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Allowances and markup

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  • #271114
    aa_custom
    Pro
    PIttsburgh, PA

    For those of you who include allowances in your bids, how do you handle markup? Do you publish it up front, saying the cost difference will be included less your markup percentage? Do you markup these items?

    Ive been marking up the full allowance, and adding that to my price, then refund and difference in actual cost.

    #271122
    NJBuilder
    Pro
    Brick, NJ, 500,000 HAM

    I don’t like allowances on the homes I build. I give you the price and let you know what’s included. Anything else is an upgrade and charged as one.

    As far as mark up on allowances It doesn’t make sense. If I gave you a budget on material for say tile I must have already put a profit on top for that line item.

    #271130
    ChadM
    Moderator
    Rogers, Ohio

    I state in my contract that all labor, material, subs, etc are subject to my O&P markup. I do mark up allowances but the markup amount isn’t shown, If I allow $1000 for an item the customer only sees that $1000 amount. If the customer goes over the allowance I do not charge an additional markup but if they go under I don’t refund the markup either – it works out in the end.

    Chad

    A Working Pro since 1993

    Member since 12/07/2013

    #271155
    aa_custom
    Pro
    PIttsburgh, PA

    @NJBuilder, why don’t you like allowances? I can’t seem to avoid them in many situations. I go into a lot of remodel projects where people are still in the planning phases and want to get a price sorted out. Sometimes I will charge a fee and write up a long, detailed proposal speccing out all the final finishes. Other times I will have to just write up an estimate with allowance place holders for the items I need to.



    @ChadM
    thats smart just putting it in my contract like that. I just went to look at a flooring project for a client(the one who I just did that built in for in my earlier thread). He wants a new floor in that room. He already went to lumber liquidators(I know….) and picked out some flooring options. I know with him it will be a battle to explain my markup and any cost difference in an allowance.

    #271160
    NJBuilder
    Pro
    Brick, NJ, 500,000 HAM

    I don’t enjoy the nit picking. People asking for money back or wanted to skimp here to use it there and stuff. I rather just show them what they get for the price and let them choose to upgrade if they wish.

    #271162
    aa_custom
    Pro
    PIttsburgh, PA

    Fair enough. I could see how that could get old, especially with a whole home build.

    #271171
    ChadM
    Moderator
    Rogers, Ohio

    I try to avoid allowances because I feel that with some customers it causes them to search for the cheapest material because they like to see how much they can save. But sometimes an allowance is just the best way for me to go – I like to get an initial proposal to customers ASAP and allowances make that easier in my opinion.

    Chad

    A Working Pro since 1993

    Member since 12/07/2013

    #271172
    NJBuilder
    Pro
    Brick, NJ, 500,000 HAM

    Fair enough. I could see how that could get old, especially with a whole home build.

    Yea. However I understand where on quick estimates you make sometimes it works. I tend to give a range on quick stuff based on averages and a rough idea on what they want.

    #271174
    cranbrook2
    Pro
    Belgrave, Ontario , Canada

    My prices stay the same no matter what . If they want any changes then I will let them know right away of a price change . I always make sure everyone is clear on the price .

    #271180

    I usually avoid them but sometimes we’ll do them for a custom rail, for example I’ll allowance them $80 per lf if rail, I then add my markup on $80. If they choose $75 they get $5 lf back, I keep the difference, if they choose $85 then they owe me $5 lf, adding the markup isn’t worth it.

    Robert Shaw -Colorado Deck and Framing
    www.mysteeldeck.com

    #271204
    aa_custom
    Pro
    PIttsburgh, PA

    I usually avoid them but sometimes we’ll do them for a custom rail, for example I’ll allowance them $80 per lf if rail, I then add my markup on $80. If they choose $75 they get $5 lf back, I keep the difference, if they choose $85 then they owe me $5 lf, adding the markup isn’t worth it.

    makes sense that way. Thanks

    #271213
    jdw1865
    Pro
    Dewey, OK

    I have built with a contract similar to @NJBuilder and prefer it. Recently have been doing houses cost plus (illegal in some states). On those we add our markup to every line item. I give copies of all invoices and add the markup to the total. Don’t ask what the mark up is. Do to a long and faulty set of assumptions it is way to low.

    #271224
    NJBuilder
    Pro
    Brick, NJ, 500,000 HAM

    I have built with a contract similar to @NJBuilder and prefer it. Recently have been doing houses cost plus (illegal in some states). On those we add our markup to every line item. I give copies of all invoices and add the markup to the total. Don’t ask what the mark up is. Do to a long and faulty set of assumptions it is way to low.

    Just easier in my opinion. I’m glad you like it too.

    #271234

    I do the same as @ChadM and @RobertCDF. All budgets or allowances are called out. The markup is buried. When they pick out the item I will show them the cost. It makes them feel good seeing the invoice and it is easier than trying to add or explain markup to a regular consumer. I don’t worry about losing a little markup if they go over budget on something. I try and budget mid to upper amounts. Most times people come in under budget and that makes a happy client.

    Andrew

    A Working Pro since 1995!

    Member since March 26, 2014.

    #271262

    I don’t do allowances on anything . Once they receive the bid , estimate , proposal that’s it . If the want something else or upgrade it’s a change order . So on the markup side there is none cause I don’t do allowance work .

    Always willing to learn .

    #271284
    TonyG
    Pro
    Colorado Springs, CO

    I use set prices per task that includes material. We go out look at the job assess the situations and give them a price on what it will cost to complete the task. If they want to change something as long as it is in the scope of work I don’t change the price. But if they want to add something outside the scope of work it is a change order

    #271301

    I don’t do allowances on anything . Once they receive the bid , estimate , proposal that’s it . If the want something else or upgrade it’s a change order . So on the markup side there is none cause I don’t do allowance work .

    So how to make provisions for something that isn’t picked yet? To me an allowance/budget doesn’t mean they can go shop you, it is just a dollar amount you included in the bid/proposal.

    Andrew

    A Working Pro since 1995!

    Member since March 26, 2014.

    #271309
    jdw1865
    Pro
    Dewey, OK

    I don’t do allowances on anything . Once they receive the bid , estimate , proposal that’s it . If the want something else or upgrade it’s a change order . So on the markup side there is none cause I don’t do allowance work .

    So how to make provisions for something that isn’t picked yet? To me an allowance/budget doesn’t mean they can go shop you, it is just a dollar amount you included in the bid/proposal.

    I like for the buyers to do all the shopping prior to construction. First it makes them decide what they want. If you let them pick after construction begins it is my experience that it will be a hold up.

    Construction goes much smoother for me when the selections are made first.

    Also if customers are shopping during construction they seem to make more changes.
    These are my observations and opinions.

    #271312

    I don’t do allowances on anything . Once they receive the bid , estimate , proposal that’s it . If the want something else or upgrade it’s a change order . So on the markup side there is none cause I don’t do allowance work .

    So how to make provisions for something that isn’t picked yet? To me an allowance/budget doesn’t mean they can go shop you, it is just a dollar amount you included in the bid/proposal.

    We try to make everything picked before a contract is signed and projected gets started . So all costs are layed out for client to see . And no problems later down line . If that happens it’s a change order .

    Always willing to learn .

    #271325

    I don’t disagree at all with pre-planning and decisions being made early on saving time. For us I don’t want to spend a bunch of time getting those decisions and designs before I am under contract. This is on larger remodels and new homes. For smaller baths and kitchens a lot of those choices can be made at the initial visit with the client and a hard number can be figured for the proposal.

    Andrew

    A Working Pro since 1995!

    Member since March 26, 2014.

Viewing 20 posts - 1 through 20 (of 28 total)
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