I hear a lot of talk about ‘overhead’, ‘profit’ and ‘project management’. They all have varying percentages applied to them. I understand they’re importance, but I’m not sure how to include them in a quote or invoice. Do you just put a ‘profit’ heading, then type in 10%? I can see a client questioning that when I’m already charging an hourly rate. What’s the norm?
Discussion Forum
Discussion Forum
Up Next
Video Shorts
Featured Story
Skim-coating with joint compound covers texture, renews old drywall and plaster, and leaves smooth surfaces ready to paint.
Highlights
"I have learned so much thanks to the searchable articles on the FHB website. I can confidently say that I expect to be a life-long subscriber." - M.K.
Replies
Why break it out as a separate item? Roll it into each catagory. Even better, just give a bottom line total estimate.
"Put your creed in your deed." Emerson
"When asked if you can do something, tell'em "Why certainly I can", then get busy and find a way to do it." T. Roosevelt
What fast eddie said - I just give a bottom line bid, I don't break anything down. If its a t&m job, then all the markups are figured into the hourly rate. I charge $50/hr on t&M, and if I'm lucky I might bring home $15 to Momma. Its expensive to be in business.
You shouldn't need to break out every detail for your estimate. Some customers do hesitate over a single number at the bottom of the page so I sometimes break it out into a 'materials' line and an 'installation' line if the job warrants it - clearly defined materials package like a deck. Make sure to take a cut for yourself on materials or account somehow for the effort of estimating, ordering, managing delivery, inspecting it and so on. Some jurisdictions apparently don't let you take a percentage of materials without applying extra taxes so you may want to add that in as an administrative fee or something in your own figuring.
I do find it helpful to itemize the process as much as possible on an estimate and the customers seem to appreciate it, but not attach a number to each item. Profit is not itemized on mine - i roll it into the materials and installation costs. Recently a customer showed me a quote from a competitor who had included his profit margin on his estimate, so it does happen, but I don't.
I'll echo what the earlier poster said about considering subs for anything you're unfamiliar with or inefficient at. Subbing stuff out makes you some good connections with other contractors in your area, and it can make your job move along more quickly.
Also, make sure that it's clear in your own mind and your customers' minds whether you are submitting an estimate or a quote. My estimate says, "This is a statement of estimated costs. Actual amounts may vary." right across the bottom of the page.
it's fun starting up, isn't it?
j
Don't break overhead and/or profit out. It should be included in your hourly rate or lump sum bid.
When you go out to eat you don't see a line item on the bill about overhead or profit do you?
When you get your vehicle repaired you don't see a line item for overhead or profit do you?
Overhead and profit is included in the price of the steak or the price for installing that new radiator.
Runnerguy
You've gotten some good advice here. Your profit margin is nobody's business but your own.
Besides, what percentage you figure in as your 'profit' is going to vary base on how efficiently you perform on the job.
I will break a price down to the screw and drops of glue used...
If they don't mind paying for me to figure out what they cost.
ever had it happen? just curious...
I got screwed on a quote similar to that once.They didn't make me break it down quite so precisely pertaining to materials as such but as method and schedule. I basically gave them the entire written instructions to do the job because they wanted to know exactly what they were getting for their money. The job was extremely custom (an experimental test house for university research) so nothing was built standard. I understood their concern, and they assured me I was a sure bet to get the job, so I obliged. They toyed with me for awhile, trying to get me to do the work in phases and by line item even though it wouldn't be practical to do so (i.e. interior finishes before sealing the roof). After much back and forth trying to get them to understand the whys and hows I finally just asked them how much money was currently portioned for the project.........about 1/5th my total bid. I again told them what was practical and what I could do for that amount. They backed out and decided to try to enlist student volunteers instead. But, I had already given them the instructions. I told them I would bill them for the time spent, they agreed to pay me. That was over two years ago. The project coordinator I had been dealing with (a faculty member) wouldn't answer my phone calls and dodged me when I called from other phone numbers. Nobody else knew anything about the dealings.Like I said, I got screwed.DC