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Pricing and Markup

Understanding how Readybuild calculates costs, markup, and pricing is essential for creating accurate and profitable estimates.

Cost vs Price​

Readybuild tracks two key values for every entry:

TermDefinitionWho Sees It
CostWhat you payInternal only
PriceWhat customer paysCustomer-facing

The difference between price and cost is your profit.

Pricing Components​

Unit Cost​

Your cost per unit of measure. This is what you pay your supplier or what labor costs you.

Example: A cabinet costs you $500 per unit.

Extended Cost​

Unit cost multiplied by quantity.

Formula: Extended Cost = Unit Cost × Quantity

Example: 5 cabinets × $500 = $2,500 extended cost

Unit Price​

What the customer pays per unit, after markup is applied.

Formula: Unit Price = Unit Cost × (1 + Markup%)

Example: $500 cost × 1.35 (35% markup) = $675 unit price

Extended Price​

What the customer pays total for this line.

Formula: Extended Price = Unit Price × Quantity

Example: $675 × 5 cabinets = $3,375 extended price

Understanding Markup​

Markup is a percentage multiplier applied to your cost to determine the selling price. In Readybuild, markup is expressed as a percentage where 100% = cost (no markup).

How Markup Works​

CostMarkupPriceProfit
$100100%$100$0 (no markup)
$100120%$120$20 (20% over cost)
$100135%$135$35 (35% over cost)
$100150%$150$50 (50% over cost)

Formula: Price = Cost × (Markup / 100)

Markup vs Margin​

These terms are often confused:

TermFormulaExample (Cost $100, Markup 135%, Price $135)
Markup(Price - Cost) / Cost($135 - $100) / $100 = 35% over cost
Margin(Price - Cost) / Price($135 - $100) / $135 = 26% of price

Readybuild uses markup for setting prices and displays margin for profitability analysis.

tip

A markup of 135% means you're charging 35% more than your cost. To achieve a 25% margin, you need approximately 133% markup.

Markup Hierarchy​

Markup can be set at three levels, with more specific settings overriding more general ones:

1. Estimate-Level Markup (Default)​

Set a default markup for the entire estimate:

  1. Open estimate settings
  2. Find the Default Markup field
  3. Enter a percentage

This markup applies to all entries unless overridden.

2. Area-Level Markup​

Override the default for a specific area:

  1. Click on the area header
  2. Find the Markup setting
  3. Enter a percentage

Entries in this area use the area markup instead of the estimate default.

Use case: A high-end kitchen might warrant 40% markup while standard bathrooms use 30%.

3. Entry-Level Markup​

Set markup on an individual entry:

  1. Click the markup field on the entry row
  2. Enter a custom percentage
  3. This overrides both area and estimate defaults

Use case: Special order components or highly competitive entries may need custom markup.

Hierarchy Summary​

Entry Markup (if set)
    ↓ falls back to
Area Markup (if set)
    ↓ falls back to
Estimate Default Markup

Contingency​

Contingency is a buffer for unexpected costs, typically expressed as a percentage.

What Is Contingency?​

Contingency adds a calculated amount to cover:

  • Unforeseen conditions
  • Price fluctuations
  • Scope uncertainty
  • Risk factors

Setting Contingency​

Contingency can be set at:

Estimate Level:

  1. Open estimate settings
  2. Find Contingency %
  3. Enter the percentage
  4. Applied to the entire estimate total

Area Level:

  1. Expand area settings
  2. Find Contingency %
  3. Enter the percentage
  4. Applied only to that area's total

How Contingency Is Calculated​

Formula: Contingency Amount = Subtotal × Contingency%

Example:

  • Area subtotal: $10,000
  • Contingency: 5%
  • Contingency amount: $500
  • Area total: $10,500

Typical Contingency Ranges​

Project TypeSuggested Range
Simple/known scope3-5%
Moderate complexity5-10%
High uncertainty10-15%
Major renovation15-20%

Discounts​

Apply discounts to reduce the estimate total for the customer.

Adding a Discount​

  1. Open the estimate's discount settings
  2. Choose discount type:
    • Percentage - Reduce by a percentage
    • Fixed Amount - Reduce by a dollar amount
  3. Enter the value
  4. The discount is applied to the estimate total

How Discounts Are Displayed​

Discounts typically appear as a separate line in the estimate summary:

Subtotal:        $25,000
Discount (10%):  -$2,500
Total:           $22,500

Discounts vs Markup Adjustment​

  • Discounts - Customer sees the discount as a separate line (good for promotions)
  • Lower Markup - Reduces price without showing a discount line

Understanding Totals​

Subtotals​

Readybuild shows subtotals at multiple levels:

LevelShows
CategoryTotal for all entries in that cost code
AreaTotal for all categories in that area
EstimateTotal for all areas

Estimate Summary​

The estimate summary displays:

LineDescription
SubtotalSum of all area totals
ContingencyCalculated contingency amount
DiscountAny applied discounts
TotalFinal price for customer

Cost Summary (Internal)​

For internal review, you can also see:

MetricDescription
Total CostWhat the project costs you
Total PriceWhat customer pays
Gross ProfitPrice - Cost
MarginProfit as percentage of price

Margin Analysis​

Use margin to evaluate estimate profitability.

Viewing Margin​

Margin is displayed at various levels:

  • Per entry
  • Per area
  • For the entire estimate

Target Margins​

Most companies have target margin ranges:

MarginInterpretation
< 15%Low - review pricing
15-25%Moderate
25-35%Healthy
> 35%High
note

Target margins vary significantly by industry, region, and company strategy.

Pricing Best Practices​

  1. Set defaults thoughtfully - Choose an estimate-level markup that works for most of your work
  2. Use area markup for variations - Different scopes warrant different margins
  3. Override sparingly - Entry-level markup should be the exception
  4. Include contingency - Protect yourself from unknowns
  5. Review before presenting - Check overall margin before sending to customer
  6. Be consistent - Use similar markup for similar work across estimates

Next Steps​