I’m curious how other contractors handle this.
Before submitting a bid, what numbers do you always check to make sure the job isn’t underpriced?
I usually think about labor, materials, overhead, break-even cost, and target profit margin — but I’d like to know what others actually use in the real world.
Do you use estimating software, a spreadsheet, or mostly experience?
I use a spreadsheet approach because I want to see the numbers before the bid goes out, not just after the job is finished.
The main numbers I look at are contract value, labor, materials, subcontractors, other direct costs, overhead, and target margin. I also think it is important to separate markup from margin because they are easy to confuse.
Once the job starts, I compare the original target cost against actual costs as they come in. That is where job costing becomes especially useful — you can see a cost overrun early instead of discovering at the end that a profitable-looking job actually lost money.
I also track change orders separately because they can completely change the final margin.
For a small contractor, I think a well-structured spreadsheet can handle this surprisingly well without adding another monthly software subscription.
To make sure a bid actually makes money before sending it out, you have to look at true labor, direct costs, overhead, break-even, and net profit.
True labor isn't just hourly pay; it includes payroll taxes, workers' comp, and benefits.
Direct costs cover materials, rental tools, permits, sub fees, and time spent driving.
Overhead covers the fixed bills like truck insurance, software, shop space, and non-billable office work.
Break-even is your direct costs plus your overhead.
Net profit is whatever percentage you stack on top of break-even so you actually make money on the work.
You verify those numbers using your own spreadsheets, saved line-item prices in your software, or past job history to make sure your estimated hours match reality.
The problem is that I don't have a way to track time at the specific task level so I'm not able to compare it to the estimate. Automatic comparison would be nice, but gathering the necessary data on the job is the bigger problem.
I have used National Estimator for straightforward plumbing, electrical, or carpentry tasks and found it to be fairly accurate. I'm curious if anyone else has used this and foud it accurate. Those building trades are not my primary business, so I have created some spreadsheets to help me estimate.
I provide maintenance, repair, and overhaul services on processing and packaging equipment. This includes mechanical, electrical, and fabrication work. I have spreadsheets with common tasks such as drilling holes, tapping, removing screws, replacing a pushbutton, wiring a plc input, etc. Each task has a time associated with it along with a multiplier. The multiplier is used to adjust for actual conditions such as removing fasteners that are hard to get to or drilling hard materials rather than mild steel. The spreadsheets are a work in progress. I populated the times initially by doing some time and motion studies to get a baseline.
Materials are straightforward. I add a markup and about a 10% contingency depending on the job. Some have very well-defined material needs and some do not.
I don't use the spreadsheets for all jobs. For simple ones, I can estimate the labor reasonably well based on my experience. I have struggled with tracking time granularly enough to assess the accuracy of the spreadsheets. I find I am close on total labor, but I don't know how close I am on individual items.
You mentioned that tracking time granularly enough to validate your estimates has been difficult. If you had a simple system that automatically compared estimated vs. actual time and showed which tasks were consistently under- or over-estimated, would that solve a meaningful problem for you? Or is your current spreadsheet already good enough?
