POL REJECTED: Changed Xact Pricing

-???????Adjuster rejects Proof of Loss and repair estimate on the grounds that “you did not state the source of your prices.”

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The Xactware pricelist was factored by 35%.?Below is my reply:

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Contractors utilize Equipment, Labor and Materials Markup to make money.

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Xactimate is a COST estimating and labor BUDGETING tool. And it is very accurate and detailed in its reporting.

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A Contractor who uses Xactimate to establish the costs and agreed scope of work, still needs to apply a Markup to cover their Overhead and make a Profit (O&P).?In order to determine their appropriate Markup Factor, the Contractor first needs to understand their operating expenses (OVERHEAD) and their desired PROFIT goal.?These two numbers are expressed as a percentage of Gross Revenues.

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In my experience in this market and, given recent events affecting the overall market, I judged local Restoration contractors' median overhead to be 22.5%.?Most owners interviewed would concede that a desired 12.5% NET Profit is reasonable to expect.?There are many risk factors that make it impossible to compare "normal" contractors and builders with Restoration contractors.?#1 is a high risk of not being paid on time or in full.?The additional politics and staffing overhead involved when dealing with insurance carriers are additional costs that most folks outside this industry don't understand.

Combine Overhead and Profit Margin and you get an overall Profit Margin of 35%.

See the attached Margin/Markup Calculator chart.

If I know the desired Margin is 35%, I use the attached chart to calculate the necessary?Markup: 55%.

Given my experience with adjusters and consultants in this industry, I know that if a contractor was to attempt a 55% Markup using Xactimate, the file would hit the brakes in a hurry.?They wouldn't know what to do with it.?

So instead, I show the "customary 10&10".?Adjusters are simply used to seeing it, and no one has said anything to the contrary.

Most believe a 10% Overhead and 10% Profit markup is a law or a rule somewhere.?It ain't.

Regardless of which side of the fence you lie on, everyone can agree that contractors need more than a 16% margin in order to stay in business.?It's just that most don't understand the math and carry the false belief that Markup and Margin are the same thing.

If we know we need a 55% Markup to survive and thrive, and we're "showing" a 20% markup (10&10) on our Xactimate estimate, then we still need to figure out the [55-20] other 35% markup.?That is why we mark up the "standard" Xactware pricelist?(OREU) by 35%.??

I am more than happy to share the Xactware pricing file "MCKENZIERECOVERY" with your adjuster.?I don’t believe they are allowed to use Xactimate anymore though.

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