Before you begin
Bring a drawing, current material prices and a defined shop rate. Use the existing estimates lesson if markup and margin are unfamiliar.
What this lesson covers
- Price material, time and other job costs without duplication.
- Use margin and markup with the correct denominator.
- Write a quote that separates included work, options and changes.
Recommended preparation
01 / Key concepts
How it works
A useful quote gives the customer a decision: this item, made this way, at this price, with these next steps. The internal estimate explains whether the shop can deliver it profitably. Keep the two connected. A vague scope can undo careful arithmetic when revisions, hardware or installation were never agreed.
- Cost base
- The specified costs used to calculate the difference between cost and selling price.
- Change request
- A proposed alteration to accepted scope that needs its own price and timing decision.
1. Measure and cost the deliverable
For a custom shelf, record final dimensions, material grade, finish, hardware, quantity and delivery method. Build the cut list with waste and price purchased quantities. Include design, setup, making, finishing, packing and communication time. Add delivery or installation only when you can define and perform that work. Recover overhead once.
2. Choose the pricing method
For a target margin on a defined cost base, price equals cost divided by one minus the margin. A markup multiplies cost by one plus the markup. They produce different prices at the same percentage. This is an internal planning margin; it is not automatically your financial-statement gross or net margin. Validate the offer with customers and comparable scope, not arithmetic alone.
Source: U.S. Small Business Administration — Plan your business
3. Present understandable options
Write a base option and one meaningful alternative, such as a different material or quantity. Explain the actual difference in the deliverable. Do not reduce the price while silently keeping all the extra work. Show price validity, lead-time assumptions, payment stages and how approval happens. Obtain location-appropriate advice for contractual terms.
4. Approve changes before doing them
When the customer changes a dimension or finish, record the added materials, hours and effect on delivery. Present the change for agreement and keep it with the original job. At closure, compare actual costs against the original scope and approved changes separately so the next estimate learns the right lesson.
Key points
- Price material, time and other job costs without duplication.
- Use margin and markup with the correct denominator.
- Write a quote that separates included work, options and changes.
02 / Worked example
A shelf quote at a 25% planning margin
Illustrative figures: $180 materials, $240 loaded labor and $30 delivery cost. Labor already includes the chosen overhead. Selling fees, tax and other unlisted costs are excluded and would need separate treatment.
| Line | Calculation | Result |
|---|---|---|
| Defined cost base | $180 + $240 + $30 | $450 |
| 25% target margin | $450 ÷ 0.75 | $600 selling price |
| 25% markup instead | $450 × 1.25 | $562.50; 20% margin |
| Extra $60 cost at same margin | $60 ÷ 0.75 | $80 added price, subject to approval |
03 / Business exercise
Apply the method
Use your own shop information or the illustrative scenario. Prepare drafts and check assumptions before making purchases, publishing posts or contacting customers.
- Write a measured scope and identify anything still unknown.
- Build a complete internal cost estimate using actual supplier prices.
- Calculate both markup and margin to check the distinction.
- Prepare a customer quote and a fictional change request, each with price and timing.
Common mistakes
- Quoting from material cost alone.
- Calling markup a margin.
- Doing customer changes first and discussing the price later.
Take it further
Compare two completed jobs with the same quoted size and explain differences in actual time, customer changes and material waste.
Business action checklist
Record your evidence and next decision as you work through each action.
- Write a measured scope and identify anything still unknown.
- Build a complete internal cost estimate using actual supplier prices.
- Calculate both markup and margin to check the distinction.
- Prepare a customer quote and a fictional change request, each with price and timing.
04 / Review questions
Review the key decisions
Consider each question, then compare your answer with the explanation. Return to the worked example whenever you need it.
1. What is the margin on $450 cost and $600 price?
View hint
Use selling price as the denominator.
View explanation
($600 − $450) ÷ $600 = 25% on the stated cost base.
2. The customer asks for a larger shelf after approval. What should happen first?
View hint
The change affects more than the drawing.
View explanation
Confirm revised scope, cost, price and lead time and obtain agreement before proceeding with the changed work.
05 / Project notes
Notes for your next project
Check off the topics you have reviewed and record the evidence, assumptions and next actions for your business. This is your personal learning record.
Record: Cost base, included overhead, price method, customer scope, exclusions, payment assumptions and change record.
No notes recorded. Use this space for your observations.
Loading your notes… 0/5,000 characters.
Check each topic above to mark the lesson as reviewed. You can browse any lesson at any time.
Put the lesson to work
Use the relevant tools below with your own figures. Dashboard destinations require sign-in and may depend on your plan. External social accounts and publishing are managed in their own platforms.
Sources & further study
WoodWorkCalc writes the exercises and illustrative examples. Named historical cases are attributed separately. These sources support the principles identified in the lesson; their publishers do not endorse WoodWorkCalc. Guidance and platform features can change. Sources retain their own copyright and licensing terms.
- U.S. Small Business Administration — Plan your business (opens new tab)
Market research, startup-cost planning and the fixed-cost/contribution break-even formula. WoodWorkCalc supplies the original shop scenarios and calculations.
U.S. Small Business Administration. Plan your business. Accessed September 14, 2026.