![]() After you figure out what your burden is each month you divide that by 20 and that is your daily burden. Rent, loans (equipment/vehicles), insurance, payroll, taxes, tools, fuel, etc. I plan.įirst, figure out what your “burden” is. (My business manager reviews every estimate I put together to make sure I didn’t make a mistake but we are human…) ![]() If customer agrees to the ballpark estimate (and makes down payment) I will order materials immediately to lock pricing (windows and doors would be the only exception, I have my window foreman second measure every window and door).Īt this point, I know how much profit I WILL make barring any mistakes in my estimate or during the project. Said estimate is an approximate based on the cost of goods that day. I adjust the profit accordingly.Īt this point I will give the customer the ballpark estimate proposal. ![]() A “cool/fun/accommodating” customer gets a different margin than an asshole customer. There are zero “pass through” costs.Īfter all of this is calculated I evaluate the profit (margin) for that time period AND customer. I figure how long it would take an “average crew” to build a project, how long it will take my deck crew to build it, what my “burden” (overhead) is for that time period, cost of materials, permit, inspections, etc. In ANY other business besides construction do you think they say “figure the cost of raw goods x2”? Hell no. And results in guessing whether or not you are profitable. This majority of the comments in this post is reason #1 why contractors fail. We gotta change with it to succeed, and general rules regarding bidding are pretty antiquated, in my opinion. The industry has always been fast changing. ![]() I get what you are saying, I just think it's an old school way of thinking. And that number is so individualized that there can be no "general rules" applied to it. The question is "what do you need to charge to run a successful company". To succeed out here you have to focus on yourself and your business. Next thing you know you are trying to keep up with other people, who may be doing great, or might possibly be running thier business into the ground. Getting caught up in rules of thumb gets you caught up in the mentality "if someone else does it for this price, then I have to do it for this price". The cost to run my business is completely different than the cost of running yours, or anyone elses. Every single job, every single board, every single business, and every single individual business owner are so vastly different. If I'm completely honest, I really do think "rules of thumb" regarding bidding are basically useless. There are many short classes and education resourses on how to run a successful business. (The CCB in my area, it may be called something else in your area). If you are new to the business and need help figuring out what and how to bid/charge, reach out to your local construction governing body. And something like 90% in the first 10 years. That is why like 60% of all construction business fail in the first few years. There is a lot more to this business than just shooting a number from the hip and doing the work. Then its a matter of knowing how long a job will take you. Take that yearly cost, divide it by hours in a work year (2,080), and that gives you the hourly rate you need to make. Yearly costs of tools and maintenance, insurance, Taxes, payroll (if any), your personal hourly wage, and profit (usually about 20%). To figure out your labor costs, you need to know how much it costs to run your business. So if the cost of material goes down, I'm supposed to take a hit on my labor? And what about when material sky rockets, (currently material for framing in my area is running about 40% more than labor costs), am I suppose to gouge the customer?
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