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Discussion Starter · #1 ·
SO a while back I re-created a new spread sheet that separated labor and materials in the estimate sheet much like the sticky for "estimating with excel for the small contractor" I understand the benefits of showing this if you are doing cost plus contracts, but for jobs as a whole such as a deck or a new construction addition, my business partner wanted to know why I had this in the estimate sheet we give to customers for a bid. I really couldn't tell him why... except for when we do cost plus, which is very very rarely. Then I read something in some thread here maybe a week ago or so where someone explained it to a "T". Such as if materials were upgraded or something.

So I was looking for that comment as to help me explain why it should be separated in the estimate sheet. Ive word searched it, read pages of threads in the business thread and most recent threads and cant find it anywhere. Can someone enlighten me as to where it is or give me their own take on why you should have your line items for labor and materials separated in your estimates. :eek:nline2long:
 

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Discussion Starter · #3 ·
Just read the link you posted, eh, it is more or less discussion about why you shouldn't itemize a bid based on different tasks, it is in essence good to not do that because customers can pick it apart to try for a cheaper price.

What I read was why it is a good idea to separate your labor (with markup added to it) from your materials (with markup added to it) Not so much each piece of labor or material broken down, but just two prices as a whole on your estimate vs just 1 total price for the whole job. These tow general prices are listed in the estimate you would present to the customer.
 

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I must say I am probably one of the few who seperate my estimates between materials and labor.
First - I basically only paint and / or wallpaper, no remodeling or multiple trades.

My reasoning, my quantiies of materials are straight forward, and customers think they can buy their own paint for less. I quote quality paints at a price less than the customer can purchase it for and that usually takes the wind out of their sails in asking for lessor / cheaper products. The customer can see what they are getting. When it comes to paints the customers usually think they know a thing or two and dont understand the differences in quality, they can see a good price though.
I also provide a line for all miscellaneous cost of sundries that is usually anticipated.

My labor is either an estimate or a quote form and is given as a total Dollar amount. I do not provide a breakdown in hours or hourly costs. Included in my labor costs are all associated costs of time at paint store etc.

I will add that I do stock up on products that I frequently use, when they go on sale, or buy in bulk quantities. That does offer me a little room for mark up.
 

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When formulating a cost estimate, you should absolutely have your materials and your labor separated in the estimate - NOT NECESSARILY on the QUOTE to the customer.

I look at my material versus labor as percentages of the entire project to help me better manage my risk on the job. If I am selling a job that has roughly 80% material cost and 20% labor cost, that is a lot less risk than a job with 20% material cost and 80% labor cost.

Labor is an unknown, material is a known (assuming you have a strong takeoff which as an experienced contractor you most likely should). If you are taking on a job where your quote is primarily based on your GUESS of how much labor cost you will have, that's a lot more risky than a quoted price that is primarily based on the cost of the material. More risk = more chance to lose money = more margin.

When it comes to sending a quote to the customer, I don't need to break out material versus labor unless there's a good reason for that. I don't want my customers to think they can purchase their own material for me to install - that's just taking more of my fixed costs away and making my variable cost of labor become a higher percentage of the project.

If I was to give a customer a price to install material they provide, the price I give them will be much higher than an amount I might give them on a material versus labor quote breakout for the same project.

That's how I look at it, I am sure everyone is different.
 

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Discussion Starter · #6 ·
When formulating a cost estimate, you should absolutely have your materials and your labor separated in the estimate - NOT NECESSARILY on the QUOTE to the customer.

I look at my material versus labor as percentages of the entire project to help me better manage my risk on the job. If I am selling a job that has roughly 80% material cost and 20% labor cost, that is a lot less risk than a job with 20% material cost and 80% labor .

I view labor both in man hours and a percentage of material coat. Especially if what you are doing is a niche where you can see it reflected on a financial statement.

As for labor being separated from materials in a quote for the most part it looks like I may be needing to do some adjustments for what I present to customers, for my self benefit. Unless it is a quote for install of materials that are provided by a customer then it will be labor only thus making my margins higher in labor. Or at least enough to cover O.H. And profit and a potential contingency for misuse or mistakes with potential materials. Per say a waste factor.


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I view labor both in man hours and a percentage of material coat. Especially if what you are doing is a niche where you can see it reflected on a financial statement.

As for labor being separated from materials in a quote for the most part it looks like I may be needing to do some adjustments for what I present to customers, for my self benefit. Unless it is a quote for install of materials that are provided by a customer then it will be labor only thus making my margins higher in labor. Or at least enough to cover O.H. And profit and a potential contingency for misuse or mistakes with potential materials. Per say a waste factor.


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Yeah sounds like you think like me. I always do my estimate of labor and examine the man hours to make sure it all feels good. The key for me is the risk.

Another simple example. If I'm selling a $5,000 product that will take me half a day to Install, and I mark up labor and materials equally, then I'm not worried if it actually takes me a whole day. The incremental labor Cost is a tiny piece of my overall estimate. If I'm selling install only for that same product, I'm carrying a full day's labor cost minimum. If that half a day install turns into a whole day then I'm Double my entire estimate that easy! (I would obviously rarely price anything with a half day labor but this was for simplicity haha)
 

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Discussion Starter · #8 ·
I feel like I'm reading to myself, markup goes on EVERYTHING. I know what I've got to sell each month before my overhead is met, I know when we don't meet sales margins what profit is paying for overhead, I know my break even,(power of broke method) if you know your overhead and labor percentages and actual dollar amount costs you can figure what you have to do a week to know when your percentages are working or not. It's stupid simple, math, but the whole selling and producing to meet those demands are the real struggle.


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To put this simply and frankly it only confuses the customers and it raises a s^*T load of why this is this much and this is that much.

You marking up materials because you have expenses with it,i.e delivery charges, being there to meet the delivery, pick up material, etc.

Next you have charges for hard and soft costs to run the job and your business, etc

Next you have overall profit margin cost.

All that goes into one price.

If you start breaking that all up and adding bits and pieces to labor, material, etc and the customer looks and says I can buy that tub for $100 and you charging me $110. and from there it goes on and on and on and 95% of the time customers think they can get it cheaper and they will and most likely it will end up costing them more.

This is the price, this includes everything specified in the contract, take it or leave it... simple as that.

Good luck
 

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If the customer wants to supply something it better be on the job and on the floor where work is being performed in advanced. If its changed or breaks or I have to reinstall it, Im getting paid each time that happens plus any delays moving forward.

Naturally I use my experience to provide guidance to customers Im working with but I do remind them that my time has value.
 

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SO a while back I re-created a new spread sheet that separated labor and materials in the estimate sheet much like the sticky for "estimating with excel for the small contractor" I understand the benefits of showing this if you are doing cost plus contracts, but for jobs as a whole such as a deck or a new construction addition, my business partner wanted to know why I had this in the estimate sheet we give to customers for a bid. I really couldn't tell him why... except for when we do cost plus, which is very very rarely. Then I read something in some thread here maybe a week ago or so where someone explained it to a "T". Such as if materials were upgraded or something.

So I was looking for that comment as to help me explain why it should be separated in the estimate sheet. Ive word searched it, read pages of threads in the business thread and most recent threads and cant find it anywhere. Can someone enlighten me as to where it is or give me their own take on why you should have your line items for labor and materials separated in your estimates. :eek:nline2long:
Hi! If you're looking to know how you can accurately calculate for labor costs in construction, there's this blog post that I saw and it covered this topic in great detail and gave examples to help you understand how they did their calculation. Here's where you can read more about it to help you come up with more accurate labor cost calculation as well as overall project estimate.
 

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Hi! If you're looking to know how you can accurately calculate for labor costs in construction, there's this blog post that I saw and it covered this topic in great detail and gave examples to help you understand how they did their calculation. Here's where you can read more about it to help you come up with more accurate labor cost calculation as well as overall project estimate.
Lol, tell the author we got it under control. No input from laymen necessary
 

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I know this is an old thread, but since someone brought it back to life I’ll throw this out there.

I don’t understand this “labor and materials” thing.

I have a lot more categories than that.

Now about equipment rental? How about rates for the equipment I own? Disposal costs? Traffic control/barricades? Special inspections?

Where does OH&P go? On the labor side?

I run a business. I’m not an hourly handyman, who can either install materials you buy, or run to the Home Depot and do your shopping for you. 😳 That’s not how it works.

How about admin costs?

Maybe the “labor and materials” quote works for a guy nailing up a couple strips of baseboard or something.
 

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I know this is an old thread, but since someone brought it back to life I’ll throw this out there.

I don’t understand this “labor and materials” thing.

I have a lot more categories than that.

Now about equipment rental? How about rates for the equipment I own? Disposal costs? Traffic control/barricades? Special inspections?

Where does OH&P go? On the labor side?

I run a business. I’m not an hourly handyman, who can either install materials you buy, or run to the Home Depot and do your shopping for you. 😳 That’s not how it works.

How about admin costs?

Maybe the “labor and materials” quote works for a guy nailing up a couple strips of baseboard or something.
My spread sheet has task, labor, material, sub contract and total cost for that line item. The hourly rates are my actual employee total cost. It's easy enough to add equipment rental or hourly rate as a line item. At the bottom it's totaled and my P&O added on as a percentage of that total. That percentage changes depending on the project.
In all cases, rentals would be a material item to the client.

As far as shopping goes, if I have to do it then I charge my hourly rate plus P&O. The bottom line is you give your clients whatever level of service they're willing to pay for. I've won projects as the high bid because they guy I was bidding against didn't want to deal with some aspects of the job.
 
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