Executive Mission Statement
One of the most challenging aspects of running our business is estimating jobs. For someone with little experience, estimating can be a tough endeavor (it can also be tough for someone with tons of experience). After all, the accuracy of the estimate will have a huge impact on the project success.
This, I believe, is the primary reason we see so many questions in what to charge for a job. But such questions are misdirected, because what I (or anyone else) would charge is completely irrelevant and doesn’t address the real issues.
The price of a job is comprised of 4 basic components: labor costs, material costs, overhead, and profit. Estimating is the process of identifying the labor and material costs. We add our overhead and profit to those costs to obtain our price.
Overhead—labor, advertising, insurance, utilities, phone, owner’s salary, etc.— is completely unique to each project. Without knowing these numbers, it is impossible to properly price the project.
Profit goals are also unique to each project. Again, without knowing the specific profit goals for a company, it is impossible to properly price a job.
Any attempt to answer a pricing question in the absence of these two key numbers is essentially meaningless. More to the point, pricing questions ignore the fact that a large percentage (often more than 40%) of the job’s price should be comprised of overhead and profit. My suspicion is that those who pose such questions don’t know their overhead, and mistake gross profit for net profit.
As I said, estimating is the process of identifying the labor and material costs for the job. Labor costs are determined by the type "scope of work" being performed, the production rates of the company’s workers (the time required to perform each task), and pay rates. As with overhead and profit, these numbers will be unique to each project. Material costs are determined by the type of materials required, the quantity required, and their purchase price.
For example, let us say that our window "installer" can install 5 Windows in one day. We look at a project that has 5 Windows. We know that our worker can prep and install these windows in at least 8 hours. We can also calculate the materials required by the sq. ft of window we will install. Now we can determine what our costs will be for the project. By adding our overhead and profit to these costs we will have the price for this project.
While the above example is simple window project, the same principle applies to every Window, Door or trim job—large or small, simple or complex (PERIOD)
What should I charge for X? really means: what is the total of my labor costs, material costs, overhead, and profit? And the answer to that question requires a substantial amount of additional information. Providing an answer without that information is simply a guess.
Accurately pricing a job is not rocket science, but it shouldn’t be based on blind guesses, or another company’s numbers either. Certainly accurate estimating/accounting takes effort, but owning a successful business isn’t easy! Asking what to charge for a job is asking for a short cut, but there are no short cuts to success.
Such questions about prices for a job are inappropriate and you risk credibility, because they ignore the many factors that determine the price. Providing a price in response to such questions is also inappropriate, for the same reasons.
It is a documented fact that 90% of small businesses fail within 5 years. Of those that make it 5 years, another 90% will fail within the next five years. Which means, 99% of small businesses fail within 10 years. One of the primary reasons for failure is not charging enough.
There seems to be no shortage of hacks willing to work for dirt cheap prices nor does there seem to be a shortage of replacements when they fail. (*apartment job) One of the most effective means for avoiding failure is to know your numbers. Asking what to charge for a job is simply an admission that you don’t know your numbers.
Let me be clear that there is nothing wrong or inappropriate with asking how to price a job. But how to price is different from what price to give. Learning the process is a good thing. Looking for an easy way out isn’t.
Brilliant Windows LLC
1635 S. Overland Trail
Fort Collins, Colorado 80526
Frank V. Martinez / President / Director of Business Operations
Donald J. Mares / Vice President / Director of Field Operations
Business Reference and Contacts
Brilliant Windows LLC / Articles filed with State of Colorado 10/27/2017 #20171810455
Good Standing
TAX ID# 82-3251134 filed 10/30/2017
Colorado Sales Tax #38014371
General Liability Insurance
Contact: Clayton A. Hayfield 408-257-7456
Policy Number PCA5007-PC250654
Payroll Services / ADP
Contact: chloe.eckerman@adp.com
hr.brilliantwindows@gmail.com / PW: hrbrilliant