Proposals for residential remodel, basement finish, service work

[JustRob]

I'm in my second year of business, I have no employees aside from the occasional 1099 apprentice. I never got into estimating but I noticed that the T&M's I did for my previous employer always worked out, so I've just been pricing up my jobs the same way.

I'm pretty good at accounting for about 95-100% of material, put a small mark up on it and then just try to guess how long it's going to take me to do the job. Right now I'm using $95-$120/hr. depending on what its for. It can take some time but I feel its a good way to make it profitable and a good price for the customer.

The only problem is that I have no idea where I stand when it comes to the average prices that home owners/contractors are paying for these services. I'm in central Colorado. I'm getting a lot of custom kitchen remodels, basement finishes and service upgrades. The smaller service jobs are a no brainer to price up but when I throw out a number for a basement finish, I'm left guessing whether this method is producing normal pricing.

I've tried to wrap my head around price per square foot and price per opening but I don't know what the average price is to begin with and some of the custom work I do absolutely cannot be priced up that way. I hear about people paying 7k for a service upgrade that I could easily do for 3500. I also have contractors asking for flat rates for air conditioning and service work, that sound crazy to me unless I just shoot real high.

The only feedback that I've gotten so far is that my prices are on the low end. I have had one contractor come back and say that my number for a kitchen was on the high side, but I still got the job.

 

[kwired]

You said small markup on materials. Probably should be at least 25% markup, some go more some nearly double materials. Not just electricians but any similar trade often does this.

When a warranty situation comes up, your markup is all you have to cover it. If it is product defect maybe the supplier will repair or replace an item but labor is still on you.

Otherwise for estimating/bidding you probably been doing the work long enough to know what will needed and how much time it likely will take you. That is where the higher markup helps you to some degree should you overlook some things. Also probably should consider that things will take longer than you thought they should take when estimating.

When estimating/bidding make the scope of the work clear. Many the smaller projects like you mention often don't have well drawn up plans and a lot of decisions end up being made on the fly throughout the project - which makes estimating difficult. On top of that a problem I often had when I was newer at this was I'd try to give a price for what I thought would be desired, only to have them decide to go with someone else that gave a lower price yet was for a minimal install and they complained the other guy charged them extra for all the stuff he never included in his original estimate.

Remember you can always estimate high, and tell them there is possibilities on trimming the fat - especially for those jobs with definite plans that will result in varying bid/estimates simply because not everyone is bidding the same install. I've found it to be much easier to talk a customer into spending less when there are items you had included that end up being something they don't really want than it is to try to ask them for more money when they come up with things you did not include.

 

[JustRob]

You said small markup on materials. Probably should be at least 25% markup, some go more some nearly double materials. Not just electricians but any similar trade often does this.

When a warranty situation comes up, your markup is all you have to cover it. If it is product defect maybe the supplier will repair or replace an item but labor is still on you.

Otherwise for estimating/bidding you probably been doing the work long enough to know what will needed and how much time it likely will take you. That is where the higher markup helps you to some degree should you overlook some things. Also probably should consider that things will take longer than you thought they should take when estimating.

When estimating/bidding make the scope of the work clear. Many the smaller projects like you mention often don't have well drawn up plans and a lot of decisions end up being made on the fly throughout the project - which makes estimating difficult. On top of that a problem I often had when I was newer at this was I'd try to give a price for what I thought would be desired, only to have them decide to go with someone else that gave a lower price yet was for a minimal install and they complained the other guy charged them extra for all the stuff he never included in his original estimate.

Remember you can always estimate high, and tell them there is possibilities on trimming the fat - especially for those jobs with definite plans that will result in varying bid/estimates simply because not everyone is bidding the same install. I've found it to be much easier to talk a customer into spending less when there are items you had included that end up being something they don't really want than it is to try to ask them for more money when they come up with things you did not include.

I guess I've been kind of gun shy to take my mark up past 15%. I'm happy with the number that I come up with. I'm extremely descriptive with the scope and I have a pretty good terms of service that outlines warranty issues. I have a good connection when I deal directly with the customer and everything is laid out on the table. When I submit a number to a contractor I know that they know what the number should be so I usually second guess my proposal and shave a little off. I'm not sure they would tell me that I'm not paying myself enough haha.

 

[jim dungar]

There are many ways to price, high markup and low hourly rate or low markup and high hourly rate, are only two of them.

My guess is that you thinking of the labor rate you pay to a worker and not taking into account all of your actual overhead costs and profit (return on investment).

 

[Seven-Delta-FortyOne]

“Markup” is meaningless, until you define what it is you are using it for.

Is it to cover overhead, profit, mistakes, missed labor, labor burden, or just because everyone else does it?

Whats missing is the fact that you don’t know what it cost YOU and YOUR company, to be in business.

And the very first thing you need to figure out is your overhead. That is what will make or break a construction company.

I’ve already posted two long posts here about pricing, and figuring overhead, so in an effort not to be more tedious than I already am, I’m link to them here.

Figuring And Applying Overhead……

This is a little thing I put together for a Contractor's FB group I’m on. FIGURING AND APPLYING OVERHEAD: First thing to understand is, figuring overhead is an ongoing task, and it deals with some projections. As the year progresses, projected figures will become actual figures, and you will...

forums.mikeholt.com

Pricing A Job….

This is my method, and this is the other sort of lengthy post I put together for the FB Group. I am a General Contractor as well as an Electrical Contractor, and as you will see, it was more geared towards the General’s, but I think it would apply equally to any type of Contractor. Many ways...

forums.mikeholt.com

Let me know if these are helpful, and if it makes sense.

 

[JustRob]

I guess the original intent of posting this was to affirm the overall method that I'm using to price up a job, and possibly the going rate for this area.

I'm just trying to present a competitive bid for the general contractor type. Again, I'm happy with the numbers I'm producing and if pen & paper with parts & labor isn't unheard-of then I'll just keep on doing what I'm doing.

I'm in a great spot where my overhead is so small that it doesn't really play a major roll in my decision making. The small mark up I use simply goes toward my admin hours to price these things up and job walks.

Trying to google this topic always leads me to outdated threads on how much $ per sq ft people are charging. Thats when I ask myself if I'm doing it wrong. With the boom we just had out here, seems like everything has gone up including these residential jobs. Just trying to stay competitive, a good deal of my work comes from referrals.

 

[JustRob]

“Markup” is meaningless, until you define what it is you are using it for.

Is it to cover overhead, profit, mistakes, missed labor, labor burden, or just because everyone else does it?

Whats missing is the fact that you don’t know what it cost YOU and YOUR company, to be in business.

And the very first thing you need to figure out is your overhead. That is what will make or break a construction company.

I’ve already posted two long posts here about pricing, and figuring overhead, so in an effort not to be more tedious than I already am, I’m link to them here.

Figuring And Applying Overhead……

This is a little thing I put together for a Contractor's FB group I’m on. FIGURING AND APPLYING OVERHEAD: First thing to understand is, figuring overhead is an ongoing task, and it deals with some projections. As the year progresses, projected figures will become actual figures, and you will...

forums.mikeholt.com

Pricing A Job….

This is my method, and this is the other sort of lengthy post I put together for the FB Group. I am a General Contractor as well as an Electrical Contractor, and as you will see, it was more geared towards the General’s, but I think it would apply equally to any type of Contractor. Many ways...

forums.mikeholt.com

Let me know if these are helpful, and if it makes sense.

Yes, thank you, this is all good information and I know that I will have to do this eventually. I haven't even been working at this full time, for a few different reasons, but when I get cranking I'm going to be looking at all of this. At this point I was just trying to do a bit of market research and see if anyone had any different methods when it come to putting pen to paper for something simple like a basement bid.

 

[Seven-Delta-FortyOne]

That is a common mindset, but one that I feel is very misinformed.

Being in business is a trade, just like electrical work, or carpentry. If someone were to ask me how to become an electrician, I would tell them they need to learn the trade. If they said they just wanted to get going on it, and didn’t know ohms law, the NEC, or how to use a meter, and they were just going to start connecting wires and see what worked and what didn’t, I would strongly discourage that method.

Same with the business end. I always say that the moment a tradesman decides to go into business for himself, he now embarks on a brand new apprenticeship, namely, business.

Knowing what others in your area are charging is good knowledge to have, but it will never tell you if YOU are profitable.

Contractors who decide not to be as tight in business and their numbers as they are in the trade, are doing the same disservice to the industry as those who perform sloppy trade work.

I am not in any way criticizing new business persons. I am only trying to encourage new business owners to understand that KNOWING YOUR NUMBERS and your business is every bit as important, for you, your company, your customers, and the entire trade industry, as providing quality craftsmanship on the trade end.

 

[JustRob]

Appreciate it.

 

[JohnE]

This shouldn't be that difficult. The 'going rate' doesn't matter. What is your 'rate'? How much can you charge for the job and make money? (granted you won't win bids if you are substantially more than the competitive market)

Personally, I have always used a unit pricing for my work. Receptacle...$x...Recessed light...$y and so on and so on. Figure out your costs and go with it. If you can't make money on 'the going rate' why would you do the work?

I'm not trying to be harsh, just trying to put it into perspective. You're asking questions here because you are not well equipped to run your business. I'm still not trying to be harsh. But owning and operating a business is 'no joke'.

 

[JustRob]

With all due respect I started this conversation because I haven't been in contact with any of the electrical community since I went out on my own. The reason I went out on my own was out of pure necessity, not for the glitz and glamour. I don't need to share the reasons why I needed to go out on my own but the past two years has been a lot more than just starting a company. I honestly would have just kept working but with this season of life I had to switch things up and I wouldn't have done it different at this point.

I have actually done quite well for myself in the year and a half that I have been in business. I have my finger in the pulse of what's going on with the financials and of course I know how how much it costs to run thing. I did that day one. My wife is an accountant, she wouldn't have it any other way.

The only thing that I haven't done is peg my operational cost to what I charge. If I did that I'd be charging 75 bucks an hour. I am piggy backing some of the rates that I am familiar with and in doing so, yes, I am reaping the benefits of having such low operational costs.

I am at the point now where I can hopefully start to scale up a bit and I am in play with a couple of new contractors that could potentially keep me booked up with basement finishes and simple remodel and insurance work. I figured that I would just kindly ask if anyone had an idea as to a more reliable, and maybe even quicker way, to price up a simple basement job. Maybe some insight on rates for my area.

Bam. Thank you so much for the private conversions on this subject, very productive.

 

[JustRob]

At this point I think I'm all good.

 

[ramsy]

I would just kindly ask if anyone had an idea as to a more reliable, and maybe even quicker way, to price up a simple basement job.

In Post #5 Seven-Delta provides one accounting solution to track profit & loss.

Typical bid price methods include T&M, per opening, per square foot, and per task. Seven-Delta's per Day method is a hybrid, which may offer more control for the circumstances described.

Maybe some insight on rates for my area.

Good luck getting local competitors to tell you their rates.

 

[Omid]

I used an Excel form and added some formulas to it. I also included a difficulty factor with only four groups. This makes it much faster and easier to price. By the way I also found those two posts from Seven-Delta-FortyOne very informative.

 

[Seven-Delta-FortyOne]

I have my finger in the pulse of what's going on with the financials and of course I know how how much it costs to run thing.

The only thing that I haven't done is peg my operational cost to what I charge. If I did that I'd be charging 75 bucks an hour.

I must say that I am having some degree of difficulty reconciling these two statements.

But whatever, if you got this, good for you.

Im at $160/hour right now, with a $250/first hour charge. And I know I’m low for California.

 

[JustRob]

Im at $160/hour right now, with a $250/first hour charge. And I know I’m low for California.

Ok, this is good. I think I'm low for Colorado, I just don't want to be too low.

 

[JustRob]

I used an Excel form and added some formulas to it. I also included a difficulty factor with only four groups. This makes it much faster and easier to price.

A spreadsheet would be great. This is the way I envision getting these thing done in the future. May I ask what fields you would be entering for, lets say, a simple basement finish. I can kind of bring this back to my original premise, I'm currently breaking these jobs down by material and projected labor. I have to assume this is the most time consuming option that I have, and possibly less consistent (i have found fluctuations in my numbers) although it does still work. Lets put rates, and how we come up with rates, aside. What is the preferred method?

$ per sq ft
$ per opening
projected parts & labor

 

[JustRob]

Ok, this is good. I think I'm low for Colorado, I just don't want to be too low.

And to be more specific, not trying to come off as greedy, it would be nice to give myself a raise. I get a bunch of referrals based off of my low prices and quality of work, attention to detail and flexibility with scheduling. I don't want to upset this trend but the price of food has gone up 100% since I bought my house haha.

If I take on an employee and have to make some major financial obligations I could easily see simply pricing based off of my operational costs plus profit etc etc. I'm not there yet. I am still a work horse and while I can manage it I'm trying to bank as much as I can keeping myself busy and not taking on extra overhead. I'm extremely profitable right now and that's not a bad thing. It allows me to help people out at a lower rate a still make money but I would be dumb to not price out some of these jobs closer to the "going rate" and not based off of what It costs me.

And there is a going rate. There is an accepted norm as to what these things should cost and I'm just trying to tap in to some of these figures. If that's information that I will not be able to find here, that's fine.

I helped out an old employer last summer. He was in a pinch with a project that went south. It was for a school district and he was about to have their legal team involved. I did a cost analysis and determined that I could give him 3 months of my time, driving an hour out of town everyday, at $65 and hour. I still did very well for myself even at that rate.

It's arbitrary, and I guess I could have lead with that information, but was not the reason for coming here. Thank you for your (2) archived breakdowns for overhead and pricing jobs. This is evergreen material that I see myself referencing.

 

[ramsy]

Sounds like you might be more comfortable hiring a professional estimator to explain all your options on each job.

 

[Dsg319]

Sounds like you might be more comfortable hiring a professional estimator to explain all your options on each job.

I guess anyone who asks a question on here should hire a “ professional electrician” to go ahead and do the job they have the question about instead of caring enough to learn about the most efficient and correct way of doing the job.