/**
* Pricing & Markup Constants
* Industry-standard markup percentages, profit margins, and pricing strategies
* Based on construction industry best practices and Connecticut market conditions
*/
import type { JobType } from '../types/calculations.types.js';
// ============================================================================
// Standard Markup Percentages
// ============================================================================
/**
* Standard markup percentages by job type
* Markup = (Price - Cost) / Cost
*
* Example: If cost is $10,000 and markup is 40%, price = $14,000
*/
export const STANDARD_MARKUP_PERCENTAGES: Record<JobType, {
minimum: number;
standard: number;
premium: number;
notes: string;
}> = {
roofing: {
minimum: 0.30, // 30% minimum for low-complexity jobs
standard: 0.40, // 40% standard markup
premium: 0.55, // 55% for complex or high-end jobs
notes: 'Roofing has high liability; justify premium with warranty and quality'
},
siding: {
minimum: 0.35,
standard: 0.45,
premium: 0.60,
notes: 'Siding requires skilled labor and has aesthetic component'
},
windows: {
minimum: 0.35,
standard: 0.45,
premium: 0.55,
notes: 'Windows are high-value items; customers expect quality installation'
},
doors: {
minimum: 0.35,
standard: 0.45,
premium: 0.55,
notes: 'Entry doors are security-critical; justify premium pricing'
},
gutters: {
minimum: 0.40,
standard: 0.50,
premium: 0.65,
notes: 'Gutters have lower material cost; higher markup percentage needed'
},
general_construction: {
minimum: 0.30,
standard: 0.40,
premium: 0.50,
notes: 'Varies widely by scope; adjust based on complexity'
}
};
// ============================================================================
// Target Profit Margins
// ============================================================================
/**
* Target profit margins (Gross Margin)
* Margin = (Price - Cost) / Price
*
* Example: If price is $14,000 and cost is $10,000, margin = 28.57%
* Note: 40% markup = 28.57% margin, 50% markup = 33.33% margin
*/
export const TARGET_PROFIT_MARGINS: Record<JobType, {
minimum_margin: number;
target_margin: number;
excellent_margin: number;
break_even_margin: number;
}> = {
roofing: {
minimum_margin: 0.23, // 23% = 30% markup
target_margin: 0.29, // 29% = 40% markup
excellent_margin: 0.35, // 35% = 55% markup
break_even_margin: 0.15 // 15% = 17.6% markup (covers overhead only)
},
siding: {
minimum_margin: 0.26, // 26% = 35% markup
target_margin: 0.31, // 31% = 45% markup
excellent_margin: 0.38, // 38% = 60% markup
break_even_margin: 0.15
},
windows: {
minimum_margin: 0.26,
target_margin: 0.31,
excellent_margin: 0.35,
break_even_margin: 0.15
},
doors: {
minimum_margin: 0.26,
target_margin: 0.31,
excellent_margin: 0.35,
break_even_margin: 0.15
},
gutters: {
minimum_margin: 0.29, // 29% = 40% markup
target_margin: 0.33, // 33% = 50% markup
excellent_margin: 0.39, // 39% = 65% markup
break_even_margin: 0.15
},
general_construction: {
minimum_margin: 0.23,
target_margin: 0.29,
excellent_margin: 0.33,
break_even_margin: 0.15
}
};
// ============================================================================
// Overhead Allocation
// ============================================================================
/**
* Overhead costs as percentage of revenue
* Overhead includes: office rent, utilities, insurance, admin salaries, marketing, etc.
*/
export const OVERHEAD_ALLOCATION = {
small_company: {
percentage: 0.15, // 15% of revenue
description: '1-3 crew company',
typical_annual_overhead: 75000,
notes: 'Lower overhead but less capacity'
},
medium_company: {
percentage: 0.18, // 18% of revenue
description: '4-8 crew company',
typical_annual_overhead: 180000,
notes: 'Optimal efficiency with office support'
},
large_company: {
percentage: 0.22, // 22% of revenue
description: '9+ crew company',
typical_annual_overhead: 400000,
notes: 'Higher overhead but greater market presence'
}
};
/**
* Overhead cost categories (typical breakdown)
*/
export const OVERHEAD_CATEGORIES = {
office_rent: 0.25, // 25% of overhead
utilities_phone: 0.08, // 8% of overhead
insurance: 0.20, // 20% of overhead (liability, workers comp, vehicle)
admin_salaries: 0.30, // 30% of overhead (office manager, bookkeeper)
marketing_advertising: 0.10, // 10% of overhead
vehicles_maintenance: 0.07 // 7% of overhead (office vehicles, maintenance)
};
// ============================================================================
// Profit Targets
// ============================================================================
/**
* Net profit targets (after overhead)
* Net Profit = Gross Profit - Overhead
*/
export const NET_PROFIT_TARGETS = {
minimum: 0.08, // 8% net profit minimum (survival mode)
healthy: 0.12, // 12% net profit (healthy business)
excellent: 0.18, // 18% net profit (excellent performance)
target: 0.15 // 15% net profit target (balanced)
};
/**
* Return on investment targets
*/
export const ROI_TARGETS = {
minimum_acceptable: 0.15, // 15% ROI
target: 0.25, // 25% ROI
excellent: 0.40 // 40% ROI
};
// ============================================================================
// Pricing Strategies
// ============================================================================
/**
* Pricing strategy modifiers based on market conditions
*/
export const PRICING_STRATEGY_MODIFIERS = {
emergency_work: {
multiplier: 1.5, // 50% premium
description: 'Emergency or urgent repairs',
justification: 'After-hours work, expedited scheduling, immediate response'
},
off_season: {
multiplier: 0.90, // 10% discount
description: 'Winter or slow season work',
justification: 'Fill schedule gaps, maintain crew employment'
},
peak_season: {
multiplier: 1.10, // 10% premium
description: 'Peak season (Spring/Summer)',
justification: 'High demand, limited availability'
},
repeat_customer: {
multiplier: 0.95, // 5% loyalty discount
description: 'Previous customer returning',
justification: 'Relationship building, reduced marketing cost'
},
referral: {
multiplier: 0.95, // 5% referral discount
description: 'Customer from referral',
justification: 'Lower acquisition cost'
},
large_project: {
multiplier: 0.92, // 8% volume discount
description: 'Large project (> $50k)',
justification: 'Economy of scale, efficient resource use'
},
premium_materials: {
multiplier: 1.05, // 5% premium
description: 'High-end or designer materials',
justification: 'Specialized knowledge, careful installation'
},
warranty_extension: {
additional_percentage: 0.03, // 3% for extended warranty
description: 'Extended warranty beyond standard',
justification: 'Additional risk coverage and service commitment'
}
};
// ============================================================================
// Competitive Positioning
// ============================================================================
/**
* Pricing tiers for competitive positioning
*/
export const COMPETITIVE_PRICING_TIERS = {
budget: {
markup_multiplier: 0.85, // 15% lower than standard
description: 'Budget option',
typical_customer: 'Price-sensitive, basic needs',
limitations: 'Standard materials, basic warranty, limited customization',
target_margin_reduction: 0.05 // Accept 5% lower margin
},
standard: {
markup_multiplier: 1.0,
description: 'Standard pricing',
typical_customer: 'Quality-conscious, fair price expectations',
limitations: 'Standard warranty, good materials, professional service',
target_margin_reduction: 0.0
},
premium: {
markup_multiplier: 1.20, // 20% higher than standard
description: 'Premium option',
typical_customer: 'Quality-first, less price-sensitive',
limitations: 'Extended warranty, premium materials, white-glove service',
target_margin_increase: 0.05 // Target 5% higher margin
}
};
// ============================================================================
// Payment Terms Adjustments
// ============================================================================
/**
* Pricing adjustments based on payment terms
*/
export const PAYMENT_TERM_ADJUSTMENTS = {
cash_payment: {
discount: 0.03, // 3% cash discount
description: 'Full payment in cash',
notes: 'Eliminates processing fees, immediate cash flow'
},
deposit_50_percent: {
discount: 0.0,
description: 'Standard 50% deposit, 50% on completion',
notes: 'Standard industry practice'
},
net_30: {
premium: 0.02, // 2% premium
description: 'Net 30 payment terms',
notes: 'Covers cost of delayed payment'
},
financing: {
premium: 0.05, // 5% premium
description: 'Contractor-arranged financing',
notes: 'Covers financing costs and risk'
}
};
// ============================================================================
// Risk-Based Pricing Adjustments
// ============================================================================
/**
* Pricing adjustments based on project risk factors
*/
export const RISK_BASED_ADJUSTMENTS = {
high_complexity: {
adjustment: 0.15, // 15% increase
description: 'Highly complex project with significant challenges',
risk_factors: ['Unusual design', 'Multiple obstacles', 'Tight schedule', 'Uncertain conditions']
},
difficult_customer: {
adjustment: 0.10, // 10% increase
description: 'Customer with reputation for being difficult',
risk_factors: ['History of disputes', 'Unrealistic expectations', 'Poor communication']
},
weather_dependent: {
adjustment: 0.08, // 8% increase
description: 'Project highly weather-dependent with tight timeline',
risk_factors: ['Winter work', 'Weather delays likely', 'Must complete by deadline']
},
permit_complexity: {
adjustment: 0.05, // 5% increase
description: 'Complex permitting process expected',
risk_factors: ['Historic district', 'Multiple agencies', 'Uncertain approval']
},
subcontractor_dependent: {
adjustment: 0.07, // 7% increase
description: 'Heavy reliance on subcontractors',
risk_factors: ['Specialized trades required', 'Coordination challenges', 'Schedule dependencies']
}
};
// ============================================================================
// Minimum Job Pricing
// ============================================================================
/**
* Minimum job pricing to ensure profitability
*/
export const MINIMUM_JOB_PRICING: Record<JobType, {
minimum_total_price: number;
minimum_margin_dollars: number;
notes: string;
}> = {
roofing: {
minimum_total_price: 3500,
minimum_margin_dollars: 800,
notes: 'Minimum to cover overhead and mobilization'
},
siding: {
minimum_total_price: 4000,
minimum_margin_dollars: 1000,
notes: 'Siding projects require significant setup'
},
windows: {
minimum_total_price: 800, // Per window
minimum_margin_dollars: 250,
notes: 'Per window minimum; batch discounts apply for multiple'
},
doors: {
minimum_total_price: 1200,
minimum_margin_dollars: 350,
notes: 'Per door minimum'
},
gutters: {
minimum_total_price: 1500,
minimum_margin_dollars: 500,
notes: 'Minimum for full gutter system'
},
general_construction: {
minimum_total_price: 2000,
minimum_margin_dollars: 500,
notes: 'Varies by scope'
}
};
// ============================================================================
// Contingency & Buffer
// ============================================================================
/**
* Contingency percentages for unexpected costs
*/
export const CONTINGENCY_PERCENTAGES = {
low_risk: 0.05, // 5% for straightforward projects
moderate_risk: 0.10, // 10% for standard projects
high_risk: 0.15, // 15% for complex projects
very_high_risk: 0.25 // 25% for highly uncertain projects
};
/**
* Time buffer for scheduling (to protect margin)
*/
export const TIME_BUFFERS = {
simple_job: 0.10, // 10% time buffer
moderate_job: 0.20, // 20% time buffer
complex_job: 0.30 // 30% time buffer
};
// ============================================================================
// Financing & Payment Processing Costs
// ============================================================================
/**
* Costs associated with payment processing
*/
export const PAYMENT_PROCESSING_COSTS = {
credit_card: 0.025, // 2.5% processing fee
ach_bank_transfer: 0.005, // 0.5% processing fee
check: 0.0, // No processing fee
cash: 0.0 // No processing fee
};
// ============================================================================
// Helper Functions
// ============================================================================
/**
* Convert markup percentage to margin percentage
* Formula: Margin = Markup / (1 + Markup)
*/
export function markupToMargin(markup: number): number {
return markup / (1 + markup);
}
/**
* Convert margin percentage to markup percentage
* Formula: Markup = Margin / (1 - Margin)
*/
export function marginToMarkup(margin: number): number {
return margin / (1 - margin);
}
/**
* Calculate price from cost and markup
*/
export function calculatePriceFromMarkup(cost: number, markup: number): number {
return cost * (1 + markup);
}
/**
* Calculate price from cost and target margin
*/
export function calculatePriceFromMargin(cost: number, margin: number): number {
return cost / (1 - margin);
}
/**
* Calculate gross profit
*/
export function calculateGrossProfit(price: number, cost: number): number {
return price - cost;
}
/**
* Calculate gross margin percentage
*/
export function calculateGrossMargin(price: number, cost: number): number {
if (price === 0) return 0;
return (price - cost) / price;
}
/**
* Calculate net profit after overhead
*/
export function calculateNetProfit(grossProfit: number, revenue: number, overheadPercentage: number): number {
const overhead = revenue * overheadPercentage;
return grossProfit - overhead;
}
/**
* Calculate break-even price
*/
export function calculateBreakEvenPrice(cost: number, overheadPercentage: number): number {
// Break-even = Cost / (1 - OverheadPercentage)
return cost / (1 - overheadPercentage);
}
/**
* Recommend markup based on job type and complexity
*/
export function recommendMarkup(
jobType: JobType,
complexity: 'simple' | 'moderate' | 'complex',
riskFactors: string[] = []
): {
base_markup: number;
risk_adjustment: number;
final_markup: number;
explanation: string;
} {
const baseMarkups = STANDARD_MARKUP_PERCENTAGES[jobType];
// Select base markup by complexity
let baseMarkup: number;
if (complexity === 'simple') {
baseMarkup = baseMarkups.minimum;
} else if (complexity === 'complex') {
baseMarkup = baseMarkups.premium;
} else {
baseMarkup = baseMarkups.standard;
}
// Calculate risk adjustment
let riskAdjustment = 0;
const riskExplanations: string[] = [];
for (const riskFactor of riskFactors) {
const riskKey = riskFactor.toLowerCase().replace(/\s+/g, '_') as keyof typeof RISK_BASED_ADJUSTMENTS;
if (riskKey in RISK_BASED_ADJUSTMENTS) {
riskAdjustment += RISK_BASED_ADJUSTMENTS[riskKey].adjustment;
riskExplanations.push(RISK_BASED_ADJUSTMENTS[riskKey].description);
}
}
const finalMarkup = baseMarkup + riskAdjustment;
return {
base_markup: baseMarkup,
risk_adjustment: riskAdjustment,
final_markup: finalMarkup,
explanation: riskExplanations.length > 0
? `Base ${(baseMarkup * 100).toFixed(0)}% + ${(riskAdjustment * 100).toFixed(0)}% risk = ${(finalMarkup * 100).toFixed(0)}%`
: `Standard ${(baseMarkup * 100).toFixed(0)}% markup for ${complexity} ${jobType}`
};
}
/**
* Calculate recommended price with all factors
*/
export function calculateRecommendedPrice(
totalCost: number,
jobType: JobType,
options: {
complexity?: 'simple' | 'moderate' | 'complex';
riskFactors?: string[];
paymentTerms?: keyof typeof PAYMENT_TERM_ADJUSTMENTS;
pricingTier?: keyof typeof COMPETITIVE_PRICING_TIERS;
includeContingency?: boolean;
} = {}
): {
base_price: number;
adjustments: { reason: string; amount: number }[];
final_price: number;
margin_percentage: number;
} {
const complexity = options.complexity || 'moderate';
const riskFactors = options.riskFactors || [];
// Get recommended markup
const markupInfo = recommendMarkup(jobType, complexity, riskFactors);
let basePrice = calculatePriceFromMarkup(totalCost, markupInfo.final_markup);
const adjustments: { reason: string; amount: number }[] = [];
// Apply pricing tier adjustment
if (options.pricingTier) {
const tier = COMPETITIVE_PRICING_TIERS[options.pricingTier];
const adjustment = basePrice * (tier.markup_multiplier - 1);
adjustments.push({
reason: `${options.pricingTier} tier (${tier.description})`,
amount: adjustment
});
basePrice += adjustment;
}
// Apply payment terms adjustment
if (options.paymentTerms && options.paymentTerms in PAYMENT_TERM_ADJUSTMENTS) {
const terms = PAYMENT_TERM_ADJUSTMENTS[options.paymentTerms];
const adjustmentPercent = (terms as any).discount ? -(terms as any).discount : (terms as any).premium || 0;
const adjustment = basePrice * adjustmentPercent;
adjustments.push({
reason: `Payment terms: ${terms.description}`,
amount: adjustment
});
basePrice += adjustment;
}
// Apply contingency if requested
if (options.includeContingency) {
const contingencyPercent = complexity === 'complex'
? CONTINGENCY_PERCENTAGES.high_risk
: complexity === 'simple'
? CONTINGENCY_PERCENTAGES.low_risk
: CONTINGENCY_PERCENTAGES.moderate_risk;
const contingencyAmount = basePrice * contingencyPercent;
adjustments.push({
reason: `Contingency (${(contingencyPercent * 100).toFixed(0)}%)`,
amount: contingencyAmount
});
basePrice += contingencyAmount;
}
// Check against minimum job pricing
const minimumPrice = MINIMUM_JOB_PRICING[jobType].minimum_total_price;
if (basePrice < minimumPrice) {
adjustments.push({
reason: `Minimum job price for ${jobType}`,
amount: minimumPrice - basePrice
});
basePrice = minimumPrice;
}
const marginPercentage = calculateGrossMargin(basePrice, totalCost);
return {
base_price: basePrice,
adjustments,
final_price: Math.round(basePrice / 100) * 100, // Round to nearest $100
margin_percentage: marginPercentage
};
}
