How do I actually bid a project?

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LKO

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Greetings to all!
I've read alot of people's questions about what the cost of this and that would be and what to charge...
What I need to know and learn is, "How do I bid an actual job" What is my overhead, what is my mark up and how do I determine profit margin?
I don't care what other contractors are charging, I just need to know and learn how to actually bid confidently.
I had a new experience of trying to bid a remodel job. (Residential) (wires were in a rats nest, tracing needed, Demo needed and framing wasn't ready yet)
The job seemed easy but time consuming, I quoted 3 days @ $65.00 per hour, about $1600.00. Contractor buys materials. I provide labor. Contractors always flinch, but he was getting bids.
Can someone help?
LKO aka "I'm dead broke electric"
:D

[ February 28, 2006, 01:25 PM: Message edited by: LKO ]
 
Re: How do I actually bid a project?

LKO, what do you mean when you say that you don't care what other contractors are charging? That is the most important thing to know. You don't have to match their price but if others bid less you must be able to sell you companies work based on something ( quality or dependability ). It's not a good idea to let the GC furnish the materials because you will always use some of your own stock and not get paid for it. When you calculated 3 days of work did you figure in time to get a permit, rough inspection and final. If the GC is on the job then you will not have to be there but I don't trust anyone that I haven't worked with. I always try to feel these small jobs out to see if they have any money to spend. Sometimes the construction cost is right on the building permit ( first place I go is to check the permit ). Around here a declared cost of 25K actually means 50K. Don't be afraid to ask questions, something like " have you got any money to spend on this project or am I wasting time just looking at it ". Many times they will come back with " the budget is tight but I have around 5 thousand I can spend on electrical". If you think you can get close to the amount quoted and still make money then give a bid if not back of nicely and inform them there is not enough in the budget for you on this job but you are still interested in future projects. Bidding remodeling is different from real construction because so many small companies are involved and many of the contractors don't have that much experience.

[ February 28, 2006, 04:14 PM: Message edited by: growler ]
 
Re: How do I actually bid a project?

Originally posted by LKO:
What I need to know and learn is, "How do I bid an actual job" What is my overhead, what is my mark up and how do I determine profit margin?

Your overhead is all the expenses needed to keep the business operating, regardless of how much business you are doing. These are things like advertising, insurance, truck payment, etc. It's probably not a bad idea to factor this figure into whatever hourly rate you have.

Markup is the profit you make on materials. Most ECs have a markup in the 20%-30% range. It takes time and effort to buy materials, so the markup should cover this.

Profit margin is what's left after overhead and variable expenses have been covered.

I don't care what other contractors are charging, I just need to know and learn how to actually bid confidently.

You really need to find out, since you are competing against them. If you are way too low, you may come across as a low-balling hack, and you just might find yourself making very little money. If you're too high, you probably won't get too many jobs unless you can convince people you're worth the extra money. Chances are, you won't get the opportunity to make that case.

I had a new experience of trying to bid a remodel job. (Residential) (wires were in a rats nest, tracing needed, Demo needed and framing wasn't ready yet)
The job seemed easy but time consuming,

Why does this sound so familiar? :p

Bidding remodeling is tough because of all the unknowns. You have to factor in the rewiring, demo, framing not ready, etc. Explain to the GC that you are bidding high because you have to assume worst-case scenario on all the unknowns. If you don't factor them in, you'll wind up having to eat the time. I didn't start my business so I could eat time, and you probably didn't, either.

I quoted 3 days @ $65.00 per hour, about $1600.00. Contractor buys materials.

Big mistake. Never let anyone else buy your materials. Chances are, he's going to buy cheap junk that is installer-unfriendly, and when it falls apart in a year, guess who gets blamed.
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Re: How do I actually bid a project?

I agree. Avoid customers that insist on furnishing materials. The markup you get on materials covers the mistakes made on labor. You also have to warranty the installation. Customers have a false sense they are saving money by furnishing materials. If I have a job where say, fixtures are furnished by owner, I mark-up the job as if I was furnishing them.
When I first got my Master's license, I thought that was all I needed to go into business. I found out real fast I didn't know how to estimate by being way too cheap. I then went to work for a contractor as a junior estimator. It takes years to become proficient. I'm not suggesting you do this, but it's not as simple as getting on this forum and getting tips. There are tons of siminars, books, etc to learn. Your competitors will thatnk you for it.
 
Re: How do I actually bid a project?

Profit margin is what's left after overhead and variable expenses have been covered.
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I have to respectfully disagree somewhat. PM should be built into hourly rate as well. It is actually what is left, but it needs to planned.

My overhead is figured based upon all of my expenses, including my wages (one man show)divided by the expected number of billable hours. Billable hours is the important term. Time for permits, bidding, doing PR with the customer are not billable, neither is a potty break. Take all of your expenses and divide them by a realistic estimate of your hours that are actually applied to a job and you will be very close to covering your bum.

Secondly, figure your proffit margin into the hourly rate. That is as simple as say adding an extra 8% onto your hourly rate.
I created a spreadsheet that does all of my calcs. for me. If my insurance costs change, I simply change the number in the spreadsheet to see what it will do to my hourly rate.

Mike
 
Re: How do I actually bid a project?

Potty breaks are not billable. Oh sh___ there goes my profit margin down the toilet again.
 
Re: How do I actually bid a project?

cdslotz

You said, "If I have a job where say, fixtures are furnished by owner, I mark-up the job as if I was furnishing them."

I find it easier having the homeowner pick out the fixtures and agreeing to an installation price than going through the trouble of selecting fxtures they may or may not like.
 
Re: How do I actually bid a project?

I don't. I am considering all the things about the job while I conduct my business in there. And like my attorney, I bill for the mental labor expended. :D
 
Re: How do I actually bid a project?

If you use labor units accociated with materials, they include potty breaks.
 
Re: How do I actually bid a project?

It just seems to work better for me to "inflate" my hourly rate slightly by counting permit time and some other chores as overhead and tell people that I don't charge per hour for getting permits, etc.

Macmikeman, that's a good idea. I never thought of it like that!

[ March 01, 2006, 06:29 PM: Message edited by: hey_poolboy ]
 
Re: How do I actually bid a project?

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