Discover what to charge and find your markup percentage based on your target profit margin
A markup is the amount or percentage you add to the overhead or constructions costs in the invoice of a project. In other words, if the lumber for a project costs you $10,000, but you charge the client $11,000, your markup is $1,000 or 10%. ($11,000-$10,000 = $1,000) or ($1,000/$10,000 = .10).
While markup is the amount you increase to any overhead or construction costs, the profit margin is the amount of profit remaining after all overhead and construction costs are paid in a project. For example, if your construction costs are $5,000, but you charge the client $5,500, your markup would be $500, or 10% ($500/$5,000 = .10). However, while your markup is 10%, your profit margin is only 9.09%. This is because your profit margin is based on the total amount you charge, not the total of amount of your expenses ($500/$5,500 = .0909).
While there are no rules on how much you can markup any given project, it seems like most residential home builders and remodelers agree that a 20% to 30% markup is standard. There are many factors you should consider in determining how much to markup your project such as the state of the economy, your location, difficulty of project, competition, and many more that can influence your decision.