Pricing for Profit
September 04, 2009
After paying for the costs to run your business and the sticks, bricks, and labor to complete your jobs, you better have some money left over for profit - over and above your salary.
Remodelers generally quote a firm price for their work, unless they work on a time-and-materials or cost-plus basis. The culmination of the estimating process is determining the price that we present to the customer in the hope of persuading him or her to buy our products and services. In order to arrive at a price, savvy remodelers realize that they must know more than the cost of the sticks and bricks, labor and subcontractors, that go to make up the project. To determine the proper price at which to propose the job to the client, remodelers must be able to identify two types of cost—job cost and overhead—associated with their particular business and with the particular project. To these two costs they add a third factor, known as profit.
Job Cost + Overhead + Profit = Price
The first factor, job cost, is the sticks and bricks that go to make up a project. Job cost is the sum total of five broad categories of expenses—materials, labor, subcontractors, plans and permits, and cleanup—that are directly related to each individual project. Job costs are bills, employee time cards or subcontractor invoices that include a job address.
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