South Carolina Estimating & Bidding
A sound bid combines the right profit math, correct overhead allocation, and accurate unit pricing. This chapter covers margin, overhead, and the unit-cost method.
Markup versus margin
Margin is profit as a share of the selling price. For a target margin, divide cost by (1 minus the margin): a $90,000 job at a 25% margin is bid at $90,000 / 0.75 = $120,000. Multiplying cost by 1.25 gives $112,500, which is only a 20% margin - the classic markup-versus-margin trap.
Allocating overhead
Overhead must be spread onto each job before profit is added. If overhead runs 15% of direct cost, a job with $40,000 of direct cost carries $6,000 of overhead, for a total cost of $46,000 before profit. Failing to allocate overhead is a common way contractors underprice work.
The unit-cost method
The unit-cost method multiplies a known cost per unit by the measured quantity from the takeoff. Framing priced at $6.50 per square foot on a 2,400-square-foot house is $6.50 x 2,400 = $15,600. Reliable unit prices, drawn from historical cost records, make the estimate defensible.