Guide on How to Price a Job as a Contractor

It is essential to understand the scope of work before you come up with your pricing.

Before you quote, consider the following:

• Job Location: Is the job location close to your office or remote? You need to consider the traveling costs here.
• Job site size: You must measure everything relevant to the job. For instance, if it's a construction business, measure every inch of the area where you have planned to build.
• Check for existing damage, accessibility issues, or safety hazards: A quick walk around the place can give you a clear picture of everything you want to check. Take pictures and attach them to your customer's profile for reference.
• Consider time constraints: If it's an urgent construction project, then difficulties accompany it. So ensure to charge more for the tight timeframe.
• Considering special requests: Consider the time and expertise required if your clients have special requests and quote additional costs. Whether you are providing standard or specialized services?
• Materials needed: Consider the materials you need to complete your quoted job. Remember to add a markup and overhead for the materials.
• Time required: How much time do you need to complete the job? This equals labor, and labor equals cost.

One of the crucial parts of construction job costs is the labor cost.

To estimate the labor cost for a job:

Step 1: Add your base salary and overhead costs together

Step 2: Multiply this total by your profit margin

Step 3: Now divide the total by your annual billable hours to get your hourly rate

Step 4: Finally, multiply your hourly rate by 8 to reach your day rate.

Don't forget to include the employee's wages, taxes, worker's compensation, and other employee-related expenses. Overall, we recommend a 20% reliable markup for hourly labor rates.

To calculate this, first list all the materials you need for the job and add the cost for each, then add the markup and calculate the total. You will get your material costs.

Now you must calculate the overhead costs for a specific time frame, i.e., for a week, month, or quarterly.

As a business contractor, you need to pay taxes. So, don't forget to include the tax estimations for each job. You can also add annual business taxes such as income tax estimations into your overhead costs or even apply them with materials and resources taxes on a job-to-job basis. Make sure to include them, as they can impact your overall revenue.

When you have curated a base rate for your construction job, it's time to check how much your competitors offer for the same services. It is a healthy thing to compare because you will get the idea that if you are doing it right. Charging too high or too low can affect your business. So, by comparing, you can adjust your pricing as needed and even deliver your services at a competitive price.

Estimating profit is the next essential step in job costing. You must keep the margin in your net sales revenue minus the labor, material, and overhead costs to get the most accurate estimate. This is expressed as a percentage.

The outcome is the profit. If you are unsatisfied with the profit number, consider adjusting the numbers in your quote, your markup percentage calculation, or your profit margin and then calculate again.