fractions of an inch in increments of 1/16"
- The first step to adding or subtracting fractions is reducing the fractions to their lowest possible terms.
- Find the lowest common denominator for each figure.
- To convert to the lowest common denominator, find the lowest common multiple. This will be the lowest number that can be divided equally by each
IMPORTANT CONVERSIONS FRACTION to DECIMAL
- Numerator is the top number.
- Denominator is the bottom number.
- Take the "top" number and divide it by the bottom number.
IMPORTANT MEASUREMENTS (D.I.Y & PROS)
- Always Use A Calculator: NEVER add anything in your head. And always double check to make sure you get the same answer.
- Write it down: Write it down so that you can go back and check it. When it comes to money, no math is to simple.
- Always multiply in Numbers: Convert feet & inches into decimals.
- Never round quantities until the end: For example if you are figuring out materials for a roof replacement and you arrive at 20.3 squares, don't just round up to 21. First multiply by the number of bundles per square.
- Graph Paper: Always keep graph paper handy for complex calculations.
Don't make costly mistakes in your math! Follow this simple tips.