How to Quote Jobs
I have seen a lot of questions about pricing and how to price more profitably.
Everyone has their own process and individual environment, so there is not a single way, but a few best practices.
Nothing below will make sense if you don’t know your numbers.
- You have to know how much time you are spending per job,
- How much material was spent per job?
- How much money was made?
You need to set up a process and procedure to collect receipts from the field, track purchases to a specific job, and keep up with how many hours of equipment usage you have per job.
It doesn’t need to be complicated but it needs to be a priority or you will wake up one day have a material order due for a project coming up with no money in the account and no idea where it all went.
Below is how I think is a good outline of what to do to confirm and organize how your pricing structure should look.
Rule of thumb is 1/3, 1/3, 1/3
- 1/3 is labor
- 1/3 is material
- 1/3 is margin
Even as an owner operator you need to be accounting for your labor hours before margin. If you take the “left overs” as your own, the business is not making money.
An easy equation to use is:
Labor + Materials x 1.37= what you should be charging.
This will equate to approx. a 1/3 margin.
The margin is where the overhead and none job specific costs come from.
The material is pretty straight forward. Best practice here is to assign partial expenses for partially used material (i.e. half a box of nails)
You need to be tracking job costs per job so you can learn what is and is not working or being priced correctly!
The labor is any sub, employee, or owners time spent actually working on that job. You have to account for the owner’s time or technically you are working for free and that is not a sustainable model…
If you just read all of that and say well if I priced that way, I’d never win any work. You need to fix your sales processes to focus on the value you bring not who can be the cheapest, you may need to re-evaluate the types of projects or clients you are going after, or maybe you just need to better at what you do…
Bottom line is there are people in your market charging like this or more and winning projects so be objective and self-aware and figure out what you need to be changing to make this work!
A way to simplify your pricing is to build out a pricing sheet by volume or quantity.
Do the research of your team and your subs to determine what you need to be charging per unit for as many aspects of your business as possible.
For your subs I would just call and ask them what they are charging per unit or volume,. Most of them have a pricing structure already they can share with you so you can price more accurately
Running a non-profitable business is like a volunteer job…