Change Order Example

Scenario

• Original job: Kitchen remodel.
• Original contract: $25,000.
• Change: The client wants to add a tile backsplash after work has already started.

Step-by-Step Breakdown

New work requested: tile backsplash installation.

Target margin: 30%.

Price = $1,400 / (1 - 0.30) = $2,000.

• Step 1: Identify the Change
• Step 2: Calculate the Cost
• Step 3: Apply Margin
• Step 4: Present the Change Order
• Step 5: Get Approval Before Work Starts
• Labor: $800
• Materials: $600
• Total Cost: $1,400
• Description of work: install tile backsplash.
• Cost breakdown: labor and materials listed clearly.
• Final price: $2,000.
• Timeline impact: note any extra days or schedule shift.
• Approval required before work begins.
• Get written approval.
• Make sure both sides clearly agree on price and scope.

What Goes Wrong Without This

• Work gets done without approval.
• Price is guessed later.
• Client disputes the cost.
• Contractor absorbs the loss.

Key Takeaways

• Always price before starting.
• Always document.
• Always get approval.