FreeConstruction · Estimating

Bid markup vs margin

Convert between markup and gross margin and get the bid price from cost.

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Your numbers

Total job cost ($)Direct cost plus job overhead.You know theMarkup is on cost; margin is on price.Percent (%)E.g. 20% markup = 16.7% margin.

For the bid build-up6 more, filled with typical values

Company overhead per year ($)Office, estimating, management, insurance not charged to jobs, vehicles and rent.Job cost you run through per year ($)Total job cost (not revenue) across all jobs in a normal year.Contingency on this job (% of cost)For quantities and conditions you can't pin down yet.Price rise before buy-out (% of cost)Material and labor rises between bid day and purchase. Check the PPI trend [2].Net profit target (% of price)Profit left after the job's cost and its share of company overhead.Price cut you might make to win (%)To see what a lower number does to the net.

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How it works

Press Calculate to convert between markup and margin.

Profit barsCost crate, plate and gaugesNear gauge: tenths of cost. Far gauge: tenths of pricePress Calculate and the profit bars stack on the cost crate up to your bid price. The near gauge counts in tenths of the cost, the far one in tenths of the price: the same bars read as the markup on one and the margin on the other.

Result

Ready when you are.Enter your numbers and press Calculate.

References

Check the work against these

The bid built up with contingency, escalation and this job's share of company overhead, the break-even and target markups, the overrun it can absorb and a markup-to-margin table, with sources. Numbers in the result and in the plain-words read point here.

1
Construction Financial Benchmarker (annual financial survey)Data
Construction Financial Management Association (CFMA)
Gross profit, overhead and net profit as a share of revenue for contractors by trade and size. Compare your overhead rate and net margin with firms like yours.
2
Producer Price Index (inputs to construction industries)Data
U.S. Bureau of Labor Statistics
Monthly price change for the materials and inputs construction buys. Use the last few months' trend to set the escalation between bid day and buy-out.
3
Manage your financesGuide
U.S. Small Business Administration
How to read your profit and loss and work out a break-even point: the basis for charging each job its share of the year's overhead.

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Bid markup vs margin

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