Residential Replacement Pricing - Divisor, Multiplier, & Markup Methods
Residential add-on or change-out is likely the contractor’s most profitable segment. Pricing the installation and sale to consumers is often considered the easiest and the most challenging at the same time based on applications, and areas such as duct modifications or exceptions. We have traditionally used cookbook pricing, based on some method of markup or divisor to create 1-day prices. In this area we explore the methods used in the trades called divisor, multiplier and markup. They are all interrelated and focus on creating a price based on a cost of goods sold summation, then either applying a division process or a multiplication process. The method is widely used, popular, and simple. It has strengths and weaknesses. The descriptions and tools inside this section define and provide solutions, we do not however recommend this be the final method you use. It has many weaknesses. Use the materials to lean and grow.