Keeping Track of Overhead

Ask the average small builder on the street what his net profit is and you’ll probably hear something like, “Well, I made $70,000 dollars last year.” But, in fact, that number is probably what’s left over after paying for materials, labor, and subcontractors. What most builders forget is that the cost of doing business still has to come out of that money. In other words, they forget about their overhead. But even builders who know what their overhead is often confuse it with the markup they apply to get the final selling price for the jobs they estimate. To know the difference between overhead and markup, you have to understand the relationship between three basic concepts: gross income,