Need help with contracting prices

6/19/2018 at 11:35:45 AM

First let me say good luck with your business! As for labour it is a bit tricky. I personally treat myself as an employee and pay myself hourly. But this means I don't pay me for paper work time. For a job I calculate how long it will take me and charge out myself at a rate higher than i get paid so the company can cover all costs from me and make money on my labour. Even then I get it wrong sometimes but you live and learn and tack on more hours for the next job. Hope that helped. For overhead it depends on what overhead you have. Do you rent a building or operate out of your house. Do you have a phone in the companies name. How about liability insurance or kilometers you rack up. You should find out what monthly cost you business has and depending how busy you are is whether you and it on for one job or more. For a quote add your materials, labour and overhead(depending on how many jobs that month) then add what you want your company to make. Keep in mind if its to much you may not get the job. Anywhere from 10% to 40% for profit depending on level of finish any time required to finish the job. You can always change your profit margin on the next job up or down. Its always a guessing game, you want to maximize profit but you also need to get job to earn some money. Its best to just keep an eye on it and adjust if you feel the need to.

6/19/2018 at 12:17:09 PM

Hi there,

So a few things I have learned in my 10 years in this industry with regards to pricing are the following.

1. You can either choose quality or quantity, but it is very hard to do both and stay "competitive". I say "competitive" because you have to decide what area of the market you want to do business in. You can either shape your business to do quick fast work and compete with cheaper pricing but do more jobs, or you can do a 5 star job, charge a medium range price to start so you are still within a reasonable rate for a wide base of customers, take your time, and do top quality work and your business will grow rapidly because of word of mouth. Then once your reputation grows, you can adjust your rates to something that is still fair for the customer, but represents the quality of work you do.

2. When starting a business, don't expect it to be self sufficient right away. It takes time before you will be able to live off the money that your business makes. This mindset will also help you with the approach on pricing because if you are pricing jobs based on what you need to make to pay the company bills PLUS your own, then it drives your price up.

3. A general rule of thumb when doing projects where you supply the materials is: always work out the exact materials you need and add a minimum 10% extra on to the order. If you are starting out, I would say 15%. This allows for grace room for any miss cuts or broken materials that may occur. I generally am upfront about adding on extra materials to my customers invoices and tell them that any materials that can be returned will be deducted off the final payment. This shows that I am being honest, but also not causing delays by having to go back to the store, and it also prevents you from having to approach your client and ask for more money because you didn't calculate things properly.

4. When it comes to calculating profit. I tend to calculate my costs, and then add anywhere between 10-20% for my profits (generally) depending on the size of the project. Smaller projects tend to be a higher percentage and larger projects tend to be a smaller percentage that I add on. It's very tough to calculate a quote based on the man hours. If it's just you two, and you have no staff that expect the rate you promised, then I would stick to flat rate billing as it's easier to bill out and then work out a split between you and your son based on the time invested in the project.

Some examples of calculating this would be:

Renovations to rooms/homes, decks, or anything that covers lots of floor space: Calculate your cost per sqft of floor space for materials, then add on your profit based on a percentage of the cost/sqft. Most quotes will be listed this way when you are dealing with a business that is branded to be professional, and not just "the average looking contractor". Image is everything. Invest in your image and it will pay off.

When quoting on fencing or framing, it's typically done in linear feat, not sqft as it doesn't take up a lot of space on the floor area itself. If you have framing + drywall, flooring, and other aspects in the same project. Then include the framing in the sqft price. Add up all your material costs, divide it by how many sqft of floor space, and then add your profit margin on to that price. Remember to calculate in the extra materials to account for waste and mistakes.

Calculating a percentage of profit from your cost won't work for every style of project though. So make sure you evaluate each project on it's own and figure out the rough time you think it will take, then try and determine what you think is a fair price for the customer that also gives you a profit. Tiling for example is not something to rush and takes time, so it typically costs more to do. I have learned over the years that I stick to what I am good at, and I hire sub trades for the rest (tilers, cabinetry, concrete work, plumbers, electricians, etc). You make less money at the end of the project, but you also aren't doing the work, so you can run multiple projects at the same time. If you want to go down this road where you manage projects, make less money on each one, but can run many projects at the same time (essential doing the sales and service); then I would consider branding your company as a general contractor early on, and invest in your image and integrity with clients so that your name spreads by recommendations and you're not fighting for work.

5. Honesty with your clients goes a long way to gaining trust, and in the long run allows you to charge more for your customer service and expertise combined with the skills you have to complete the work. Anyone can learn the skill sets, but only a small % of people can truly run a professional business. If mistakes are made, eat the cost, it goes a long way to gaining long term clients and word of mouth. We may be business owners, but we are not perfect, and as a business owner, if we make mistakes, we don't pass that on to the client, we take care of the mistakes and make sure they know it happened, and that it's on us to resolve, not them.

I can't stress enough that a professional image and honesty will go a long way in this industry towards gaining the trust of your clients. I am 25 years old running a successful general contracting company. I started in construction 10 years ago, but even with 10 years of experience, it was an uphill battle asking clients to trust me with thousands of dollars of their money, when all they see is a young guy in front of them.

If customers ask for a cost break down, you don't need to give them an itemized list, but be prepared to tell them the lumber total is this much, the flooring cost this much, etc, and my PROJECTED profit for my time spent planning, organizing, and constructing the project is worth this much. If they ask how you got to that number, tell them it's based on a percentage that you felt was fair to both parties based on the work that goes into the project, and the overall cost. Explain you don't charge hourly because you want them to know that they are paying based on the value of the project, and you don't believe in people charging them to work at a certain pace. You price things this way because you want to make sure you take the time that is necessary to make sure things are done right, and they shouldn't be billed extra for labour to have it done right, or have it done poorly and charged less.

I also invested in company shirts and professionally designed

6/19/2018 at 12:37:16 PM

Apparently the end of my reply was cut off so I will summarize.

5 things to be successful in this industry are:

1. Professional Image + Honesty/Integrity will make you busier than you could have ever hoped for.

2. Don't get greedy. Price the project based on what is fair to both parties. If you make mistakes on one project and it costs you, don't try and charge more on the next one to make up for it. Accept your losses and move forward with the lessons you learned during the last project.

3. Know your limits. It's other people's money, and ultimately your profits if you start trying to make more money by doing work you are not strong at, or have no knowledge of doing. Best suggestion, hire it out a couple times, make less money, and be onsite to help the contractor/learn from them if you want to be doing the work yourself.

4. Don't cut corners. Get the right permits, complete all the paper work, hire the trades that need to be licensed to complete certain work! Do not attempt to do the work of electricians, plumbers, gas Fitters or HVAC as they all need to be licensed tradesman who complete this work when you are not the homeowner. If something fails and causes damage, or worst case burns a house down with people inside. You won't survive the insurance lawsuits if they discover that you did the work that a licensed tradesman should have done and it resulted in the cause of the fire or damage being claimed.

5. Stay humble, but think outside the box. Don't get cocky if business starts going well. Keep your head level and focus on the work, not the money in your pockets. Your success can be your biggest downfall if you let it get to your head. Don't be afraid to try new things though. Do your research before hand, ask lots of questions of other contractors/trades, and always look for inventive but safe ways to do the same job for less costs. If you can decrease your costs, and keep your rates the same, it results in more profit without increasing the customers price, which is a win win for both parties.

Feel free to call me anytime if you have other questions.

Matthew

(705) 481-1926

6/19/2018 at 10:19:40 PM

Having been in business for over 40 years now partnerships never work.

6/20/2018 at 2:52:00 AM

Well don't be sorry! there's nothing I respect more then someone that's willing to learn. You can never get better unless you're willing to ask others. I always tell my guys...there's nothing I know that I didn't learn from someone else. With that said. I'm very blunt, and I'm going to give you real advice. Even though it may not be what you want to hear. (I was fortunate enough to have someone do the same for me) I'll say it.

It may offend other responders. I'm not here to hurt feelings, but feelings isn't my business, and they certainly aren't going to help you. ...but, you need to ignore all advice you've received so far on this thread. none of us (myself included) can give you proper advice with the information provided.

Here is some of the missing info needed in order to give you helpful advice..

1. are you a carpenter?(I may be wrong, but your wording leads me to believe your a handyman) ...nothing wrong with that at all of this is the case!. But it's not the same. Which means the pricing also isn't the same. No carpenter/contractor is interested in home improvements (again,nothing wrong with that)

2. Are you a legitimate company? (Hst#,company is insured,paying wsib,cpp,vacation pay,holidays, etc etc..? Big difference depending on the answer

3. What kind of work are you doing/referring to? For example...like most trades and businesses, there is an industry standard. Let's use hardwood floor installation as a simple example. Going rate in Ontario is between 2.50$-3.50$ sq/ft. (Generally) which means, what you'd like to make per hour totally depends on your skill set and speed. If your crew lays 1000 sq/ft of hardwood in 2 days(@3$ per ft, and my crew takes 5 days(@ 3$ per ft)....it's the same cost to the customer. I don't get to charge more because I'm slower! You may get lucky with a clueless client. But, if you wish to be in business long term (and have morals) the cost is the same to the client. Another example for you, I just hired 2 new guys. And they are wonderful! Hard workers with lots of potential. But they aren't very experienced with hardwood installation. That's fine. I know they'll be good at it eventually. So I start them out and teach them. Knowing full well they won't be fast, but eventually will become very efficient. Doesn't mean I get to charge more per/sq ft while they learn! I except the fact that my business will not make anything/breakeven on hardwood installation until they are well versed at it.

4. Definitely more information needed about your services and business. But I'll end with a hypothetical. I'll assume you're carpenters. Skilled builders that can build anything on a plan that's out before you. And you're 100% legit as far as a proper business goes. Competing industry standard Wages in Ontario are as follows -

Employed Carpenters in non unionized residential construction Generally make between 20-25$ per hour. (If they want to make more, it's time to work for yourself

1. -laboures range from minwage-16$per/hr

apprentices range from 16-20$ per hour

General rule of thumb is charge out double(with out exceeding 45)

Markup standard is between 18-25%

18 for large jobs

25 for small.

Best of luck. Happy to help with more information

6/21/2018 at 8:05:12 AM

Definitely figure out how long a job takes you and quote the job as piece work. It benefits both parties in that the customer knows the price will not change and can therefore budget their reno much easier, and also you since you can work without the added stress of the clock (obviously you still want to be efficient, but no one is watching over your shoulder).

As time goes on you will adjust, but expect some growing pains as you learn what you can do in the scope of a day's work.