Adjusting Your Bid, and Sticking With It
Regardless of what method of figuring overhead and profit you use, you will find that your charges will have to flex with the times. Some builders would disagree. They will do virtually anything to maintain their markups or margins when times are slow. Their unwillingness to work without adequate compensation is admirable. But emulating their strategy can be shortsighted.
In particular, you may face a choice between taking on projects at sharply reduced markups or letting seasoned and loyal employees. Sticking with your people maybe not only the ethical thing to do but the best business strategy. When business turns up, the expense of having built a few projects with tight markups may look like a wise investment. You will be ready to capitalize on expanding opportunities without the huge cost of integrating new people into your operation.
If you decide it is necessary to trim your markups to get through slow times, you can:
- Make doubly sure overhead is trimmed as far as practicable.
- Trim profit, and expect the same of your subs. You do not have to protect their markups at the expense of your own.
- Cut your pay or take part of it from the cash reserves you have built up during better times
Who Sells What You Want
Just how far you go in trimming overhead and profit to keep your people employed is a judgment call. Whether you are marking up austerely in bad times or generously in good times, stand by your markups once you have submitted your bid.
Portions of this content was sourced and/or published in:
- Barbara J. Jackson, Construction Management Jumpstart