What could be the consequence of having a mark-up that is too low on a project?

Having a mark-up that is too low on a project means that the contractor is not adding enough additional cost on top of their direct expenses to cover overhead and profit. As a consequence, this could lead to an insufficient cushion if costs exceed estimates. In construction, costs can fluctuate due to various factors such as delays, material price increases, or unexpected project complications. If the mark-up is minimal, the contractor may find themselves in a precarious financial situation where even slight increases in expenses can significantly impact overall profitability. This can lead to serious financial strain, making it challenging to complete the project without incurring losses. Thus, having a properly calculated mark-up is essential to ensure that all potential costs are covered, allowing contractors to maintain financial stability throughout the project.