GC margins?

Question

We bid a renovations project to 3 GCs.  I have only received 1 response so far. But the GC accidentally sent me a breakdown of his subs cost associated with the project with his mark up 45%  plus a 5% kick back fee to the interior designers that referred him.  So I am looking at a 50% mark up.  I know the GC provides a service and deserves to be compensated for his services, so long as he earns it.  But I am curious to see what is the typical GC mark up.  My understanding is that most GCs get paid  on a cost plus method similar to this one but I am shocked by the margin of the mark up. The other 2 GCs are independent of the interior designers.

Another issue for another day is the kick back fee to the designers. I paid them a reasonable flat fee for there services.  The fact they are pushing their contractors makes me skeptical. I felt like they were pushy, but I assumed they wanted to work with people they know.  But I now know the real reason.  They fee they would have made on the kick back would have doubled their income.

What I really want to know is what is a typical GC fee.  The renovation project should cost about 100k.

Aaron McGinnis · Answer

There is no 'rule of thumb' or secret profit margin understanding that happens between contractors behind closed doors in smoke filled rooms.

Many, many contractors go out of business because they can't price high enough to sustain a business.

The important thing to remember is that, in most cases, the market dictates both cost and price... it's not that different from selling a house - you can only sell for what the market will bear.

Charlie John · Answer

A Reno budget of 100k seems like a pretty big project. If you were the GC in charge on something like that then you would want to get paid for it too.

A little shady about the kick back thing but maybe just ask and their response will tell you if it was truly shady or not

Ravi P. · Answer

Brandon, You are right.  Once I have the other 2 bids I can get a better idea of what the market rate should be. I guess I was just blind sided by the designer kick back because I felt they did feel they would be looking out for me.   I will be addressing this with the GC and interior designers.

Ravi P. · Answer

I reposted this in Contractors section.

But isn't there a typical fee? or rule of thumb number?  Or is it get what you can?

James Ritter · Answer

The contractor wants to make as much money as possible. That does not surprise me.

I think you may have had a stroke of luck. You now know how much margin there is in the deal for the GC. Time to negotiate!!!