Estimating Methods/strategies

d-rock

In the past year, I've realized no one will tell you what they charge per Sf or LF, no matter how much i've poked and prodded. I figured out that it's something I would have to learn by trial and error, using my experience as a starting point. It's been tough going, ups and downs, but I think i'm starting to get a hang of it. I've tried LF pricing,SF pricing etc etc..
Having said that, it seems that other, established contractors aren't willing to talk pricing, but are happy to discuss methods of estimating. Not just drywall guys, but all trades. I try to get a little advice from everyone. Recently it was from an electrician. He told me he prices every job with himself in mind, meaning he would do the work with a helper or two no matter the size. He figures his weekly salary, and wages for his guys, materials and just tacks on 10%, often he will bring it down to 8%. So the idea is he gets a good salary while working then collects profit at the end (in a good scenario). If he needs to run another job at the same time, he hires a foreman to run the job for him based on a little less than his salary, which is already part of the price. For some reason this sounded like a great idea to me, especially for this economy because you could still be competitive, while earning your pay and profit.
I was doing LF and SF or T&M plus 20%, which i brought down to 15% or 17%, but I think for now, I will work at 10% especially because it's so slow. My concerns are :
SEQUENCING- seems jobs never go as smoothly as you'd like. Ideally I like to complete the framing and insulation 100%, then go in and rock like a maniac. Usually the GC's always screw up, or need things done out of sequence for special items i.e. cabinets, fire stop,etc etc. Or "just close up one side of the walls for now" I find men work best when there is a flow, a mindset, and they can move uninterrupted. If you take a man off rocking to do some minor framing, he has to go to a different location in the building, get different tools, materials, ladders, scaffold..whatever. It breaks the momentum, and therefore profit flow. How do you prevent a GC from doing this to you without straining the business relationship, or affecting the bottom line ?

Muddauber

Are you and your electrician friend leaving something out of your job costs?

I don't think 10% over labor & materials will leave you any profit.

silverstilts

I don't think you can change things as far as the little things that always seem to hold up a job.. or some other sub throwing his weight around so he can get in and started on the job ( tile guys are the worst ) It is just one of those bumps in the road . There are very few and in between GC that have things go as scheduled and if you do find them bend over backwards for them ... I just hate it when we get a job and as soon as a few pieces of rock is up they want the whole crew there .. waisting man hours . It is impossible to make any money just standing around and I always try to mention in a polite way the job will not get done any faster , got to have some organization or should I say logical sequence /path if you are jumping from one thing to another it prolongs the overall process .... but most general contractors just can't get that in there head .... why pay someone for 2 weeks worth of work when it can be done in one week , profit right out the door and then some. I have had people go ballistic just because the rockers were not there waiting for some mud rings to be put on just so they could hang a few sheets a day ..... I guess it also depends on the size job also .. you have to do what you have to do ...

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aka the rock doctor

Muddauber

Overhead???

silverstilts

maybe he is working out a $120 per hr plus materials so 15 percent would not be so bad but i don't think so and you are so right about the overhead.

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aka the rock doctor

d-rock

this is exactly why i posted this..I'm trying to make sure i'm not doing something wrong. labor+materials+ 10% profit/overhead. sounds reasonable in this economy.

d-rock

btw..labor is not 120 per hour, it's cost plus 25% for taxes and worker's comp.

Darren@Partners

Taxes (Ssn and Medicare) 8% + WC 7.6%(mine is pretty low, never a claim) = almost 16%. Think 9%mark up is enough? I mark up wages about 180% to where the hourly rate is 60% of what I am charging. Ex: $37.50 for a $20 manhour. I figure every check I write costs $7 at least. That is .175 per hour alone. Six paid holidays costs over .50 per manhour. I'd go on, but you get the idea.

Just be sure you are marking up ALL the real cost.

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www.partnersconstruction-drywall.com

d-rock

not sure i follow. if i'm estimating a job, and i figure labor +materials plus 10% profit/overhead, i'm short-changing myself ?

silverstilts

As long as you figure in all your overhead as stated above you should be ok but you must figure in at least 10 percent on all guys to me this is a little low , but you know yourself what you have to have none of us out here know your full circumstances .... 10 percent seems a little low unless you are doing a huge volume ... make sure to cover your azz on the work comp , insurance SS ,medicare , and all the other stuff ... I myself like to see at least or no less than 20 percent on everything which is still not a whole lot , like I say unless you have a huge volume and a large crew to add that percent to you will not come out good at all..

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aka the rock doctor

d-rock

So you guys are saying I should apply additional percentage on top of tax and worker's comp for labor, add materials THEN add 10% profit ? Am I missing something here ?

taper71

It really depends on what type of contractor you are . If its just you and a couple of guys working out of your home you really dont have that much overhead other than your insurances comp, taxes ,material, and labor. If you are a contractor running multiple itch, rock , tape, and texture crews with an office with supervisers ,secretararies and such then profit and overhead are alot more important to stay in business. The difference being is the small guys usually only have 1 or 2 jobs at a time and then look for more when they are nearing completion, whereas the big boys have multiple jobs going on all the time sitting on plans for homes. apartments etc.. being built next year and hire and lose crews depending on the need for labor.
I dont think what I said answers your question , but it comes back to get what you can get for the type of buisness that you are. If you are small and competing with small then chances are you are cheap and have to be to get the work from the cheap GC,s or HO's that can and will take advantage of the scum that dont pay taxes or comp.
The big boys usually have built up a buisness over decades and are able to charge accordinly because they deal with builders that have built up their buisness over decades and have multiple jobs all the time.
Small guys have to fight for their jobs and work cheaper. Not because of quality or reliability, but because they have alot more cheap scum to compete with or deal with. Over time you can build up a reputation to where you are running multiple crews and charging more for it,but really only if the big boys dont swallow you up or take you out if there is no room for you in the market.

Darren@Partners

Exactly. Ten percent AFTER totaling ALL costs would be a minimum. Withholding and workers comp alone is way over 10%. Benefits like holidays, sick leave, health insurance, 401k participation adds up quick, could easily be over 20-25% of base pay.

Take any employee cost for the year and divide by 2000 (# of hours per year) and that is how much per hour it costs. Example: young guy's health premium at $250 per month is $3000 / 2000 is $1.50 per hour. Six holidays is 48 hrs x $20 per hour is 960 x 1.15 (for withholding and wc) is $1104 / 2000= .55 per hour.

None of this takes into consideration training costs. I estimate that to be 5k per year for the first 3-5 years, then 2 k per year after that.

True cost of an employee is somewhere around 150% of his wage.

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www.partnersconstruction-drywall.com

Muddauber

Here are a few overhead costs for a small start up co. with a home office.

TRUCKS- truck payments
gas
maintenance
ins.

EQUIPMENT-
tool & equipment purchase or rental

PHONES- cell phones
office phones
fax line

OFFICE- furniture
file cabinets
computers
software
copiers/printers
misc. supplies

PROFESSIONAL FEES-
bookkeeping/accounting fees
attorney fees

OTHER- dump fees

NON BILLABLE HOURS-
# of hours per week estimating, ordering supplies,general bs.

Drywall Tycoon

The size and volume of the project can make a great difference on the amount of profit required.

Small highly detailed projects normally require a greater percentage of profit.

Large volume, straight going without many details require less percentage of profit.

Both dictate the length of time we spend on the job. The percentage method doesn't work unless all of the jobs are similar in size and scope.

Tycoon

Drywall Tycoon

Dauber hit it on the head with his list. Total the list of overhead on a monthly basis.
Multiply by the number of months on the project. Or divide if it is less than a month.
Same with your profit. Keep you labor and material separate.

The percentage of profit will always be variable.

Tycoon

d-rock

since my business is new (little less than a year), my overhead is just comp, insurance, taxes, truck, phone and misc. office expenses. i get extra guys when i need them. workers comp and taxes cost me roughly 25% of whatever i pay a guy. i don't consider my time spent estimating, or out hustling for more work. I don't want to be a small fry forever, that's not why i started a business, but i don't expect it to happen overnight either. I just want to make sure i'm not undercharging. Either way, some of these damn GC's are never happy no matter how low i go. And if it's about making a living, like i said before, i'll just go back to my union job.
Should i figure a monthly average for fuel,phone etc. into my numbers ?

Drywall Tycoon

If you don't figure fuel or phone into it. There will only be drywallers that send smoke signals and ride bicycles. ( Just joking)

When money goes out. It must come back in. Average it out over the period of the job you are bidding. If you have multiple jobs. It is extra money in your pocket.

Tycoon

d-rock

Seems to me most guys consider total costs of labor(including taxes/comp), materials . then add 10-20% for profit/overhead. However I haven't been considering phone and vehicle expenses DIRECTLY into my estimates. Perhaps these are figures i should consider more closely, and fold them into labor costs.

rebel20

As stated by Dauber consider all the expenses he has put in and don't forget the home office itself as an expense. Total rent or house payment divided by Sq/ft of house times sq/ft of room being used as office per month. These are overhead. And you will see they add up fast. Going out there and beating yourself for Uncle Sam and insurance companies and soforth is probably not what you went into business for.