The Selling Price is Right

By Sal Alfano. There are two common ways to use a percentage to arrive at a selling price that includes gross profit. Assuming you know what estimated direct costs for the job are, one method uses a divisor to find the selling price; the other uses a multiplier.

The two charts below will make it easy to find the right number to use.

Divide and conquer. To find the selling price using the divisor chart, find your overhead percentage in the left-hand column and your target net profit in the top row. Now find the divisor located where row and column intersect, and plug it into this formula:

Estimated Costs ÷ Divisor = Selling Price

Overhead of 22%, for example, and net profit of 7% would yield a divisor of .71. The selling price on estimated costs of $2,650 would be $3,732 ($2,650 ÷ .71).

Go forth and multiply. The multiplier chart works the same way, except that you multiply the number you find in the chart times estimated costs. Using the same 22% overhead and 7% profit, the chart yields a multiplier of 1.4085. Selling price for the same estimated costs as in the above example is still $3,732 ($2,650 x 1.4085).

Chart of Divisors

Chart of Multipliers