I agree that the formula isn't great. I'm not following you're formula either. So I apply a mark up on materials, apply a labor rate and THEN add a specified profit margin? Why not just add more on to the Materials mark up and have a higher original labor rate?
I see your example about the gold boulders. But as I said earlier, I wouldn't break down my formula to clients. If they asked I would even out my numbers to make more sense. The current formula that I mentioned on this thread is just for MY bidding purposes until I get more comfortable with guessing total man hours. In your boulder example, If they asked how much I would bid to install the boulders I obviously wouldn't tell an actual customer $25/hour.
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Originally Posted by clipfert
Labor hours way too low.
Mark up way too high.
This formula will not work.
What if you were installing 5 solid gold boulders at 10 million a piece? With your formula your labor if would be 150 million. This example is extreme but you can see what I mean.
If you gave that proposal to someone broken down with your numbers what are you going to do when they tell you they will supply the material? You take the job and will lose big tine on your $25/hr rate.
Mark up your materials 20-30%
Apply your labor rate. This will include your overhead and labor burden.
Add profit margin to above total.