How do contractors usually charge? It’ s always a percentage above cost?
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There's a small hole just under the left ear. Plug a 4.5V wall wart in there.
How?
Well, speaking from well over 30 yrs of experience (not all using the proper guidelines), we charge an amount that will give us a decent wage, health benefits, continuing education, buy and repair the tools we need to do the job, pay taxes and licensing, cover insurance/liability/bonding if required, oh yeah-vacation and sick days like normal human beings.
Then we add a percentage which should mean that the business is still around should you have a need to contact us in the future.
why?
....and most of them are worth every penny you pay them.
The thing is I don't understand why some charge by square foot and others by percentage of cost?
I doubt that many contractors figure their "cut" by square feet. Often they will estimate the total price of a project (less any "fancy" features) by square feet, since this works out well for them if they're doing something similar to what they've done before. But it's just one of many estimating techniques, and it's not uncommon to use a combination of several in producing an estimate for a single project.
Ultimately, a contractor's going to want to get some percentage of overall cost as his profit margin. But even there the contractor may have to use several different techniques, since not all costs are created equal. In particular, some administrative costs are usually included in what you might consider "profit", and different contractors vary as to how they do that.
You've got me confused.
Sg ft charge I understand and see it in estimates of job cost for flooring for example. I also see it advertised at box stores for most damn anything-granite counters for example. However, when you get the real estimate you will find it to be higher because of edgework, backsplash, type of sink, amount of seams.................
In flooring, almost the same-is there underlayment installed, old goods taken out, new shoe installed, furniture moved?
You see an advertisement for 3.00 a sq ft installed for laminate floor..................................you have a 10x10 room. Simple math-300.00.......................
Bill or real estimate comes and it's 475.00?
"what's the 125.00 extra for?"
move furniture, shim low spots, remove and replace shoe mold, undercut doors................
Percentage of cost:
I do most jobs Cost Plus. I give an estimate that is a spread number-from 5,000.00 to 6500.00 for example. If they want a firm price-take the 6500.00. I know from experience that the job will be somewhere in between (which includes many of the unforseen things that others might charge "extras" for. With cost plus, the customer is charged all labor, material, subcontractors costs plus the predertimed percentage, which miraculously falls somewhere in that 5000.00 to 6500.00 price range.
On the sq ft cost you have a definite price in mind and the profit and overhead is rolled into that price. On cost plus, the profit (and/or overhead) is added to the actual job cost.
Bet that's no clearer than you had it before, sorry.
First off, note that contractors may charge a flat amount for the project, a time-and-materials rate (generally with some markup on the materials), or some other scheme. Also note that many jobs (eg, simple roofing jobs) are easy to estimate and easy to know what a decent profit margin is, while other jobs (building, say, a specialized scientific research building) are apt to have lots of twists and turns and change orders and be hard to price.
In addition, when business is booming a contractor will likely price bids to increase his profit margin, while in difficult times (like the present) he may even accept a small net loss just to keep his people employed, keep leased equipment busy, etc.
So there's no single way that contractors figure their "take". Knowing how to price a job is a part of the "art" and "science" of contracting, and is at least as important (for the long-term well-being of the contractor's business) as knowing how to physically do the job.
There's a lot of
There's a lot of misconceptions about how to arrive at a price for a job. The short version is: the contractor has to charge enough to pay his bills, and himself. If he fails to do this, his business fails.
Sometimes customers will want some information, with the intent of identifying legitimate prices, or even of being able to receive a 'better' price. You can always tell the real bargaining 'experts;' they're the ones who brag how cheap a deal they got, then later complain that you just can't find good help these days.
Sure, there are various methods used to come up with a quick, approximate estimate. There are also various accounting tricks used to analyze a job. For the customer, this is where a 'little knowledge is a dangerous thing.'
An example is the 'hourly rate.' The 'hourly rate' is what I need to AVERAGE to pay my bills, and hs NO connection with how much time I'm on the job site. It's an accounting tool for me alone, and has no relevance to the customer. Tell me what you want done, and I quote a price- that's what you pay, whether I'm on site 5 minutes or 5 weeks.
Left off from most 'methods' is what I call the "Customer factor." This is whre the contractor modifies his price according to his estimation of the nature of the customer: is the customer difficult, disorganized, or have payment issues? Will there be future business? Etc. These are factors a contractor will consider only AFTER the customer has developed a track record; promises are worthless. Indeed, most of us have 'lists' of things customers say that result in RAISING the price, or simply being 'too busy.'
LOL!!
is what I call the "Customer factor." LOL!
That's a polite way to put it, I've always called it a "PITA surcharge". And it can get quite steep...
Bill
It' s always a percentage above cost?
You know of some other way to run a business?
Joe H
A dozen ways to estimate and charge for projects. For carpets only, by the yard. For floors, by the sqft. For houses/additions maybe by the sqft or maybe simply by a detailed estimate. Some may charge materials times 2 (in the industry, often roughly half of the cost of construction is materials, the other the labor to install; but it varies depending on the trade/work to be done). Whatever makes them comfortable to compete, get a job and pay the bills including a reasonable wage including overhead costs.
What is "cost" to you?