Forum Discussion

travisshepherd's avatar
travisshepherd
Verified Community Coach
4 days ago

How do you calculate your baseline price before sending a quote out?

​When you look at a job site, how are you actually building your estimates? Are you pricing based on true operational costs and target profit margins, or are you matching local competitors and hoping there is money left over at the end of the month?

​Knowing your numbers comes down to a few key questions:

​What is your true hourly overhead rate? (Total monthly fixed overhead divided by total monthly billable hours)

​Are you calculating margin or markup? (Markup on cost is not the same as gross profit margin. If you want a 30% margin, multiplying your costs by 1.30 leaves you short at 23%.)

​What is your minimum shop rate before pulling a rig out of the driveway?

​How are you handling this in your business?

cleaning
how much to charge
painting
pressure washing
pricing strategies
profit margins

1 Reply

  • HUGEHomePros's avatar
    HUGEHomePros
    Verified Community Coach
    12 hours ago

    I think anyone that's basing prices off their competitors is making some really big assumptions that could get themselves in trouble. If you base it on someone else's price you are basically assuming they are saavy business people that have a firm understanding of their P&Ls and are pricing themselves for growth. I'd guess that 9/10 contractors are not like that. 

    Basic rule of thumb - for every $1 you spend, your should be charging $2. Obviously you aren't going to get your overhead back on one job but you need to come up with an hourly rate or day rate for labor that will help you get that back over the course of the month. 

    our minimum rate is a half day - $550. It works out to $137.50/ hr. What I learned years ago when my min charge was less, people would run my guys around trying to accomplish as much as possible in 2 hours then we'd get callbacks then poof! There goes any profit. I'd rather have ample time to accomplish tasks, only work with people who can afford quality services. I'd rather have my guys not work and make no money then have them work at someone's house, have to coordinate everything, and give me stress - AND make no money.