With rising costs and clients being more mindful of their spending, people occasionally ask us how our pricing works. It’s not as simple as you think. In the world of contracting, labor + material ≠ costs.
Here are some of the not-so-apparent costs that we use to develop the costs per hour:
- Business Insurance
- Workers Compensation Insurance
- Tooling
- Administrative Costs (Project Management, Material Procurement, Sub-Contractor Scheduling, etc.)
- Taxes / Permits / Certifications
- Vehicle/Machinery Rental & Maintenance; Fuel
- General Overhead (Accounting, Legal, Utility Costs, etc.)
You may be thinking “Why should I care about that?” Here’s Why –
Quotes & Costs
Like any business, contractors exist for two reasons – 1. To provide a product/service, and 2. To make a profit. These costs (and many others we won’t elaborate on today) aren’t something that contractors can afford to swallow and stay in business. The key for clients is how these costs roll up into a bid. A well-run company knows exactly what these costs are, and works diligently to manage them, reducing the burden for clients! Ever wonder why there is such a disparity in quotes you are receiving from two different contractors? Odds are, it has everything to do with the amount of these costs the company needs to account for in order to survive, and how well they are being managed by the company leaders.
Reliability
Can you get your project done cheaper with Stan in a Van or Chuck in his Truck (that have no overhead)? Sure. Just remember, they may not have the bandwidth to warrant their work, be uninsured, and could stop answering the phone at any time. If we can’t accommodate a client’s schedule and get asked for a referral, you can be sure we will send folks to other household names in the Cedar Valley. This is simply based on their longevity, and the quality/value they are able to provide. Based on your needs, only you can decide if those are risks you are willing to take.
Variety of Services
Lastly, some clients may look for an ‘ala carte’ quote. This is a breakdown of prices for each portion of a project. While we can develop those numbers, clients should understand that the relationship between labor and materials almost never directly correlates. Some aspects might involve multiple trips, employees working together rather than on different activities simultaneously, specialty/subcontractor involvement, etc. It’s best to have an open conversation about budgets, priorities, and timelines up front so you can work together to develop plans that best accommodate your needs!
Hopefully, that gives you a little bit of insight into how contractors develop bids. We can assure you that we are working just as hard behind the scenes managing our business, as we are at delivering you value on your next project! Happy Fall!