A common misconception in building and renovation goes something like this:
Client: “Contractors are competing with the big box stores and the home delivery powerhouses like Amazon. So, my General Contractor should undercut those prices and extend those discounts to me. I want to get the best deal possible, so I should get the Contractor’s discount.” Sounds reasonable, right? Everyone wants to save a buck.
Will SheBuilds clients receive Contractor pricing?
The short answer, is no. Why not? Because General Contractors and Builders of all types are business owners. Every business needs to cover their expenses and make a profit to keep their doors open.
Businesses make a profit through markup. Markup is the % added to goods after cost to arrive at the sales price. For you math folks out there, here’s the formula: Markup = (100 × Profit/Consumer Cost)
Markup allows the business to cover their operating expenses or overhead and make a bit of profit.
For example:
Total cost to the business: $10.00
Consumer price: $14.00
Profit: $4.00
Markup: 28.5%
A Case Study:
Let’s say Fred Meyer buys apples from the grower for $0.50/pound. When you as the customer go to Freddies to buy those apples, do they charge you $0.50/pound? Not normally.
Why? Overhead. Freddies buys the apples, pays for the apples to be transported to their distribution facilities and then to their stores. They have to pay the delivery drivers, vehicle expenses like gas and insurance. They pay for forklifts and their operators and other heavy equipment to offload the apples. There are additional expenses like salaries, benefits, auto and property insurance, lease and building maintenance expenses like electricity and toilet paper. And the list goes on! These expenses are examples of their overhead.
After all these expenses are paid, they are at the “break-even” point. As a business they need to make a profit. So, they price the apples at around $2/pound, or more if they are honey crisp! We happily (mostly) pay the price.
In this example:
Apple price: $0.50/pound
Overhead: $1.25/pound
Sale price: $2.00/pound
Profit: $0.25/pound
Markup: 12.5%
Let’s say a customer tells Fred Meyer: “Hey Freddies, I want your discount!” In other words, I want your apples for your cost, or $0.50/pound.
Do you see the problem here? Fred Meyer still has ALL the overheard costs associated with getting those apples to the stores. Additionally, selling at “cost” they lose their profit. No $ to cover expenses? No profit? No Fred Meyer.
So, by now you may be wondering what apples have to do with kitchen renovation?
The same principles apply to General Contractors and building professionals in all the trades. We all have overhead expenses. Lots of them: Staff, leases, vehicle and property insurance, fuel, vehicle maintenance, security, signage, sales materials, tools, licenses and permits. After all those expenses are paid, we likewise need to make a bit of profit to keep our doors open.
Here at SheBuilds we do our best to keep markup low and our prices competitive. Markup is simply the cost of doing business.
It is our mission to be the premier design-build firm in the Portland Metro Area. We are so blessed to have wonderful clients who value the service and expertise we bring to the table.
