How many times has a homeowner asked you to do a job for less than you quoted? Ever wonder why? In today’s Blog we’re going to discuss why homeowners feel this way and to the homeowners that might be reading I’m going to explain in simple terms why your contractor has to make a profit.
Most construction companies have overhead, meaning even if they are a one man show or a large construction company they have expenses to run the company successfully and be around for a long time.
What’s a fair mark up on a job really depend on the company and region they do business but the principles remain the same. Most reputable construction companies have the following expenses:
Website, Marketing, Business Banking Fees, Computer and Office Equipment, CPP, EI, Workers Compensation, Sales Tax, Payroll Tax, Bookkeeping, Employee Benefits, Tools and Equipment, Association Dues, Liability Insurance, Auto Insurance, Disability Insurance, Fuel and Maintenance on Vehicles, Uniforms, Statutory Vacation Pay, Building Repairs or Business Rent, Equipment Repairs, Training and Education, Materials, Material Delivery Fees, and Utilities
These are the cost of doing business and are usually factored into the price of a project proportionately. So for the sake of argument let’s say according to the internet (which by the way has no idea of the size and scope of work involved to complete your project) you have 3 general contractors all bid your job at $250,000 but you like one of the contractors and decide to work with him/her. So you ask them to do the job for $225,000 and they agree. The problem with this is they will most likely run out of money to finish the job to your satisfaction because they have had to cut corners to complete it.
If the size and scope of work is the same across the board you may have slight variations in price because every company has a different overhead expense. But the best way to ensure your project is going to be a success is to understand the project will have back end expenses that you don’t see. For instance maybe your contractor uses state of the art software to provide you weekly reports and daily status reports. Or they have a super safety record and all their crew come with multiple tickets from both the Construction Safety Association and Trades Association. Plus all the trades involved in your project have impeccable references from organizations like the BBB - well all these cost money.
Sure you can go with the cheapest contractor and risk they haven’t got all the systems in place to complete your project on time and on budget because they aren’t charging enough money to complete it, or worse they have let their insurance lapse and someone gets hurt - and they go after your homeowners insurance.
But keep in mind the company you work for is in business to make money, that’s why they can afford to offer you a great salary with benefits, training when you need it and keep the lights on. Well your contractor is just like your employer, they want to ensure their employees and sub trades are compensated fairly so their families will be comfortable too.
I hope this blog helped explain your contractor isn’t making to much money and instead gave you insight to how contractors will be around to satisfy your building and construction needs and those of your friends and family