Markup refers to the additional percentage of cost that is added to materials and labor costs in a construction project. This markup covers overhead, profits, and any other associated costs such as insurance, licenses, and permits. It can also include fees for services like design or engineering services. Markup is usually calculated as a percentage of direct costs, meaning that the higher the overall cost of materials and labor, the higher the markup will be.
A typical markup range for residential construction projects can vary from 5-25%. The exact amount depends on factors like project size, complexity, location and duration. By adding markup to the job's total cost, contractors are able to cover their expenses while still turning a profit. As a result, markup helps contractors grow their business, provide quality services to their clients, and stay competitive in the market. Markup is also an important way for contractors to track and adjust their pricing over time. By analyzing past projects and client feedback, contractors can make informed decisions about when and how much to markup a project. This helps ensure that they're not undercharging or overcharging for jobs while still covering their costs.