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Hello everyone…I wanted to take advantage of all of the good advice that I always read on this site. I 2-3 years into doing side work in the Baltimore area. It’s not my main job, and probably never will be, but I enjoy it greatly. I’ve done like most new guys and got the national estimator books, read the forums, did the research, and talked to the contractors that I could to get job pricing estimate experience. Lately, I been getting into bigger jobs that I’m unsure how to price to make sure that I am being fairly compensated for my efforts. There is one job currently that I am looking to estimate and would very much appreciate anyone’s opinion on if I’m hot or cold. I bid by the job, and to come up with that number I bid each part of the job separately and then sum it all up. Then I bounce that number against an general hourly rate of ~$35/hour to see if the numbers are close.

Here’s the job:

This is finishing of a basement bedroom and bathroom 4000 ft^2 house (Home price 1.1 million). The room is 20’ x 14’ with 9 foot ceilings. The jobs includes

Bedroom
Walls were framed when the house was built. Concrete floor.

-framing a 24” x 70” closet with double 36” doors
-full electrical(outlets, ceiling fan, recessed lights, cable, tele)
-drywall of the entire room and ceiling (hanging, taping, finishing)
-full base, chair and crown
-prime and paint of the walls(3 walls one color, 1 wall another)
-painting of the trim
-berber carpet installation
-material pickup

For this job, I estimate that everything listed for the bedroom will take me about 80 hours. By my hourly method that comes to about $2800 + materials. If I bid by the job, I came up higher at $3500 + materials. ???????


Bathroom
Walls were framed when the house was built. Concrete floor. Rough plumbed, and finish plumbing will be completed by a sub plumber.

-full electrical(outlets, exhaust fan, recessed lights)
-drywall of the entire room and ceiling (hanging, taping, finishing)
-prime and paint of the walls
-painting of the trim
-12x12 floor ceramic tile
-material pickup

For this job, I estimate that everything listed for the bathroom will take me about 40 hours, not including the work done by the plumber. By my hourly method that comes to about $1400 + materials. If I bid by the job, I came up higher at $2200 + materials. ???????

I don’t have all the workman’s comp, worker salaries (I work solo), overhead. About the only costs that I have is gas and tool upkeep and replacement.

Please send me any thoughts that you have.
 

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You are not being fairly compensated if you bill out at $35 an hour. I stopped reading at that point.

Let's do the math here, in Grumpy's world. If you bill out at $35 an hour you are paying yourself about $20 an hour. General Liability Insurance(a must)? Cell phone use? Computer Depreciation? Vehicle depreciation? Vehicle Insurance? Equipment Depreciation? Time spent bidding on jobs you didn't get? Time spent securing permits and scheduling material deliveries etc? Advertising? Travel time to and from job sites?

I bill out at $75 a man hour and think that is cheap.

Why would you take on that kind of liability for $20 an hour? If something goes wrong there is zero cushion in your price, and trust me eventually something will go wrong. Why would you bill out at $35 a man hour knowing that your competitors are billing out at $120?
 

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Discussion Starter · #3 ·
estimating

Grumpy...thanks for the thoughts...I guess that I see where the screen name comes from...$35/hour comes from my original labor rate for work that I have been doing...Remember that I started out doing it on the side and now I am starting to get more involved with it...Your response proves my need to look into this more closely...I will re-examine my numbers and get back to you...thanks for the help...
 

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I am into the masonry aspect of construction. When I bid a job I dont ever bid for "by the hour". It's always by the sq. ft. and whatever extras the customer wants. Whether it by highlighted windows, arches, quoin corners, whatever. Always by the sq. ft. I have never been burned yet, knock on wood, and think that as long as I keep doing it by the sq. ft. something will have to go seriously haywire for me to lose money on a job.
 

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Your best bet if you have been doing this awhile is hire an accountant. After a few days reviewing your books they can tell you what you need to charge to make money. Probably well worth the few hundred bucks.. and if you can't afford a few hundred bucks you know you need to raise your prices.

The problem with bidding by the piece (square foot) is when stuff becomes out of the ordinary. I too usually bid by the square (100 square feet) but I add for anything unusual, and when adding for unusual work it's always by the hour. The rule of thubs is under normal conditions I can do x square feet in one hour. Then you work backwards off the rule of averages. I would think that's much harder to do with small remodel jobs like bathrooms and kitchens.
 

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1.Are you licensed and insured? If not your customer is asking for trouble.
2.Are you doing the plumbing and electric? If so you are asking for trouble.
This also has to be considered in your pricing. Im in your market and if your working in a 1.1 mil house and only charging 35 an hour I would be supprised if you would get the job. People that have large houses like to let their neighbors know how much they spent. Grumpy is in line with a rate of $75 an hr. I pay my carp subs between 30 and 50 depending on the skill level.
 

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I can't believe that in this day and age anyone would walk in a H.O. house without a million dollar liability insurance "Umbrella policy". Remember, if anything goes wrong, the H.O's own ins. company will come after you with a battalion of lawyers that will find every dime = asset = you own or ever HOPE to own.
Get a policy and pro-rate the cost for every hour you hope to work, then add that to your present hourly rate. You'll sleep better at night and still be below your competition.
 

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Oh yeah that's another nice thing about being a corp... when your insurance is based on payroll. You can set your payroll low, but reasonable, and take quarterly draws on the profit as an owner of the corporation which will not effect your insurance rates since it's technically not payroll.
 

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Grumpy said:
Oh yeah that's another nice thing about being a corp... when your insurance is based on payroll. You can set your payroll low, but reasonable, and take quarterly draws on the profit as an owner of the corporation which will not effect your insurance rates since it's technically not payroll.
Grumpy, have you got more info or links on this? I'm in Canada, but I'm sure our laws are similar, and I'd like to start researching which type of company will work best for me.

Thanks, and sorry for getting off topic.

Kevin
 

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Kevin, no I do not have any links on this. It is something I figured out (I am sure I'm not the first to think of it). I bounced the idea off my book keeper and accountant. When the insurance auditor asks to see the books they are looking at payroll. A corporation Shareholder draw is not classified as payroll. Thus it is ignored when the insurance auditor checks the books. This only works if your insurance rates are based on payroll. I know some guys get rates based on their sales volume.

Also keep in mind you still pay taxes on draws, so it's not like you're not cheating the government... just creative book keeping.
 

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Grumpy, so shareholder withdrawals arent considered payroll for the insurance audit? Will that work for me as well?

Right now my LLC consists of myself, partner, and a grunt (my brother that we are training in the trade...apprentice if you will). When I organized the LLC, we are all 3 listed as full members/shareholders with myself as the organizer.

My Gen Liability is a flat $451/year for a 1M policy. Wisconsin doesnt require an LLC to have WC Ins, however the company that I sub under does require it of their subs so I got a WC policy, filled out the coverage exemptions for my partner and I so we wont owe any WC on what we make since we arent covered, however, Wisconsin allows only 2 members to be exempted and not 3 so my brother is covered and obviously doesnt make as much as my partner and I do, I figured I would have a WC expense on what we pay him.

We invoice once a month, perhaps twice depending on whether it was for completed units (we trim apartment buildings) or extras, as well as each jobsite invoices on different dates, hence we get paid once or twice a month and do a percentage-type split of the money after the overhead is paid (insurance, supplies, etc) as well as take X-amount off the top of each payout to keep in the company account for anything that may come up, etc and so on.

Now is it your quarterly draw system that keeps it from being considered payroll or is it the fact that shareholders money is not considered payroll for WC purposes?
 

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I would think it would work for you. It really depends on your insurance carrier. I see no reason why not. I pay myself a low salary and might add on a "bonus" if I need a little extra for some reason, then quarterly is cash out time. Yes it's the shareholders draw that isn't considered payroll for WC purposes.
 

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Nice. So is your "salary" considered for WC purposes, you obviously being a shareholder and all or is that too exempt? We pretty much pay ourselves as soon as the money comes in, we dump the check into the company account and write checks to ourselves out of it. Would this put us in the "counting as payroll for WC" or would this be considered as shareholder draws. No one who hasnt been an equal shareholder in the LLC since day 1 is ever paid out of the account. Would the frequency (sometimes twice a month) of the "draws" put it onto the payroll category....or would be still be cool with the status quowithout having to go on the quarterly system that you use?
 
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