Your Guide to Kitchen Cabinet Refacing
Markup on kitchen cabinets: what is reasonable?by Rob Sabo
Face Your Kitchen Columnist
Controlling cost is important when it comes to completing a kitchen renovation or kitchen cabinet resurfacing project on a set budget. One way to ensure that you are not overpaying for a kitchen remodel is to avoid contractor markup on materials.
Contractors make money in one of two ways: labor and markups.
Labor expenses can't be helped--it is part of the reason you hired a contractor in the first place. But there are ways you can avoid or control your contractor's markup on cabinet materials.
Why do contractors markup materials?
Keep in mind that your contractor markup on materials is standard practice in the construction industry and the primary means they have for making a profit. In many cases, your contractor might be getting a price break of 10 to 20 percent or more for showing loyalty to a particular salesperson or brand, a break that is not passed on to retail customers. Charging you full retail price on items they have gotten at a discount is their reward for purchasing in volume.
If contractors relied on labor alone for their profits, they might not stay in business very long. They have to pay for overhead expenses: an office (and, in some cases, office personnel), insurance, bonding and licensing, and tools and other equipment. Small- to medium-sized contractors carry an overhead of 25 to 30 percent, while larger contractors have added overhead of 30 to 35 percent, says Hanley Wood Remodeling magazine. This means that small- and mid-sized contractors target a markup goal of 50 percent to make a 33 percent profit, while larger construction companies eye a markup of 67 percent for a 40 percent gross profit margin. These are not unreasonable expectations; however, when pricing your project, there might be some room to negotiate a better deal.
Average markup for kitchen cabinets
Markups vary--especially in today's tough construction environment. A study of 500 contractors in early 2011 finds that 44 percent of contractors have reduced profit expectations in hopes of winning more work. A markup of 15 to 20 percent is not unreasonable in today's market, according to Remodeling magazine. Contractors blogging about the topic have suggested average markups of 27.5 percent.
The key to an affordable kitchen cabinet remodeling job might be avoiding high markups. You can use the Internet as a research tool for product pricing, and have a candid conversation with your contractor about costs. Or you can compare the best prices your contractor can give you to affordable cabinet refacing and decide which route will get you the kitchen you want at a price you can handle.