Builders markup%

A builder doesnt need office and staff - if he does have that , it means he is doing volume building, and scale of economy in how he charges should be kicking in and actually becoming cheaper . He still shouldnt be fleecing people by making false commissions on other peoples work for which he actually does virtually no work.

Its actually funny how you think it has to be a %. You see, payment for work is based on an hourly market rate for a given skillset , ie a fixed quantity, not a %. Do you think people who work for a company get paid a wage based as a % of the profits? No, they are workers, not shareholders.

The $100 I made up was based on an hours work, which I would estimate is all the effort most tradies would put in when engaging a subby.

As for the warranty red herring, lets face it, if the subby stuffs up, he will be back in there re doing his work, else sabotage himself by getting no more referrals and a bad name.- pointless if you are trying to work in an industry. Risk? Hardly, not in the main, and you know it..

No idea why you are bringing a lounge suite into the discussion, totally irrelevant.

Just because someone has an office and admin staff does not mean then are a volume builder. There are costs involved in running a business etc which you correctly point out can be incorporated into an hourly rate however if a building company is sub contracting any scheduling and follow-up is done by the company. Agreed that tradies will come back and rectify things but it all has to be coordinated.

I did not say that it has to be a fixed % but usually one would work on a margin to cover other costs to arrive at a fully loaded cost. I know my hourly charge out rate is not what goes into my pocket but it is sufficient to cover down time, holiday and medical cover and ongoing fixed costs of running a business. Apologies for using margin as a catch all term to cover the add-on costs.

The reason I bring up the lounge suite is that everyday we pay % add-on or margin on items when ever we purchase as every step adds-on to arrive at the final price paid. In many ways this is no different to building, unless items are on the floor they are indent in just like building a house.

If it was virtually no work and no office staff or support was needed there would be many more owner builders. I agree that you need to keep an sharp eye to be able to call out when gouging is occurring. Sometimes it is unavoidable.....

The OP enquired about residential building work, so thats all Im confining my comments to.

I know standalone house builders who build houses by themselves. They do not have support staff or an office other than their study at home to do the little bit of paperwork required. A moderately smart tradie learns to do his own BAS, and use an accounting package. Even a spreadsheet will do the trick and make it simple for an accountant to process. There really is not that much involved in running a building business, or any trade, - unless you start handling multiple projects simultaneously

My point is in most cases, subbing out does not go beyond a phone call, a quick discussion onsite, and a bit of tax paperwork. I dont have a problem with a tradie charging for that actual time.

But let me give you another slant on the situation. Lets say its time for some maintenance on your work vehicle and it goes into the shop. The mechanic takes a quick look, and guesses what new parts will be required. He doesnt make any effort to get those parts at a good price for you, but simply rings up the supplier he deals with (Repco, Bursons, etc) and buys them at whatever they supply. This is a nice little rort for the suppliers, because they put huge markups on those parts , Ive seen them do it to the tune of 300%. The mechanic doesnt care, because he just passes on the price to the customer, but not before putting his own markup of 10%-20% on them. Total effort on his part - a 30 second phone call. And yet according to your logic, he is fully justified in potentially making a few hundred dollars on his own markup? Lol. So if it is god enough for builders, then really it is good enough for anyone, especially your mechanic.

Just remember then, gouging is endemic in every little corner of Australia's capitalist economy. What was it Gordon Gecko said?

I think you are jumping to conclusions. I do not think needless add on is justified. I infact went through every variation with a fine tooth comb and called the builder out where I thought I was being taken advantage of.

I don't doubt that many sole operators can learn book keeping and paperwork to run their business. However as business grows one has to decide where they spend their time and may choose to add staff.

I actually agree with your points but also think as one expands running costs increase.

Just need to cross check prices and question where add-on is too much. Of course there are the situations where builders gouge. Flooring, oainting. Driveway, aircon.

Ive said all I need to say here and dont want to get too off topic, but just on these two points

• bookkeeping in a basic sense of recording your ins & outs can be as simple as indexing your receipts and expenses in a single spreadsheet, or buying a small accounting package and spending a few mins per day on the PC filling data. Both are excellent for presenting organised data for your accountant to use. Also as an analytical tool for the operator to see how his profit is going. Nothing really hard about it.
• one doesnt expand one's business to make less - you do it to make more. Sure expenses increase, but so do profits.

Builder margin is confidential to the builder, although a margin will be disclosed in variations, for PC and PS items. Do not assume that the margin on those items is the same as the margin on the rest of job.
As a client,if you decide on a variation then you should expect the variation quote to include a 20 to 25% margin, plus an upfront fee for the variation usually $250. Lets say you decided to change the a wall and its details, then within the overall cost you will be charged for quoting time costs as well.
I hear someone say, $250 fee for just making or asking for a variation? Why, that's not fair, is it? The answer is yes it is, as the builder has to interrupt his whole schedule which includes all work outside your job, contract legal docs like variation, extension of time, contract need to be signed/updated, altered and filed. Home warranty insurance, builders insurance requires updating. This all adds up to more than you will ever know. The re scheduling of trades can be costly, eg lets say that your variation delayed works by 2 days, which put my bricklayer out of schedule where he would then lose 2 days waiting on variation works to be completed. If he has another job he can start, he has the right to do it so he is not losing money. If that job takes 2 weeks, then your job will be delayed 2 weeks. Your variation has now held up the bricklayer and all other trades and further delays can snowball. That 2 week stoppage on your job will cost the builder thousands of lost dollars, because you have just taken 2 weeks out of his financial year to earn income. For some of you here that may be hard to understand, read it a few time, let it sink in and think about it, and it should then make sense. if it doesn't then your IQ is too low for me to explain further.
But that's not all folks. LIABILITY. The builder is totally responsible for everyone and every conceivable thing that can go wrong on a builders site. WHS laws hold the builder as responsible for all safety and accidents and the builder is guilty until he proves himself innocent. Court and money costs over years, along with stress normally destroy the builder before the court case ends, and even when the builder wins there is no compensation for him. I myself know two builders where this happened. Lawyers will tell any builder that the law is totally stacked against them. An then you have all the trades that you have to guide through the project. What if one of your subcontractors go broke halfway through the project??
Being a builder is one of the most difficult occupations.
You tell me of any occupation whereby; you have to guarantee your work for 7 years which includes all your trades work, lose everything because of WHS laws, your client turns around and says he is not paying or he runs out of money, your client is foreclosed by his bank and he doesn't tell you and you have $100,000s owing to suppliers. The law can now also go back further than 6 year and hold you responsible. I could go on and on.
One thing to note is subbies are said to be accountable now but that's a lot of bs. If my subby did some bad work and its discovered later the QBCC makes me the builder rectify it, then its up to me to chase the repairs or costs up with the subby, court costs alone stop me and no subby will turn around and pay.
You cant even sue a doctor or specialist these days as the AMA lobbied and had the laws changed in their favour. What about handing over tens or hundreds of thousands for a brand new car, and your dealer rejects your warranty claim.....there is no law that fines the dealer or takes his licence away, like our QBCC does. Lets say you see your financial adviser and invest and lose because that dipshit told you to invest in a forest that burnt down......no law their to sue his arse.
So how much do you think a builder should be charging with all this risk? How much do you think he should be making per year as gross salary alone? Lets say a plumber fixing leaking taps and hot water systems is grossing $120,000 per year salary, what would you think a builder should earn? How much net profit do you think a builders company should make?