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Discussion in 'Business Operations' started by dylan, Nov 26, 2004.

  1. dylan

    dylan Member
    from Ontario
    Posts: 273

    I tried a "new" layout for my quotes this summer and got pretty good feed back from my customers. They often found one big figure intimidating so I broke it down and showed them where their money is going. Here is how it works.
    I list all the materials that they are getting for the job. Quantity, colour, brand, ESTIMATED price and cost to deliver. They now know exactly what they will be receiving and can see that it does not take long to spend money on materials. I charge the customer what they would pay if they got the materials themselves. The only place I might get a markup is if I can get a contractor discount. On some items I won't be getting a markup so if something costs more than estimated then the customer gets charged more. They are aware of this upfront. The customer pays for everything.

    Then I estimated the number of hours required for the job. This gets multiplied by the hourly wage that I charge for employees. I charge by the hour for however long the job takes. The customer pays for everything.

    Next I show overhead recovery. I figured out what my overhead is on a daily basis and multiply that by the number of days working the job. This number can't be negotiated. The customer pays for everything.

    Finally I include my profit. Based on a percentage of the job.

    I often get asked if that is the best (lowest) that I can do. With my set up I can quickly look back and see where some money can be saved if the cost is too much for the customer. I usually don't feel like reducing my profit just for the fun of it so that option is out. I can't reduce my overhead recovery numbers because that needs to be recovered. The labour numbers can't really be reduced unless the scope of the job changes and that money needs to be recovered to pay the workers. Material costs need to be recovered as well, but if the customer were willing to limit some aspect of the job and eliminate some material it would have a trickle down effect and lower the labour, OHR and profit areas as well.

    Hope that all makes sense to everyone. Some customers don't like to deal with all the numbers so this system is not great for them but most enjoyed using it. The customer should be paying for everything. I like it better than just marking up labour, material and adding a profit. In the long run it may achieve the same thing by recovering overhead and producing a profit.

    Is anyone else using a different method?
    Here is a sample layout that I can use when walking the property. Certain sections may need to be resized for actual use.

    Item Quantity Estimated Cost Actual Cost

    Filter Cloth
    Edge Restraint
    Spikes, Staples, Glue
    Jointing Sand
    Granular "A"
    Granular "B"
    Stone Dust
    Wet Saw
    Cut Off Saw
    Small Tamper
    Large Tamper
    Jumping Jack
    Sprinklers, Timers, Hoses
    Plant Material (see list)
    Screeding Materials
    Disposal Fees
    Decorative Stone

    Material Total
    Overhead Recovery
    Total Cost
  2. tiedeman

    tiedeman LawnSite Fanatic
    from earth
    Posts: 8,745

    that was too much reading for me :)

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