As a general contractor, one of the most important jobs you will have is developing a system for pricing that works best for you. Many moving parts are involved when working as a contractor. Therefore, knowing how to remain in a price range that makes sense and is accessible to your customers while allowing you to compensate your team adequately and maintain high-quality results is very important. So what can you do to develop an excellent pricing system? Here are a few tips and tricks to help you out.
Keep your old estimates on file
Your job as a general contractor is likely busy as is. There is no reason for you to add unnecessary work to your daily tasks. When typing up an estimate for a client, for example, for a remodeled kitchen or bathroom, use a recent estimate as a reference. Use the previously completed estimate like a template, then make the appropriate adjustments to assure that the number you come up with is relevant to the work and materials it will take to complete the job.
Whether or not you charge for an estimate is up to you. Depending on the size of your company and the size of the project the client wants to be completed. It might or might not make sense to charge for the estimate. Many companies give out estimates for free. Therefore the clients' previous experiences with contractors could also influence whether or not they want to make that payment.
Avoid charging per square foot
Charging per square foot is a popular option for many contractors. Many large corporations take this route, and due to the size of their team, it may be what works best for them. However, as a contractor just starting out or with a small business, charging the same as large corporations could put you at a disadvantage. Instead of going by the standard of charging per square foot, opt for the following steps as an alternative;
Assess the cost of the materials
The cost of the materials you will need to complete the project will determine the project's baseline cost. Do an onsite visit to take measurements and discuss their options regarding materials for the project with your client. Their decision regarding flooring, paint, finishes, etc., has the potential to change the cost dramatically and is one of the primary factors that lead to varying price points in similar projects.
Determine the size of the team you will need
Once your client has decided on the materials, they would like to use. You can now determine the size of your team. Depending on the complexity of the project and if the client has a specific period in mind to get the job done, the size of the team will vary.
Determine the hours it will take to complete the project
The number of hours it will take to complete the project will be crucial when determining the price. You can pay your workers hourly for the job, which will help you determine how much to charge your client.
Once these three factors can be determined, all that's left to do is add up the price of the materials and add the total derived from multiplying the hourly wages for each team member by the hours it will take to complete the project.
Pricing tends to be one of the most stressful parts of being a general contractor. However, it does not necessarily have to be. Developing a system that works best for you, your employees, and your clients will allow you to plan out your projects with greater ease while increasing your organization's professionalism.