How Not to Discuss Markup With Your Customers

JLC’s resident business guru Melanie Hodgdon explains that because there are different ways to organize a business’s cost categories, contractors who charge exactly the same amount for a job may apply very different markups to their estimated costs in order to arrive at the same final sales figure. One business may include labor burdens – such as payroll taxes, insurance, etc. – in their Cost of Goods Sold, while another business might include those costs in their overhead. This results in very different totals for estimated costs, gross profits, and gross margins, even though net profits and net margins will be similar. So don’t get trapped discussing markup with your customers – it’s irrelevant.