As a construction industry consultant, I’m frequently asked, “What number should I use to mark up my costs?” The simple answer is “Whatever will cover your overhead and provide the target profit you want.”

A common mistake is to look at total overhead for a given period (say 12 months) and express it as a percentage of total sales for that period. For example, here’s a company with $800,000 in sales, less production and overhead costs. Dividing each amount by the total sales figure gives us the results shown in the right-hand column.

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