What is a markup? #
Markup refers to the increase applied to the estimated cost of something in order to arrive at the final bid value to be presented to the customer. Markup is not the same thing as margin; margin is the target profitability %, while markup is the % (or integer) the cost value is increased by to arrive at the bid value. As an example, a 100% markup on a $100 cost-to-me line item produces a bid value of $200; that $200 bid would have a 50% expected margin ($100 profit).
Note: Do not confuse markup with margin!
Markups on labor and materials #
A contractor estimates that the labor costs on a job are $1,000 and the material costs are $500. Her/his standard markups are 2x (+100%) on labor and 1.5x (+50%) on materials. The proposal to the client notes a labor line item of $2,000 and a materials line item of $750, for a total bid value of $2,750.
Using markups in Knowify #
Knowify allows you to quickly mark up your budget line items when creating a bid. You can decide whether to show the labor/materials components of your bid to the client, or whether you would prefer to just show them the line item or lump sum total.
In a fixed price contract, the markup is applied to the budget. In cost plus, the markup is applied to the actual cost. When setting up the cost plus agreement you will be able to define the applicable markup for labor (at the role or employee level) and materials. As you register time and purchases, the markup will be applied to the billable items. Those billable items will be ready for billing when you need them, with no need to make additional calculations or remember the applicable markup
See how it works:
