**(If you don't consider this, you probably are!)**

So, you're putting together a bid for a customer on a series of new windows. Once you calculate the cost of materials and labor and it adds up to $8,000 before you calculate profit (we are keeping with easy round numbers for this example.) You want your profit margin to be 20% on this job.

**Using your calculator you add (+) 20%, right?** **(WRONG!)**

Too many contractors short themselves on their bids and do not even realize it. Using a mutation of what they believe is the **cost plus** method (this is not the actual cost plus method, as that is a way of calculating labor expense), they take the overall job cost and add a percentage of that for-profit say 20% in this case.

**$8,000 (job cost) x 1.2 (the supposed profit) = $9,600 ****(WRONG!)**

You want 20% of the overall bid to be profit in your pocket right? Well at this rate you have just SHORTED YOURSELF $400.00 on a $10,000 job. That’s a new power tool at a minimum and could even have been a new deer rifle in your gun safe. So how are you supposed to calculate 20% of your bid as profit?

**It’s so simple your gonna laugh, to keep yourself from tearing up.**

**$8,000 / .8 = $10,000 ****(CORRECT!)**

You have taken the job cost, $8,000 and made this 80% of your total bid by dividing the job cost by.8. By dividing your total job cost by .8, you have just made that $8,000 into 80% of your total bid, and you are left with a profit margin that is 20% of your total bid. **PFM?** (PURE FRIGGEN MAGIC), **Nah, just math!**

*"It's not that big of a deal,”* you say…. Well, let’s try it on a little bigger project.

Let's say you are bidding a whole house. Total cost with labor included is $258,000. Your old method 258,000 x 1.2 = $309,600 gives you 51,600 in total profit (if all goes well).

**Now let's try it using the correct math.**

**258,000 / .8 = $322,500 giving you $64,500.00 in profit. Thats $12,900 more than your old method.**

So if you want a 25% profit margin, just divide by .75. Or, maybe you're looking to be a really nice guy and only take a 15% profit margin, then divide by .85.

Whatever you want your profit margin to be, just take 1, minus the margin .2 for 20%.18 for 18% and so on. And what you are left with is the divisor. Be it .8 for 20% or .82 for 18%.

**It’s that easy!**

No need for applause, but if you found this interesting, check out the training courses that are available online at **licensetobuild.com.** We will help you win more jobs, make more money, and sleep better at night, period.