Understanding The Different Types of Markup

In the contracting world there are basically two types of markup methodology that contractors will use: a Total Volume Based Markup Method that places a markup to achive a prescribed Gross Profit on the sum of all the Labor, Materials, SubContractor, and Equipment costs.and a Capacity Based Markup that places the responsibilty of recovering overhead costs on the available production capacity (or labor) a company has.

We make no bones about it we teach and work with contractors and other service businesses to help them implement and understand the more robust Capacity Based Markup methodolgy because of the dangerous flaws in the Total Volume Based Markup Method. (see our blog article One of the Potential Problems in Using a Traditional Volume Based Markup for more on why).