Podcast 265: How To Mark Up Your Jobs The Right Way with Michael Stone

Michael Stone

There are so many mistakes to be made in the area of markup and profit, and there are plenty of contractors out there making those mistakes–and those are the ones who can’t keep their businesses afloat.

If your business isn’t as profitable as it needs to be, then you need to hear what Michael Stone has to say. He’s been with us in Episode 14 and Episode 66, and now he’s here to talk about the specifics that can keep you profitable.

What you’ll hear in this episode:

Michael’s background: almost 58 years in construction; wrote a book in 1997, and started doing seminars
Michael’s premise has always been to help contractors help take care of their families
Out of 1300 contractors who have attended Michael’s 2-day seminar since 2014, only 4 have gone out of business
Michael’s book, Markup & Profit, originally published in 1999
The 6 most common reasons a contractor’s business fails (from Episode 14):
- Not charging enough for your work
- Failure to use proper change work orders
- Failure to use good, legal contracts
- Having too many employees for the volume of work
- Having an improper payment schedule
- Having a lack of profitable sales
Why you shouldn’t give bids for jobs
90% of contractors go out of business because of not charging enough
The cold, hard facts: 32% of contracting businesses fail the first year, 57% don’t make it 2 years, and 74% fail by the end of their 3rd year
The difference in market-based and cost-based pricing
How to pay your employees top dollar because you charge top dollar
How to determine whether you’re using market-based pricing
Cost-based pricing means you don’t worry about competition, never adjust a price downward, never use the word “free” in advertising, maintain the highest pay scale for ALL employees, work only on a fixed fee contract, and know when to say NO.
Profit and overhead
The biggest myth in construction is that as your sales go up, you can cut your markup
Fixed overhead vs. variable overhead
How to calculate markup: Total sales divided by job costs equals markup
Markups that roofing contractors SHOULD be using
Why contractors feel guilty for charging more
Payment schedules and cash flow
The ratio of employees to dollar volume