Tips for a Thorough Estimate
Gone are the days of walking in with a tape measure and giving a potential client an off-the-cuff estimate or simply adding labor plus materials to get the price. In order to reliably make a profit in the installation business, rely on these proven tips.
Determine What Everything Cost Per Square Foot
Since a majority of your estimates are based on a square footage figure, you will need to translate all cost into a per-square-foot figure.
- Labor Cost – You can calculate the hourly wage times the total number of employees on the job to yield what you are paying in labor cost. Don’t forget to also add the costs of workers’ compensation, health insurance, retirement benefits, and taxes to this figure.
- Travel – This cost can be easily overlooked, but they add up and will eat into your profits if not calculated. You can calculate the per-square-foot cost by adding the cost of gas and cost of driving, then dividing by the square footage installed.
- Overhead – You know that your time is valuable, but you will need to add up the time spent writing bids, meeting with clients, calling distributors, and calculating payroll.
- Materials – To accurately calculate the costs, make sure you add the current price of wood, cutting allowance, tax and delivery fees. In addition to the wood, you’ll need to factor in things like sub-floor prep, saw blades, trash bags, rags, stain, filler, finish, etc. While determining the number for job sundries will fluctuate, with practice you should be able to get a close estimate of this number.
- Profit – Finally, you need to pay yourself, maintain your vehicles, and repair and purchase new equipment. Determine what the percentage of gross margin should be in order to make a profit. A good accountant can work with you to get a number to multiply your cost per square foot on a job so that you reach your gross margin profit goals. Remember that your profit margin comes from the percent of your sales, not the percent of your costs.
These may seem like a lot of numbers to crunch, but once you take the time to fully calculate all these costs and translate them into a per-foot cost for one job, you should be able to use your formula to simply plug in the particular details of future jobs.