Yeah that's where I still have a lot to learn. This is my first big job. Have done the actual job before but for family at no charge before I started the business. I'm still learning how to charge and how much without going over board and losing business but also not so low that I don't make enough for it to be worth it.
Question for guys running businesses
- Thread starter K3901
- Start date
EddieWalker
Epic Contributor
I never mark up materials or equipment rental. I bid my jobs with an estimate on what I expect the materials to cost, and a solid number of what my labor will cost. I decide what I want to make for the job, and if I have to take time to go rent something, haul it to the job, or have it delivered, and then deal with fueling it, cleaning it, loading it up again and returning it, that all factors in to what I charge in my labor.
In my opinion, clients are tired of being nickle and dimed. They like being able to budget a job, and they hate it when the contractor says they need more money once the job starts. If you bid the job low, suck it up with a smile, do the job to your very best ability, and learn from what you figured wrong.
I also always over bid my materials estimate by 20% on average so I come in under budget on every job. Last one was over $400 under what I bid it. They where VERY HAPPY!!!!!
In my opinion, clients are tired of being nickle and dimed. They like being able to budget a job, and they hate it when the contractor says they need more money once the job starts. If you bid the job low, suck it up with a smile, do the job to your very best ability, and learn from what you figured wrong.
I also always over bid my materials estimate by 20% on average so I come in under budget on every job. Last one was over $400 under what I bid it. They where VERY HAPPY!!!!!
jenkinsph
Super Star Member
I bid a job last week for digging for a water line on a very steep hill side. The job went better than expected so I discounted it $200. Customer was happy and I was too.
I don't work by the hour on anything now. When people call and ask for an hourly rate I tell them each job is different and will offer to bid the work. If shopping for the lowest hourly rate, that is not a customer I want. What these customers really want to know is how much does it cost to do this job correctly turn key.
If you ever have someone standing there while you are working with a stop watch in his hand you will learn fast.
Yeah I don't plan to bid it hourly. That's just the rate I use to figure out a price. Hopefully I get it done in the amount of hours I think it will take. If it takes longer then that's my fault and I'll know to add more next time. If it goes faster I'll give a discount.
EddieWalker
Epic Contributor
90 percent of my jobs I give a total bid. But with some of the old houses in the area, I go hourly. I tell them what I expect it to take, but that with so many variables, I wont do it any other way. I've had a door with some rot around the base of it and the client wanted it replaced. Simple half day job normally, but when I found that the studs on either side of the door where eaten way by termites, that turned into a very long 3 day job. Fortunately, I told them hourly and what could happen. Sadly, it was worse case scenario for them, but they felt I was fair with them and I've done 4 complete bathroom remodels in two houses for them since then.
PILOON
Super Star Member
I very rarely 'flat rate' a job.
If you do you are committed no matter how bad it goes.
If you 'flat rate' you need to build in all unforseens as well as profits.*
Most trades have basic rates.
Often I'd bid by the hour at my rate with a 'not to exceed' that would be that trades basic.
ex; flooring sanding used to be $1.50 /sq ft and I'd use my $40/hr not to exceed i.e. $1500. for a 1000 sq ft job.
I always was much lower than the trade rates and everyone was happy. Many jobs could be 50-60% of 'trade rates'.
It worked well with plumbing and electrical work.
When it came to materials I pointed out that I had no choice but to take a mark up for anything that went thru my books as it reflected my business volume and the govt would expect me to remit based on volume and our retail taxation setup is such that I'd need to charge on the end price even tho it already been paid once at purchase. We have a goods and service tax system here and no tax exemptions for trades.
Result is the client automatically saves about 20% if he purchases directly to his account. I'd get the client to name me as an authorized buyer on his open account at the lumber yard.
This way the client has receipts against his work done that he can use to evaluate for capitol gains when he sells at a later time.
I have done $300,000 renovations, built complete homes, raised houses with dynamiting to clear bedrock and added 2nd stories to existing cottages.
Whenever I used my small CUT on a job I'd add $50/hr for it plus my time. generally was for landscaping after a project and generally only a few hours.
If I'd need to fetch supplies I'd add a 'fee' (like $15-20) for each trip, but mostly materials were delivered by the supplier.
*Remember one client that insisted on flat rate to Install some 8 or 9 large windows and I said that a probable average would be 2-3 hrs each. (prep was done by an unknown).
Once finished he paid in cash and thanked me profusely and was very happy.
I informed him that based on the agreed flat rates I had actually earned close to $90./hr.
The result was that I did about 2 months more work at my usual rates and actually had to call off more as I had a list of regular clients that I had delayed.
One chap just finished building a $400k retirement home whereby all trades were paid hourly wages and he supplied all materials from his account with me named as his buyer. He saved about $40,000. going that route.
As a 'consultant-advisor' I was on a modest retainer basis with a daily site visit mainly to keep the flow going and check progress.
Hey, I'm basically retired so I had fun.
The main advantage to him was in the fact that I was very familiar with most trades they could not fool me by goldbricking.
If you do you are committed no matter how bad it goes.
If you 'flat rate' you need to build in all unforseens as well as profits.*
Most trades have basic rates.
Often I'd bid by the hour at my rate with a 'not to exceed' that would be that trades basic.
ex; flooring sanding used to be $1.50 /sq ft and I'd use my $40/hr not to exceed i.e. $1500. for a 1000 sq ft job.
I always was much lower than the trade rates and everyone was happy. Many jobs could be 50-60% of 'trade rates'.
It worked well with plumbing and electrical work.
When it came to materials I pointed out that I had no choice but to take a mark up for anything that went thru my books as it reflected my business volume and the govt would expect me to remit based on volume and our retail taxation setup is such that I'd need to charge on the end price even tho it already been paid once at purchase. We have a goods and service tax system here and no tax exemptions for trades.
Result is the client automatically saves about 20% if he purchases directly to his account. I'd get the client to name me as an authorized buyer on his open account at the lumber yard.
This way the client has receipts against his work done that he can use to evaluate for capitol gains when he sells at a later time.
I have done $300,000 renovations, built complete homes, raised houses with dynamiting to clear bedrock and added 2nd stories to existing cottages.
Whenever I used my small CUT on a job I'd add $50/hr for it plus my time. generally was for landscaping after a project and generally only a few hours.
If I'd need to fetch supplies I'd add a 'fee' (like $15-20) for each trip, but mostly materials were delivered by the supplier.
*Remember one client that insisted on flat rate to Install some 8 or 9 large windows and I said that a probable average would be 2-3 hrs each. (prep was done by an unknown).
Once finished he paid in cash and thanked me profusely and was very happy.
I informed him that based on the agreed flat rates I had actually earned close to $90./hr.
The result was that I did about 2 months more work at my usual rates and actually had to call off more as I had a list of regular clients that I had delayed.
One chap just finished building a $400k retirement home whereby all trades were paid hourly wages and he supplied all materials from his account with me named as his buyer. He saved about $40,000. going that route.
As a 'consultant-advisor' I was on a modest retainer basis with a daily site visit mainly to keep the flow going and check progress.
Hey, I'm basically retired so I had fun.
The main advantage to him was in the fact that I was very familiar with most trades they could not fool me by goldbricking.
Tractor Seabee
Elite Member
- Joined
- Oct 5, 2011
- Messages
- 3,900
- Tractor
- Kubota BX25
A lot of these decisions often become a function of how your state sales/excise taxes are levied. I stay away from marking up any material or equipment to avoid the hassle of collecting and paying the sales tax. Pay it when I buy it, client pays what I pay. I operate technical services business; so in WA state no tax on labor. If I marked up material I would have to buy it tax exempt, mark it up and collect/pay tax on the total. Every state is different. Here construction contracts are taxed on the bottom line. Equipment rental is taxed same as material.
Moral: understand your tax codes and do what is best for your situation.
Ron
Moral: understand your tax codes and do what is best for your situation.
Ron
MESSMAKER
Veteran Member
I usually give them the option. I prefer to work by the hour because it is best for both of us.I sleep better ,for sure. If they make me bid the job, I usually add 50% to cover the unforeseen. Most of the time I make more but sometimes that still does not cover it. My best advise would be to walk away from a job that you really don't want to do or just does not feel right. There will be other jobs.
jenkinsph
Super Star Member
When first starting out don't take on more than you can deal with. Much simpler to start with smaller jobs, get in, get out and get paid. As you progress you will have an arsenal of experiences that will aid you in bidding jobs and will improve your speed.
powerscol
Veteran Member
When I got started playing at this - odd jobs and haying, etc, I went to a Better Business Bureau class on starting up a business (sponsored by the local college). I was a great class covering how to run, hire, fire, finances, liability, business plan, ets - all needed to be successful and they had experts in all the fields to help get a business going. They hooked me up with several folks already doing this and they helped me set up an LLC (a must for your financial protection) and books and how to bill and document receipts. One man always bid lump sum and a another did time and materials. His mark up was 15% and it was right on the contract. BTW - you should use a contract and have it reviewed by a layer. Mine has a limited liability clause as allowed by my state. I always start the day with a safety meting with the owner of where not to be, keeps pets and kids inside and where to stand if they wish to talk. I am a little **** on that after 40 years in construction.