Being a self-employed contractor puts you at a unique advantage in the world. There are a lot of factors out of your control, like the inevitable rise or fall of the cost of material, but you also get to call the shots like your own boss and set your prices and rates.
Having these many things to consider as a contractor can seem daunting at first, which is completely understandable, especially if you’re a beginner. There are a few key things to keep in mind when it comes to how to charge as a contractor.
What is a Job Quote?
Unsurprisingly, as the name suggests, a job quote is what you provide to your prospective employer that gives them an idea of how much the job will cost. How to charge as a contractor requires factoring a variety of items into the estimate to make sure you’re as accurate as possible.
Job quotes need to encompass a lot of information and variables and absolutely need to be accurate—for the benefit of both your company and possible employer. You need to factor in things like:
- People necessary to complete the job
- Time needed
- Possible travel expenses
It’s common to question, “how do contractors price out jobs?” especially when you’ve just started estimating how much your work will cost. Perfecting your algorithm will take time and practice, but there are some basic steps to help make sure you’re estimating as closely as possible.
When you give a quote, you’re estimating the time it will take you (and a possible crew) to complete a job in an allotted time frame. You need to make sure your numbers are accurate; otherwise, you won’t be paid what you deserve and won’t be able to increase the price later.
It’s not impossible to change your quote for a customer, but you have to reconvene with the customer to make sure they agree to your new price. It’s better to be accurate the first time, so you can get in, get the job done, and then get paid for your time and hard work.
Best Practices for Quoting Jobs
Ideally, you know how long it takes you to complete various tasks that will make up the job you’re estimating based on your previous experience. As long as there aren’t any additional surprises in the job, that knowledge is a solid baseline for how much you can estimate right off the bat.
You also need to factor in how much it’ll cost to hire others to complete the job with you if additional help is required. You need to pay a fair wage that matches the skill level of the people you hire to ensure you’re not overpaying or underpaying anyone.
Factoring in travel costs is crucial, too. The last thing you want to do is inaccurately calculate how long it takes you to get to the site and not include the cost of gas. Travel expenses will rise the further away the site is and should include hotel costs and per diem for you and your employees if necessary.
Do not ever guess your estimated total. If possible, you should always do the math to get accurate numbers. Even once you’ve double-checked your numbers, check them again. You’ll catch any mistakes that could have been made earlier in your total and get your final number.
Finally, keep up with the market. Know your competition and how much they’re charging—don’t lower your numbers necessarily, but stay on par with them. It keeps you competitive without being overpriced. Ideally, if you can pitch a better number than them, you’re more likely to get the job.
How to Price a Contractor Job
Pricing a job can seem overwhelming at first, but practice makes perfect. Also, especially when starting, keep an itemized list to make sure you don’t skip over any crucial items that need to factor into the overall price. You want to make sure you’re paid fairly, and you’ve charged your customer a fair price.
Your job quote needs to encompass the full scope of work being estimated. We’ve already mentioned the importance of taking location into account, but there are other factors too. You could prefer to charge based on square footage alone, which is good for something like deck installation if you know the procedure and materials inside and out.
You also need to make sure you factor in the cost of material as well. In fact, keeping a list of all the materials you’ll need to complete the job will help you keep track of the price easily, so you can add it to your estimate without needing to guess how much any item will be.
Other things to consider include:
- Time constraints
- Existing damage or things that will make the job more difficult to complete
- If you are doing standard or specialized work
We’ve already discussed the importance of factoring in other labor if you’re not completing the job alone. Still, you also need to factor in two crucial aspects: taxes and profit when it comes to estimation. If you don’t include taxes in your estimate, odds are you’ll be out a significant chunk of money.
Taxes will be taken out of every material purchase and labor wage, so it’s important to remember that upfront and factor it into your price. This way, you get a clear picture of what your actual profit will potentially be and not just an estimation. Your profit will always come out after the cost of labor, overhead costs, and material, so make sure you estimate it well.
Knowing how to charge as a contractor takes time and practice, but once you’ve done it enough, it’ll be like riding a bike—reflexive and no longer intimidating. Keep your job quotes and estimates accurate and competitively priced with others in your industry—you’ll get regular customers and word-of-mouth business sooner than you think.
Check out the our other articles for more great tips on contractor work and other service-related field advice.