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Firm Quotes For Difficult Jobs With Unknown Variables

 
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Old 08-05-2013, 08:03 AM   #21
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Re: Firm Quotes For Difficult Jobs With Unknown Variables


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Your hourly rate and markup for materials should cover all that.
But I do agree that if they insist on a fixed price, you should aim for the high end to cover your arse.
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Old 08-05-2013, 08:28 AM   #22
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Re: Firm Quotes For Difficult Jobs With Unknown Variables


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Originally Posted by ryanshull View Post
Your hourly rate and markup for materials should cover all that.
Hourly rates should cover overhead and make some allotment for net profit, but the net profit is limited. Might be in the 5% range. If you work all year hourly, AT BEST, you will make 5% net profit. (or whatever your calculated net is). If your indirect costs go up, you make less obviously.

If you incorporate more value-priced work, there's really no limit. You could make much, much more than 5%. Yes, there's more risk and you may eat some materials or spend some additional time, but when you're working a job that potentially has 30% NET profit, there's room to do it right.

You definitely don't want to issue a fixed contract price for essentially the same numbers that your hourly estimate would be!

I know one contractor who issued a relatively high fixed price but would offer to split any "leftover" at the end of the job with the customer. So if he gave a $10,000 price, and he got the job in at $9,000, the owner got a $500 discount. Based on trust...but it's all based on trust really. Personally I think that starts involving the owner in a through process of deleting job scope or quality to save money.
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Old 08-05-2013, 11:18 AM   #23
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Re: Firm Quotes For Difficult Jobs With Unknown Variables


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Originally Posted by blackdoghamma View Post

Hourly rates should cover overhead and make some allotment for net profit, but the net profit is limited. Might be in the 5% range. If you work all year hourly, AT BEST, you will make 5% net profit. (or whatever your calculated net is). If your indirect costs go up, you make less obviously.

If you incorporate more value-priced work, there's really no limit. You could make much, much more than 5%. Yes, there's more risk and you may eat some materials or spend some additional time, but when you're working a job that potentially has 30% NET profit, there's room to do it right.

You definitely don't want to issue a fixed contract price for essentially the same numbers that your hourly estimate would be!

I know one contractor who issued a relatively high fixed price but would offer to split any "leftover" at the end of the job with the customer. So if he gave a $10,000 price, and he got the job in at $9,000, the owner got a $500 discount. Based on trust...but it's all based on trust really. Personally I think that starts involving the owner in a through process of deleting job scope or quality to save money.
If you need a 30% profit, you figure a 30% profit margin into your hourly rate, just like you would on your fixed rate.

Most service based businesses are hourly. I make roughly the same amount either way..........because I am honest.
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Old 08-05-2013, 01:51 PM   #24
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Re: Firm Quotes For Difficult Jobs With Unknown Variables


Just don't get trapped into identifying exceptions and possible future problems.
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Old 08-05-2013, 02:59 PM   #25
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Re: Firm Quotes For Difficult Jobs With Unknown Variables


Thanks for all the help. These jobs do not come up often but when they do they tend to be odd as to the work and unique as to the specific work needed to be done. Sometimes experience just does not help. Other than to know generalities. (That wall could be insulated, or concrete filled, etc) It is nice to have all of these options on the table.

I will go with the mid to higher quote and make our best guess. If they do not like it then there are other contractors.

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