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:
| Term | Definition | Who Sees It |
|---|---|---|
| Cost | What you pay | Internal only |
| Price | What customer pays | Customer-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
| Cost | Markup | Price | Profit |
|---|---|---|---|
| $100 | 100% | $100 | $0 (no markup) |
| $100 | 120% | $120 | $20 (20% over cost) |
| $100 | 135% | $135 | $35 (35% over cost) |
| $100 | 150% | $150 | $50 (50% over cost) |
Formula: Price = Cost × (Markup / 100)
Markup vs Margin
These terms are often confused:
| Term | Formula | Example (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.
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:
- Open estimate settings
- Find the Default Markup field
- Enter a percentage
This markup applies to all entries unless overridden.
2. Area-Level Markup
Override the default for a specific area:
- Click on the area header
- Find the Markup setting
- 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:
- Click the markup field on the entry row
- Enter a custom percentage
- 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:
- Open estimate settings
- Find Contingency %
- Enter the percentage
- Applied to the entire estimate total
Area Level:
- Expand area settings
- Find Contingency %
- Enter the percentage
- 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 Type | Suggested Range |
|---|---|
| Simple/known scope | 3-5% |
| Moderate complexity | 5-10% |
| High uncertainty | 10-15% |
| Major renovation | 15-20% |
Calculation Strategy
By default, Readybuild calculates contingency on cost and applies project margin to the marked-up price only. Some companies need a different layering — or a single tax line on the final price — to match their own pricing model. Three optional settings control how contingency, margin, and tax combine.
The three settings
| Setting | Options | What it changes |
|---|---|---|
| Contingency Base | Contingency on cost (default) / Contingency on extended price | Whether contingency is calculated from cost or from the marked-up (extended) price. |
| Apply Margin on Contingency | Off (default) / On | When on, contingency is included in the markup base, so your project margin applies on top of the contingency buffer. |
| Tax Rate (e.g. GST) | 0% (default) / any % | A single flat tax (such as 5% GST) applied to the marked-up, contingency-inclusive total. Leave at 0 for no estimate-level tax. |
Contingency on extended price and Apply margin on contingency cannot be used together — the two would depend on each other circularly, so Readybuild prevents selecting both.
The Tax Rate is separate from the per-item Tax % on a line. Per-item tax is part of the item's cost; the Tax Rate here is one estimate-wide tax (like GST) added on top of the final marked-up total.
Where to set it
Company default — go to Settings → Estimating → Estimate Settings → Calculation. These defaults apply to every new estimate.
Per estimate — open Add New Estimate or Edit Estimate Info and expand Advanced calculation settings to override the defaults for that estimate.
Snapshots protect existing estimates
When an estimate is created, it captures the calculation strategy in effect at that moment. Changing the company default later never re-prices existing estimates — only newly created estimates pick up the new default. To change an existing estimate, edit its own advanced settings.
Example: margin on contingency with a 5% GST
- Item cost: $100, markup 150%, contingency 10%, tax rate 5%
- Contingency: $100 × 10% = $10
- Marked-up price (margin applied to cost + contingency): ($100 + $10) × 1.5 = $165
- Tax (5% on the marked-up total): $165 × 5% = $8.25
- Final price: $173.25
Discounts
Apply discounts to reduce the estimate total for the customer.
Adding a Discount
- Open the estimate's discount settings
- Choose discount type:
- Percentage - Reduce by a percentage
- Fixed Amount - Reduce by a dollar amount
- Enter the value
- 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:
| Level | Shows |
|---|---|
| Category | Total for all entries in that cost code |
| Area | Total for all categories in that area |
| Estimate | Total for all areas |
Estimate Summary
The estimate summary displays:
| Line | Description |
|---|---|
| Subtotal | Sum of all area totals |
| Contingency | Calculated contingency amount |
| Discount | Any applied discounts |
| Total | Final price for customer |
Cost Summary (Internal)
For internal review, you can also see:
| Metric | Description |
|---|---|
| Total Cost | What the project costs you |
| Total Price | What customer pays |
| Gross Profit | Price - Cost |
| Margin | Profit 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:
| Margin | Interpretation |
|---|---|
| < 15% | Low - review pricing |
| 15-25% | Moderate |
| 25-35% | Healthy |
| > 35% | High |
Target margins vary significantly by industry, region, and company strategy.
Pricing Best Practices
- Set defaults thoughtfully - Choose an estimate-level markup that works for most of your work
- Use area markup for variations - Different scopes warrant different margins
- Override sparingly - Entry-level markup should be the exception
- Include contingency - Protect yourself from unknowns
- Review before presenting - Check overall margin before sending to customer
- Be consistent - Use similar markup for similar work across estimates
Next Steps
- Selections - How selections affect pricing
- Finalizing Estimates - Review and present your estimate
- Estimate Contracts - Turn estimates into contracts