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What would you price this job (details)?

8K views 26 replies 14 participants last post by  hamiltonenterprising 
#1 ·
I'm new to the business. I'm subcontracting right now. A guy designed the project, my crew and I do the dirty work.

Here are the details:
Materials (at WHOLESALE costs): $1,750.00
Total Labor hours (including me): 66
Extra expenses (gas to/from, equipment rentals):$490.00

So...what would you guys say you would price it as? I'm not talking as a subcontractor, just overall price to hand to customer.
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#2 ·
Here's what I'm figuring. You guys tell me where I'm off.
I would say this is a $7,428.14 job. That breaks down as:
Materials: 5,292.06 (wholesale times 3)
Labor: 1,650 (66 hours x $25/hour)
Extras: 486.08 (I rounded up to 490 earlier)

Is wholesale times 3 reasonable? Btw, I wouldn't break down line items on a bid like this with the customer.
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#4 ·
Try it and learn from it.

1. were you able to get the job at that price
2. did you estimate the right cost of materials
3. did you estimate the right number of man hours
4. was there enough money to pay you and your help and still cover the cost of your overhead and profit

The less billable hours you have each year, the larger the amount of money you have to recover out of that hourly rate. That does not mean that people want to pay you more per hour to work, but it is a reality that you have to account for.
 
#9 ·
What kind of job is it
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The job includes putting in 2 beds, planting 3 small ten gallon crape myrtles, 3 5-8 ft blue atlas trees, 1 7-8 ft golden deodora, maiden grass all around, salvia plants and a few others. (Removal of sod, applying edging, hauling in 1 ton of top soil, landscaping fabric, plants, then adding 2 tons of 3"rock instead of mulch). Also includes delivering and installing five ~200 pound boulders.
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#10 ·
300% markup seems high depending on what it is and your hourly rate seems low
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I'm not covering much overhead at $25/hour. However, I am making it up by overcharging on the material. My logic is that, as a newbie, I am always going to be off on the time expected to complete the job (total man hours). I have been low everytime. So to balance that out, I gave myself the cushion of tripling wholesale prices. This gives me a balance where I know I'm not going to underbid hours tremendously.
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#13 ·
What kind of warranty do you provide? Like a 1 year disease warranty?
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1 Year Plant warranty. Covers any plant death other than not watering and acts of god. Tough to tell a customer " you didnt water" during hot months though

A pretty good idea btw is to triple plant costs to find labor, MU + warranty prices. comes out pretty close except for larger plant material (lg Bnb trees and that type of thing)
 
#14 ·
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.
 
#16 ·
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.

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.
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#17 ·
Here's what I'm thinking now. Tell me about this potential formula. $50/man hour, and 200% wholesale price (doubling wholesale price).

I'm on my phone but I think it comes to $7,200 which is fairly close to my original number but more more sense in the formula.
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#18 ·
Here's what I'm thinking now. Tell me about this potential formula. $50/man hour, and 200% wholesale price (doubling wholesale price).

I'm on my phone but I think it comes to $7,200 which is fairly close to my original number but more more sense in the formula.
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Excellent advice here. I knew my formula was nothing but a stop gap until I found a real one.

What do you all think about this one:

Materials: 200% of wholesale (double wholesale)
Labor: $50/ man hour.

Is that reasonable or do you think it should be more like 175% of materials and $65/man hour?

In the 200% MU example, I show the bid to come to 7,200. That's fairly close to my original number. In the 175% example the price would be 3062.50+4290=7352 + 400 extras= 7752.50

Which do you think is more feasible in the long run?
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#20 ·
Neither. Can you tell us what your profit is? Your profit margin is added to the end for one specific reason. Keyword "MARGIN"

If your not making a profit why do the job?? You are just employing others and working for a wage.
I can tell you my operational profit (money made on this job, including material purchase, labor, gas, rentals, etc) but it won't include overhead (insurance, phone bill, etc etc) because that all gets very complicated applying overall overhead to specific jobs.

Materials+labor+miscellaneous expenses (gas, rentals, etc) is 3,068. Operational profit margin on this job is in the ballpark of 40-45%.

I'm new to landscaping, but not new to financial statements. I graduated Magna Cum Laude in Finance and my background is understanding finance. I've never seen a financial statement that adds in a profit margin AFTER. Profit, by definition is revenue-expenses=profit. Therefore profit is what you have left over AFTER subtracting expenses from revenue.

I can understand if you've tailored a custom formula that works for you, that's cool. All I'm saying is that I haven't seen one done that way, and was hoping you could show me what you mean.
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#22 ·
Clipfert has a lot of good advice.....

Yes, you are marking up product WAY WAY WAY too much. I wish we could mark up product like that and still land jobs. Maybe if I had a labor rate that low it would sometimes work out. But that's the wrong way to do it.

First of all, you have to stay somewhat competitive. Nobody else is going to be marking up materials 200% or 300%. That's ridiculous. What are you going to say when a customer asks you what portion of your "lump sum" bid is materials? You going to lie to them? Make something up? Give them the real cost? Either option is a bad way to go. It's best to just mark it up by a percentage that is fair and then make your money on the labor.

Now what is a fair mark-up? Well, your customer isn't going to want to pay a whole lot more for materials from you than he would on his own. He may allow you to charge a little more for your procurement time. But not 200%. There's a really easy rule-of-thumb for how to charge for product: Charge what the customer would pay on his own if he were to buy that same product. In other words, they pay you RETAIL PRICE.

What that means is that sometimes you'll make a really good mark-up, because the price you can get things at is at a deep discount. Other times, it means you don't make as much, and then you may have to add 20-30% for your procurement time (and warranty).

Plants, I am able to buy for about 50% off what the customer would buy them for. But I can't even sell plants at full retail because most of my competitors sell them for less than retail. So in order to remain competitive, we mark up plants only 30%. That's more than fair. We make a good profit on them and it covers our procurement time. Actually, there's very little procurement time. Maybe just my time ordering them, because the nursery I use delivers them straight to our jobsite.

Raw materials like barkdust, soil, gravel, aggregate, sand, mulch, etc. I can only mark up maybe 20% in order to remain competitive. But that's fine. 20% is a totally fair and normal markup in our industry.

Irrigation parts & materials I can mark up quite a bit. Because I get most of them at 50% off and they have nowhere to buy them that cheap. So I can mark them up at least 50% over my cost and still be under what they can buy them for. Let me provide an example. Let's say a rotor head lists for $20.00. I get them for $10.00. I can mark them up 50% to $15 and still be under what my customer could buy them for. So irrigation materials mark-up is about 50% for us on install jobs.

Sod, I cannot mark up too much. For one, because we only get like a 10% discount. For two, people call and find out how much sod costs and if I marked it up too much, they'd call me on that. So we mark up sod about 20% from our cost. And 20% is still a decent markup for something that takes only one phone call and is delivered.

Outdoor lighting is our biggest profit margin item. We get about 60% markup on that product. Which is really nice.

Our labor rate is $60 an hour and that will probably go up to $65 in 2014. That is where we make our profit and cover overhead. Anything else we get on material mark-up is just bonus.

Also, giving a "lump sum" bid might work if all you're ever going to do is small jobs in the $2,000-$10,000 range. The main problem with the "lump sum" price is that people feel you are not justifying how arrived at that number. A lot of people are going to be thinking, "What??? $7,500 for some planting beds??? How the heck??? That seems outrageous!" And they'll start shopping you. In the end, they'll probably find out that the price wasn't too awfully bad, but now that they've talked with several other contractors they decided they liked another one better. So you lost the job because you scared them off, initially.

I eventually learned that our customers like our bids broken down by detail. Then they would look at my bid and think, "What??? $7,500? How the heck.....Let me see.....Ok....$1100 for the plants... I guess that sounds about right....$2200 for the trees....yep.....$400 for planting soil, Oh yah, I guess we need that.....$50 for planting fertilizer, yah, I guess we need that.....$250 for bark mulch to finish off the beds, guess that makes sense......$340 in irrigation materials, yah, I guess that seems fair since there aren't any sprinkler heads over there..... and $3160.00 for labor.... I guess that sounds about right. Wow! That all adds up to $7500, huh??? I guess so. Ok. I guess this seems fair." Then we have a better chance of landing the job, because we broke it down for them and they can see all of our pricing is fair and well thought out. We're being completely up front about every cost. Customers like that.
 
#23 ·
Like Jim said, some things are better margin than others. I'm a dealer for outdoor stainless steel cabinetry and appliances, and the margin is good there. If I don't get a discount, though, I have a purchase agreement that I give my client that says their cost is retail plus 25% for me to acquire it on their behalf, plus installation and setup. It's simple, it's transparent, and it makes negotiation easy.
 
#24 ·
..... It's simple, it's transparent, and it makes negotiation easy.
That's why I like itemized bids. It's easy to show my customer that I thought of every single cost and itemized all of the costs for them to see. Otherwise, I used to have the customer come to me with stuff like, "Whoa! $3400 in materials??? How much am I paying for the sod?? How much are each of those trees???" etc. Now I never get those questions. They see how much each price is and if they bother to check how much those items are on their own, they will find that I am selling them for a fair price. Maybe sometimes a little more than they'd pay. But not much. And that's understandable, since I'm handling all the ordering and procurement.

This also eliminates people trying to negotiate with me. I used to give the lump sum bids and for a $7500.00 job I'd have people say to me, "We like your company. But the cost is higher than we can afford..." (Which is often code for, "we have the money but we want to see if we can get you to do it for less so we can use the extra money for that nice vacation we're hoping to go on"). "..... Could you guys do the job for $6,500? If so, I think we have a deal."

I don't get stuff like that anymore. Because they can see there isn't much room for negotiation. When you just give them a lump sum bid then they're thinking you've built in all sorts of extra wiggle room (which you have, I guess, if you're charging 200% or 300% mark-up). When I give one of our bids they can see there isn't any wiggle room. It's not like I marked up stuff excessively. And it's not like my labor is unfair. It's obviously a fair bid and they can take it or leave it.

Another really nice benefit to giving itemized bids is it often makes us look better than the competitor. If they get another bid that maybe doesn't mention each of the materials (e.g. lump sum bid) then they'll often take my bid and ask that other guy about each of the items in my bid. Often times, they find out that that other guy didn't plan on using that big of a tree, that much soil amendment, any mulch to finish off the job, etc. So they start to realize that we've really thought it through more thoroughly than the other guy has.
 
#25 ·
When I bring a contractor in to my clients, I prefer to see an itemized proposal. I know some guys like to shoot for the moon so they can be the hero and throw in all kinds of "extras" throughout the job, but I've seen that massively backfire. I designed a project for a poolbuilder back in '08-'09, and his costs (materials, subs) would've been $66k. So I assumed that since everyone was tight on work in that area at that time, he'd price somewhere around $110k, and that would've been fair for the job (pool, engineered walls, etc) and while a stretch, not way past their budget.

So I present the design, homeowners love it, and I turn it over to the poolbuilder. He does a little warm-up spiel and then says "folks, this project is $194,000 but if you sign today I'll do it for $176,000." I almost fell out of my chair, and if I had I would've landed on the floor next to the clients. There was nothing to discuss, nothing to value engineer or phase in, he just whipped out a lump sum, flung it against the wall, and tried to make it stick. It didn't, and not only did they not move forward with him, they wouldn't return any of his phone calls OR any of mine. Had he gone through a line item proposal they would've probably not liked the # at the end, but they would've at least been able to see where they could reduce. Moron.
 
#26 ·
I can tell you my operational profit (money made on this job, including material purchase, labor, gas, rentals, etc) but it won't include overhead (insurance, phone bill, etc etc) because that all gets very complicated applying overall overhead to specific jobs.

Materials+labor+miscellaneous expenses (gas, rentals, etc) is 3,068. Operational profit margin on this job is in the ballpark of 40-45%.

I'm new to landscaping, but not new to financial statements. I graduated Magna Cum Laude in Finance and my background is understanding finance. I've never seen a financial statement that adds in a profit margin AFTER. Profit, by definition is revenue-expenses=profit. Therefore profit is what you have left over AFTER subtracting expenses from revenue.

I can understand if you've tailored a custom formula that works for you, that's cool. All I'm saying is that I haven't seen one done that way, and was hoping you could show me what you mean.
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With your financial wisdom am I correct in assuming you have a fair math background? Here comes a math lesson.

You posted revenue- expenses = profit but were not trying to find the profit you're asking for the price or in the words of the equation revenue. To solve for revenue you have to add expenses to both sides of the equation. Therefore to find revenue = profit + expenses. If I were to put it in context of your job price = materials + labor + misc + profit

We have now appropriately solved the equation that you posted and came to the same conclusion as the other posters.

Thats all for today class, tomorrow's lesson is multiplication
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