Pricing, Estimating, And Success

**shanekw1** · 10-02-2008, 12:47 PM

When I get a quote on materials from my suppliers, the price on the quote is good for 30 days. If prices go up, the quoted price I got is still good until the 30 days are up. I put an expiration date on every estimate I do.

thefencepost · 10-04-2008, 08:51 AM

Going back to the "going rate".

When I got into the fence business, I had already been an installer, estimator, and sales manager so was aware of most overhead costs on a per job basis. I was also well aware of the "going rate" for different products I wanted to offer.

A great example for my field would be a basic wood privacy fence: The going rate for legitimate contractors and companies that I call my competition (there are about 40 in my area) is between $15-$16 per lineal foot installed.

Materials for that fence run $8-9 per foot. Labor is $3-3.50 per foot (depending on the project size) and the remaining covers overhead and profit.

There is a going rate in my industry, it has risen over the summer due to material costs, and unfortunately if I did not keep my prices within that range, I would be out of business. I have sold projects where my price is higher based on a referral and even website design. But if I try to sell my fence for $18 per foot, I will not be able to make any sales, and will then go out of business.

Going rate, or market price as I would rather refer to it as, is VERY important in my business. As the rate changes, my business needs to change with it. If I need to look at getting materials from a different supplier or something to make my rate match up, it must be done or I won't make any sales. It is already difficult enough with the economical problems we are having, so I stick with the going rate, I turn a profit, and continue in business.

valleyairPhilly · 10-10-2008, 10:33 AM

Well said. It is getting harder to price jobs these days in the heating & air conditioning business with the prices of our mterials and equipment changing everyday. We never know what a job will cost from one week to the next.

pcplumber · 10-15-2008, 09:52 AM

I agree with all the posts, to a degree.

This is why I think everyone calculates their prices in reverse. Suppose you come to me with an idea for a new business, or a new product. My first question is going to be, "how much can we get for the service or product. Obviously, we should want to earn as much money as possible.

You want to know how much you can get for a product before you start to calculate cost, overhead, etc. You don' calculate the costs first, and then try to calculate how much you should charge. What happens when customers are willing to pay much more money. You are limiting yourself to being a low-priced contractors. Every successful contractor, I know, wants to know the maximum amount he can get, first.

You are think you are going forward, when you are really going backwards. You are trying to calculate how much everything will cost and figure how much you should charge. No! It should be how much you can get, from the customer, first.

How much can you get for a remodel? Can you get $300 per square foot. Then you calculate the cost to see what is left for you.

Jack

rbsremodeling · 10-15-2008, 10:11 AM

Quote:

Originally Posted by pcplumber

I agree with all the posts, to a degree.

Your trains are on the right track. Your engines are in the front, but your train is going backwards.

This is why I think everyone calculates their prices in reverse. Suppose you come to me with an idea for a new business, or a new product. My first question is going to be, "how much can we get for the service or product. Obviously, we should want to earn as much money as possible.

You want to know how much you can get for a product before you start to calculate cost, overhead, etc. You don' calculate the costs first, and then try to calculate how much you should charge. What happens when customers are willing to pay much more money. You are limiting yourself to being a low-priced contractors. Every successful contractor, I know, wants to know the maximum amount he can get, first.

You are think you are going forward, when you are really going backwards. You are trying to calculate how much everything will cost and figure how much you should charge. No! It should be how much you can get, from the customer, first.

How much can you get for a remodel? Can you get $300 per square foot. Then you calculate the cost to see what is left for you.

Your train is going in the wrong direction and sometimes even sideways. You train is going to jump the track and crash.

Jack

This makes absolutely no sense to me. You have to know your cost of doing business before you come up with a price.

How can you establish a price with out know your cost to produce a product?

eastend · 10-15-2008, 10:33 AM

the point is, I think, that you could determine your price based on your costs etc, BUT if that price exceeds what the market will bear for your product/service, you will not make money.
Working by selling-price backwards, will tell you if your pricing structure and marketing model are viable in your marketplace.
Once you know that, you can fine tune your pricing to optimize your profit.

pcplumber · 10-15-2008, 09:11 PM

Quote:

Originally Posted by eastend

the point is, I think, that you could determine your price based on your costs etc, BUT if that price exceeds what the market will bear for your product/service, you will not make money.
Working by selling-price backwards, will tell you if your pricing structure and marketing model are viable in your marketplace.
Once you know that, you can fine tune your pricing to optimize your profit.

You are getting warmer!

When you use the system of calculating your 'cost plus' to arrive at a price, you create own psychological barriers. You are instilling, into your brain, that your price is the right price because this is what your numbers tell you. Numbers can't think and they don't talk. Numbers do not tell you what your customers will pay.

There is no right price. No sound contractor is going to work for less money than his traffic will bear. The quality of traffic, you bear, becomes limited by the price that you charge. This is another psychological problem. I use a contractor to hang doors. He charges me $750 to hang one door. I think this is outrageous, but the door hanger thinks he is the best door hanger in the world. When he quote his price, he speaks with conviction. You cannot charge higher prices until you think you are worth the higher price. Therefore, you limit yourself to only low-priced jobs. You cannot charge higher prices if you think your 'cost-plus' system is telling you what to charge.

Stop thinking like the other contractors. Think only about what 'your' traffic can bear. Block your mind about the economy and the fact that other contractors are slow. They probably deserve to be slow because they think like other contractor who are slow. Stop thinking that you will lose work if you don't charge what you call the 'right' price. No special price will get you every job. Worry more about not charging the highest price so you can maximize your profit, so, should you fall on hard times, you will have the wad of cash you need to back you up.

Don't you ever wonder why there are about ten million of contractors and only a few that shine? Why are there millions of pizza makers and only about 6 that shine?

I'll tell you why most contractors don't shine. It is because they are thinking just like the other 9,999,999 other contractors.

This is what I am doing with my business. My sales are 400% to 1,000% higher than similar companies that are my size. My net profit (take home) is about 600% to 1,200% higher that similar companies. Most companies in my area are starving. I am swamped with work all the time. This is not only a result of the ability to close sales. It is the result of thinking different than other contractors, being focused, having an attitude that nothing can stop me, an attitude that I can do whatever I can imagine is possible, and some very hard work.

Do you want to know why there are still contractors, in this economy, who are dancing to the bank. It is because they are not thinking like the contractors who think bad business is a result of wars and economics. This world is never without wars, political, and economic problems, and if you are waiting for the world to become ideal, for you, then you will be waiting for a few hundred years.

Do you understand why I can do? It is because I believe that I can and I will do everything I can to make it happen. This can happen only if I abandon your system of analyzing the way you do.

Don't forget what this thread is about. It is about how all services and businesses determine the best price. The best price is the one that gives you the highest return on your investments. You don't start with the lower price and work up. You start with the highest price, you think possible, and you can lower the price until you reach the balance where your volume of sales creates more net profit that the highest price.

I have been setting the prices for services and products, for over 40 years, and hundreds of times, I was wrong, and I lost $millions before I realized that my customers were willing to pay more. The numbers would not tell me. I had to test the markets to see. We kept raising our prices, without number crunching, and now we charge more than other contractors. Do you know why, yet. It is because you (the other contractors) don't realize that customers are willing to pay more than what your number won't tell you.

Jack

richard123 · 10-20-2008, 04:44 AM

i also have set price list, it keeps things easy and under control, also you dont recieve the aggro from the client when it comes to pay time.!!!

Landed · 11-05-2008, 09:05 AM

I must compliment the original post by Brian Phillips. He, in a nutshell, has described very well the process of understanding how to estimate. Perhaps the most important sentences to make estimating successful for a particular company is this:

Profit goals are also unique to each company. Again, without knowing the specific profit goals for a company, it is impossible to properly price a job.

bradjacob · 11-06-2008, 12:52 PM

Not sure if this was answered (or covered) so if it is, please just point me to it....

In giving a more accurate estimate, you mention to include OVERHEAD and PROFIT. I need some more detail on this. To me, profit was always lumped into labor - or was just 'part' of it. Not sure how to split them up or what really separates the two - could anyone recommend some things to consider in splitting them up or differentiates the two?

The next thing mentioned, was overhead. You said that one must consider things like insurance, etc... Let's say (for example) that my insurance was $1000 for the year and the costs for incorporating were $1000. That's $2,000 that needs to factored into the price of each job? If so, what happens if I have only 4 jobs per year? What about 30 jobs? How do I factor that in?

I find this forum (especially the Business section) really helpful. Lots of great info here from some smart individuals.

Landed · 11-07-2008, 02:03 PM

Quote:

Originally Posted by bradjacob

Not sure if this was answered (or covered) so if it is, please just point me to it....

In giving a more accurate estimate, you mention to include OVERHEAD and PROFIT. I need some more detail on this. To me, profit was always lumped into labor - or was just 'part' of it. Not sure how to split them up or what really separates the two - could anyone recommend some things to consider in splitting them up or differentiates the two?

The next thing mentioned, was overhead. You said that one must consider things like insurance, etc... Let's say (for example) that my insurance was $1000 for the year and the costs for incorporating were $1000. That's $2,000 that needs to factored into the price of each job? If so, what happens if I have only 4 jobs per year? What about 30 jobs? How do I factor that in?

I find this forum (especially the Business section) really helpful. Lots of great info here from some smart individuals.

I think you are making the same mistake many do. You are not separating labor from profit. They are different.

Here's part of the original post:

Quote:

The price of a job is comprised of 4 basic components: labor costs, material costs, overhead, and profit. Estimating is the process of identifying the labor and material costs. We add our overhead and profit to those costs to obtain our price.

Overhead—advertising, rent, insurance, utilities, phone, owner’s salary, etc.— is completely unique to each company. Without knowing these numbers, it is impossible to properly price a job.

Profit goals are also unique to each company. Again, without knowing the specific profit goals for a company, it is impossible to properly price a job.

Labor is the hourly wages you pay your help - even if you are a single person shop. Profit is what the "company" makes after all other associated costs are paid. Cost of incorporating is a one shot outlay and should be amortized.

Very simple to separate.

To simplify: You pay 5 workers $10/hour. If the job will take all five workers five days, that will be 200 man hours. At $10/hr, your labor cost will be $2000. You have pre-determined your profit will be 30% of your labor, so you add that $600 to the estimate (do NOT line item "Profit = $300" on your estimate

) (Profit can be based on total job costs if you want, your choice)

Your insurance should be based on some sort of percentage of company value or gross income. Add that percentage to your estimates as overhead. Let's say your workers comp is based on 10% of wages, add $200 for the above example.

You make it sound like your insurance is a flat yearly fee. Figure out how many days you work per year, figure a per diem cost, and add that cost to the estimate depending on the number of days the job will last.

Overhead such as vehicle costs, tool depreciation, and so on, need to be broken down to an per diem cost and added accordingly (there are other methods, but that is the most simple)

Simply put, you break down all costs down to a per diem. You know how many days the job will take, and you go from there.

Profit, in my books, is based on a percentage, that is easy to tack on. If you want a flat per annum profit, then figure out a per diem and lump in with the other per diems.

Remember to pay yourself for "supporting" labor. On site estimates, office time, material pick up, bank runs, etc.

Ryan_the_GC · 11-14-2008, 10:27 PM

Great forum!

Snow Man · 11-14-2008, 11:01 PM

Quote:

Originally Posted by Brian

One of the most challenging aspects of running a contracting business is estimating jobs. For someone with little experience, estimating can be a rather scary endeavor (it can also be scary for someone with tons of experience). After all, the accuracy of the estimate will have a huge impact on the contractor’s success.

This, I believe, is the primary reason we see so many questions asking what to charge for a job. But such questions are misdirected, because what I (or anyone else) would charge is completely irrelevant and doesn’t address the real issues.

The price of a job is comprised of 4 basic components: labor costs, material costs, overhead, and profit. Estimating is the process of identifying the labor and material costs. We add our overhead and profit to those costs to obtain our price.

Overhead—advertising, rent, insurance, utilities, phone, owner’s salary, etc.— is completely unique to each company. Without knowing these numbers, it is impossible to properly price a job.

Profit goals are also unique to each company. Again, without knowing the specific profit goals for a company, it is impossible to properly price a job.

Consequently, any attempt to answer a pricing question in the absence of these two key numbers is essentially meaningless. More to the point, pricing questions ignore the fact that a large percentage (often more than 50%) of the job’s price should be comprised of overhead and profit. (My suspicion is that those who pose such questions don’t know their overhead, and mistake gross profit for net profit. But that’s a different issue.)

As I said, estimating is the process of identifying the labor and material costs for the job. Labor costs are determined by the type of work being performed, the production rates of the company’s workers (the time required to perform each task), and pay rates. As with overhead and profit, these numbers will be unique to each company. Material costs are determined by the type of materials required, the quantity required, and their purchase price.

For example, let us say that a painting contractor knows that his painters can prepare and paint a certain style of door in 30 minutes. He looks at a job that has 10 of these doors. He knows that his painters can prep and paint these doors in 5 hours. He can also calculate the materials required by the spread rate of the product he will use. The contractor can now determine what his costs will be for the job. By adding his overhead and profit to these costs he will have his price for this job.

While the above example is simple and uses a painting project, the same principle applies to every contracting job—large or small, simple or complex—regardless of trade.

What should I charge for X? really means: what is the total of my labor costs, material costs, overhead, and profit? And the answer to that question requires a substantial amount of additional information. Providing an answer without that information is simply a guess.

Accurately pricing a job is not rocket science, but it shouldn’t be based on conjecture, blind guesses, or another company’s numbers either. Certainly accurate estimating takes effort, but owning a successful business isn’t easy. Asking what to charge for a job is asking for a short cut, but there are no short cuts to success.

Such questions about prices for a job are inappropriate, because they ignore the many factors that determine the price. Providing a price in response to such questions is also inappropriate, for the same reasons.

It is a documented fact that 90% of small businesses fail within 5 years. Of those that make it 5 years, another 90% will fail within the next five years. Which means, 99% of small businesses fail within 10 years. One of the primary reasons for failure is not charging enough. Contractors are as guilty of this as anyone.

There seems to be no shortage of hacks willing to work for dirt cheap prices. Nor does there seem to be a shortage of replacements when they inevitably fail. One of the most effective means for avoiding failure is to know your numbers. Asking what to charge for a job is simply an admission that you don’t know your numbers.

I hasten to add that there is nothing wrong or inappropriate with asking how to price a job. But how to price is different from what price to give. Learning the process is a good thing. Looking for an easy way out isn’t.

Putting paint on the wall is a trade skill. Pricing a job is a business skill. A skilled craftsman does not necessarily make a good businessman, because different skills are required. The owner of a contracting company does not necessarily need to have trade skills, but it is imperative that he have business skills if he is to succeed. The longer you wait to obtain those skills, the closer you move to joining those 99%.

Brian Phillips

I read down to the 3rd paragraph , fell asleep . Will continue story tomorrow.

rbsremodeling · 11-14-2008, 11:06 PM

I know you rub alot of guys the wrong way but for some reason your twisted mind brings me much joy.

Sorry for mucking up Brian's excellent post

Snow Man · 11-14-2008, 11:25 PM

Quote:

Originally Posted by rbsremodeling

I know you rub alot of guys the wrong way but for some reason your twisted mine brings me much joy.

Sorry for mucking up Brian's excellent post

hang in ther you improver you.

will575 · 11-16-2008, 02:12 AM

You really have to know both the real cost of doing any given job AND What the market will bear. You don't want to leave money on the table, but if you need a particular job you need to be able to predict what your competition will quote. Not that you would do it at or below cost, but you may want to do it for say 15% as opposed to the 20% or 30% or whatever you would like to get. I almost never compete on price, I compete on quality, at my price. I agree w/ Brian, except that I feel you do need to know what is going on with pricing. I would never bid a job based on "going rate" alone, or what someone else said they would charge, especially if that someone was not in my same geographic area. Bottom Line: I always ask 2 questions 1)what will it cost 2) what can I get. I am usually not the low bidder. I'll bet most of the 90+% who fail are competing on price. If you compete on price, long term success is impossible, PERIOD. I have to be able to justify my price, explain why my higher price is a better VALUE. But still if a customer gets 4 prices I can't be double what the others are.

Sarah9910 · 11-17-2008, 08:56 AM

This is a great thread, remember that if your software is set up correctly..the labor burden will be charged to the job along with the wages and is actual costs. So gross wage + employer costs (workers comp, ER FICA, FUTA, SUI, Union Expenses) = job cost labor with labor burden. AND your equipment cost will be entered when payroll is entered.

Many software programs have the option to add an "additional OH" to a job. This is a portion of the indirect costs. Costs that are often posted to the 600 range (most commonly) in your chart of accounts and are costs that are attributable to the work you do of construction but haven't been allocated to a specific job. Could be shop or warehouse expenses. If a contractor doesn't know his true overhead amount to allocate, I often set them up with "actual costs" meaning that we allocate equipment used on the job to jobs (at the equipment cost rate) and we set up payroll to cost the employer cost of benefits and workers comp and taxes to jobs but we do not add an additional OH yet. If they choose to do that later, we can set it up at any time.

Then, we see how the cost on the job compares with the budget as the job progresses, or at the end of the first job once on the new system. In my terms a budget is the estimate before OH and Profit and the contract is the estimate with OH and Profit included. In my terms OH is not labor burden, labor burden like workers comp insurance, taxes, etc. is an actual cost and is in the estimated labor cost. and becomes part of the actual job budget.

You should see a "contra" account in your chart of accounts in your indirect range for "equipment applied to jobs" and for "additional overhead applied to jobs" if you are doing these types of entries. The equipment range of cost accounts less the equipment applied to jobs account is a great way to see at a glance how well you are utilizing your equipment.

Brian · 11-19-2008, 07:24 PM

Quote:

Originally Posted by will575

I have to be able to justify my price, explain why my higher price is a better VALUE. But still if a customer gets 4 prices I can't be double what the others are.

Your first sentence refutes your second sentence. If you offer more value, and can explain why your higher price is a better value, you can be double the other prices and still get the job. You just have to offer more value and explain it.

Brian Phillips

enforcer · 11-21-2008, 09:16 PM

this is by far the most interesting and insightful post i have ever read here. i think it is important to know the average rate,this way it makes it easier for you to justify your price. secondly,it is extremely important to speak confidently. so many contractors speak in an apprehensive manner and give the home owners a sense that he or she may not know what they are doing. i try and speak with authority and let our work speak for itself. Confidence is something that takes time to achieve. if you believe you are the best so will the customer.

MrHands · 11-22-2008, 12:29 AM

Although I believe if MOST potential customers compare apples to apples and the proposal is delivered with confidence and authority, the higher "value" will win the job.

That said, I do not think too many will disagree that some customers are plain and simple price shoppers. And you can talk and present and prove the difference between you and the other guy until you are blue in the face, and they will take the "second to the lowest" price.

10-02-2008, 12:47 PM	#121
shanekw1 View Profile shanekw1 Trailer park boy Send Message Follow Blogs (0) Threads (3,606) Photos (0) Reviews (2) Projects (0) Toolbox (2) View All Activity Trailer park boy Trade: Remodeling Join Date: Mar 2008 Location: Castlegar, BC, Canada Posts: 3,606	Re: Pricing, Estimating, And Success When I get a quote on materials from my suppliers, the price on the quote is good for 30 days. If prices go up, the quoted price I got is still good until the 30 days are up. I put an expiration date on every estimate I do.

10-04-2008, 08:51 AM	#122
thefencepost View Profile thefencepost The Fence Post Send Message Follow Blogs (0) Threads (43) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity The Fence Post Trade: Fence Contractor Join Date: Aug 2008 Location: Raleigh, NC Posts: 43	Re: Pricing, Estimating, And Success Going back to the "going rate". When I got into the fence business, I had already been an installer, estimator, and sales manager so was aware of most overhead costs on a per job basis. I was also well aware of the "going rate" for different products I wanted to offer. A great example for my field would be a basic wood privacy fence: The going rate for legitimate contractors and companies that I call my competition (there are about 40 in my area) is between $15-$16 per lineal foot installed. Materials for that fence run $8-9 per foot. Labor is $3-3.50 per foot (depending on the project size) and the remaining covers overhead and profit. There is a going rate in my industry, it has risen over the summer due to material costs, and unfortunately if I did not keep my prices within that range, I would be out of business. I have sold projects where my price is higher based on a referral and even website design. But if I try to sell my fence for $18 per foot, I will not be able to make any sales, and will then go out of business. Going rate, or market price as I would rather refer to it as, is VERY important in my business. As the rate changes, my business needs to change with it. If I need to look at getting materials from a different supplier or something to make my rate match up, it must be done or I won't make any sales. It is already difficult enough with the economical problems we are having, so I stick with the going rate, I turn a profit, and continue in business. __________________ Keith R. Bloemendaal Raleigh Fence Contractors, LLC Fence Advice

10-10-2008, 10:33 AM	#123
valleyairPhilly View Profile valleyairPhilly Registered User Send Message Follow Blogs (0) Threads (7) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Registered User Trade: heating & air conditioning Join Date: Oct 2008 Posts: 7	Re: Pricing, Estimating, And Success Well said. It is getting harder to price jobs these days in the heating & air conditioning business with the prices of our mterials and equipment changing everyday. We never know what a job will cost from one week to the next.

10-15-2008, 09:52 AM	#124
pcplumber View Profile pcplumber Pro Send Message Follow Blogs (0) Threads (853) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Pro Trade: Plumbing, heating, real estate, general contractor Join Date: Oct 2008 Location: Los Angeles Posts: 853	Re: Pricing, Estimating, And Success I agree with all the posts, to a degree. This is why I think everyone calculates their prices in reverse. Suppose you come to me with an idea for a new business, or a new product. My first question is going to be, "how much can we get for the service or product. Obviously, we should want to earn as much money as possible. You want to know how much you can get for a product before you start to calculate cost, overhead, etc. You don' calculate the costs first, and then try to calculate how much you should charge. What happens when customers are willing to pay much more money. You are limiting yourself to being a low-priced contractors. Every successful contractor, I know, wants to know the maximum amount he can get, first. You are think you are going forward, when you are really going backwards. You are trying to calculate how much everything will cost and figure how much you should charge. No! It should be how much you can get, from the customer, first. How much can you get for a remodel? Can you get $300 per square foot. Then you calculate the cost to see what is left for you. Jack Last edited by pcplumber; 10-15-2008 at 11:14 PM.

10-15-2008, 10:33 AM	#126
eastend View Profile eastend New York City Send Message Follow Blogs (0) Threads (188) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity New York City Trade: historic woodwork restorations Join Date: Jan 2006 Location: New York Posts: 188	Re: Pricing, Estimating, And Success the point is, I think, that you could determine your price based on your costs etc, BUT if that price exceeds what the market will bear for your product/service, you will not make money. Working by selling-price backwards, will tell you if your pricing structure and marketing model are viable in your marketplace. Once you know that, you can fine tune your pricing to optimize your profit.

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10-20-2008, 04:44 AM	#128
richard123 View Profile richard123 Member Send Message Follow Blogs (0) Threads (89) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Member Trade: Building Join Date: Oct 2008 Posts: 89	Re: Pricing, Estimating, And Success i also have set price list, it keeps things easy and under control, also you dont recieve the aggro from the client when it comes to pay time.!!!

11-05-2008, 09:05 AM	#129
Landed View Profile Landed New Guy Send Message Follow Blogs (0) Threads (26) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity New Guy Trade: estimator Join Date: Nov 2008 Location: Midwest Posts: 26	Re: Pricing, Estimating, And Success I must compliment the original post by Brian Phillips. He, in a nutshell, has described very well the process of understanding how to estimate. Perhaps the most important sentences to make estimating successful for a particular company is this: Profit goals are also unique to each company. Again, without knowing the specific profit goals for a company, it is impossible to properly price a job.

11-06-2008, 12:52 PM	#130
bradjacob View Profile bradjacob Member Send Message Follow Blogs (0) Threads (38) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Member Trade: Carpentry Join Date: Nov 2008 Location: Easton, PA Posts: 38	Re: Pricing, Estimating, And Success Not sure if this was answered (or covered) so if it is, please just point me to it.... In giving a more accurate estimate, you mention to include OVERHEAD and PROFIT. I need some more detail on this. To me, profit was always lumped into labor - or was just 'part' of it. Not sure how to split them up or what really separates the two - could anyone recommend some things to consider in splitting them up or differentiates the two? The next thing mentioned, was overhead. You said that one must consider things like insurance, etc... Let's say (for example) that my insurance was $1000 for the year and the costs for incorporating were $1000. That's $2,000 that needs to factored into the price of each job? If so, what happens if I have only 4 jobs per year? What about 30 jobs? How do I factor that in? I find this forum (especially the Business section) really helpful. Lots of great info here from some smart individuals.

11-14-2008, 10:27 PM	#132
Ryan_the_GC View Profile Ryan_the_GC Registered User Send Message Follow Blogs (0) Threads (2) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Registered User Trade: General Contractor Join Date: Nov 2008 Posts: 2	Re: Pricing, Estimating, And Success Great forum!

11-14-2008, 11:06 PM	#134
rbsremodeling View Profile rbsremodeling Professional Instigator Send Message Follow Blogs (0) Threads (6,872) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Professional Instigator Trade: Design Build Remodeling Contractor DC MD Join Date: Nov 2007 Location: Washington, DC/ Maryland Posts: 6,872	Re: Pricing, Estimating, And Success I know you rub alot of guys the wrong way but for some reason your twisted mind brings me much joy. Sorry for mucking up Brian's excellent post __________________ Last edited by rbsremodeling; 11-14-2008 at 11:40 PM.

11-16-2008, 02:12 AM	#136
will575 View Profile will575 Member Send Message Follow Blogs (0) Threads (64) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Member Trade: remodeliong, repair, woodworking Join Date: Nov 2008 Location: las cruces, nm Posts: 64	Re: Pricing, Estimating, And Success You really have to know both the real cost of doing any given job AND What the market will bear. You don't want to leave money on the table, but if you need a particular job you need to be able to predict what your competition will quote. Not that you would do it at or below cost, but you may want to do it for say 15% as opposed to the 20% or 30% or whatever you would like to get. I almost never compete on price, I compete on quality, at my price. I agree w/ Brian, except that I feel you do need to know what is going on with pricing. I would never bid a job based on "going rate" alone, or what someone else said they would charge, especially if that someone was not in my same geographic area. Bottom Line: I always ask 2 questions 1)what will it cost 2) what can I get. I am usually not the low bidder. I'll bet most of the 90+% who fail are competing on price. If you compete on price, long term success is impossible, PERIOD. I have to be able to justify my price, explain why my higher price is a better VALUE. But still if a customer gets 4 prices I can't be double what the others are. __________________

11-17-2008, 08:56 AM	#137
Sarah9910 View Profile Sarah9910 Business Consulting Send Message Follow Blogs (0) Threads (268) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Business Consulting Trade: Business Consulting for Contractors Join Date: Sep 2004 Location: Michigan Posts: 268	Re: Pricing, Estimating, And Success This is a great thread, remember that if your software is set up correctly..the labor burden will be charged to the job along with the wages and is actual costs. So gross wage + employer costs (workers comp, ER FICA, FUTA, SUI, Union Expenses) = job cost labor with labor burden. AND your equipment cost will be entered when payroll is entered. Many software programs have the option to add an "additional OH" to a job. This is a portion of the indirect costs. Costs that are often posted to the 600 range (most commonly) in your chart of accounts and are costs that are attributable to the work you do of construction but haven't been allocated to a specific job. Could be shop or warehouse expenses. If a contractor doesn't know his true overhead amount to allocate, I often set them up with "actual costs" meaning that we allocate equipment used on the job to jobs (at the equipment cost rate) and we set up payroll to cost the employer cost of benefits and workers comp and taxes to jobs but we do not add an additional OH yet. If they choose to do that later, we can set it up at any time. Then, we see how the cost on the job compares with the budget as the job progresses, or at the end of the first job once on the new system. In my terms a budget is the estimate before OH and Profit and the contract is the estimate with OH and Profit included. In my terms OH is not labor burden, labor burden like workers comp insurance, taxes, etc. is an actual cost and is in the estimated labor cost. and becomes part of the actual job budget. You should see a "contra" account in your chart of accounts in your indirect range for "equipment applied to jobs" and for "additional overhead applied to jobs" if you are doing these types of entries. The equipment range of cost accounts less the equipment applied to jobs account is a great way to see at a glance how well you are utilizing your equipment. __________________ Sarah Keiser, Business Consultant for Contractors Success In-Formation LLC Leading the Way in Software Education www.successif.biz Last edited by Sarah9910; 11-17-2008 at 09:06 AM.

11-21-2008, 09:16 PM	#139
enforcer View Profile enforcer Pro Send Message Follow Blogs (0) Threads (639) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Pro Trade: windows-siding Join Date: Aug 2008 Posts: 639	Re: Pricing, Estimating, And Success this is by far the most interesting and insightful post i have ever read here. i think it is important to know the average rate,this way it makes it easier for you to justify your price. secondly,it is extremely important to speak confidently. so many contractors speak in an apprehensive manner and give the home owners a sense that he or she may not know what they are doing. i try and speak with authority and let our work speak for itself. Confidence is something that takes time to achieve. if you believe you are the best so will the customer.

11-22-2008, 12:29 AM	#140
MrHands View Profile MrHands Member Send Message Follow Blogs (0) Threads (73) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Member Trade: home services Join Date: Nov 2008 Posts: 73	Re: Pricing, Estimating, And Success Although I believe if MOST potential customers compare apples to apples and the proposal is delivered with confidence and authority, the higher "value" will win the job. That said, I do not think too many will disagree that some customers are plain and simple price shoppers. And you can talk and present and prove the difference between you and the other guy until you are blue in the face, and they will take the "second to the lowest" price.

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