I’ts over, never go back to bidding jobs,
and I’m looking for ideas about what to
charge either by the hour (or the day or the
week), how to mark up materials, how to bill
customers, etc… Anyone out there who works
strictly time and materials??? I have about twenty
years experience and lots of medium size renovations
under my belt and am often thanked for my fine workmanship
I’m close to new york and all those people with second homes,
the hamptons etc…Also: what can a top notch lead carpenter
get working for a big high end outfit either as an employee or a sub?
Replies
Call the union hall. That will be pretty close .
Tim Mooney
A good bid = high profits. Why no more bidding?
As far as working as a specialized T&M sub, your location and your reputation will dictate your rate. Mark-up materials a mininum of 40%, as much as 100% if your source is exclusive. As an example, I pay one carpenter sub $60 per hour, another one I pay $50. Several others command $35. I don't use those guys. They're working for wages and should work for a firm full time. The $60 ph guy will make a decent living. The $50 ph guy needs to increase his wages by 10%-20%..........if he could. Another ten years and he'll have a had time keeping up.
The real deal is figuring out what your real specialty is and market it up like a couple of very special guys I use. One of them, finish carpenter, gets $75 ph. The hardwoods carpenter, finish & stairs get around $100 ph. He also works no more than 35 hours per week.
Figure out your specialty and do nothing but that specialty.
Mark and GOLDHILLER,
Interesting thread. I had just about given up on this forum but lately I've been extremely inspired.
Where bouts do you live? If I made that kind of dough here in Thunder Bay,Ont., I'd have to pinch myself. Our local economy is not exactly booming.
I had a chat yesterday with a local stair and rail specialist who is presently billing at $65/hr. and wanting to raise to $85/hr. but I think it will be a few years before he gets it...
silver
interesting article in JLC about charging cost for materials and putting all overhead etc on labor,bobl Volo Non Voleo Joe's cheat sheet
"Interesting thread. I had just about given up on this forum but lately I've been extremely inspired."
Grab the other end of that screed board and give us a hand , and you could be extremely involved. We are trying to make it better. Your help would be appreciated.
I heard a story today from a preacher.
He was at some university where preachers go to learn. He had a methodist instructor , who was also a pastor of a big church. Any way he would tell this guy to come over to his office in the church to talk to him. He was there one day visiting with him and a lady came in a little upset. The old pastor said excuse me a minute , this lady needs my help I think. He went out into the hall with out closing the office door .
The lady said preacher , you have been preaching on tithes for the last six weeks . We are getting tired of it !
The old preacher said mamn, when you all start responding to my sermons , we will move on .
Tim Mooney
Tim Mooney
Took me a long time to adjust.
" I'm a man and I can change,if I have to." (Red Green)
silver screeder
what about the duy whos just starting out on his own? It seems that everyone wants it done for cheep,when you look 25 years old.
Don't worry bobby, there's a small window where you don't look young. You can avoid the "cheap" during that time. Then, whoosh, they start thinking you'll be giving them a break cuz now you're the old guy. I often thought since getting grey that I shoulda used that reverse grecian formula when I was young in order to appear to know what I was doing. Never mind if you know or not, some people look on experience and talent as appearance only. Best of luck.__________________________________________
Remodeling Contractor just outside the Glass City.
http://www.quittintime.com/
Grow a beard. Bathe slightly less frequently and stoop a little like you've moved just one wheelbarrow too many of demo'd materials.
Rustytools,
Yes sir..........I've worked strictly time and materials since 1980. We're currently booked out about 2 years and haven't ever had a slack time when there weren't jobs to do. Fact is, we can't keep up with demand and need. Warning...this can have serious consequences on vacation time.
Frankly, I don't understand why more guys don't work time and materials. I learned way back when that nearly every time I bid a job, I screwed myself. So I just quit the practice and went time and materials. I don't waste any time driving around from home to home trying to under-bid the last or next guy and save myself all the aggravation to boot. I realized that people who were looking for the lowest price on a job weren't the type of clients I needed or wanted, so there was no reason to play that losing game at all.
We haven't accepted any new clients for about 5 years now because we're always booked out by repeat customers.
goldhiller-
do you bill one flat rate for yourself and help
or different pay scales? Actually I plan to bill
about $ 55. per hour for lead man and 30,
for the helper, mark up my materials 20%. thats it.
Keep everything as simple as possible so
I can get back to concentrating on the work
again. It seems like everytime I bid a job
the small changes and extras screw up
the works and makes it difficult or impossible
to complete the contract.
Rustytools,
Yes, we keep things simple as well. I charge an established hourly rate for field /job site work and a different established rate for shop time which is approx, double the field work rate.
As I read this thread , including “22 reasons…………….â€, I ‘m reminded and exceedingly happy that I don’t have to operate in such a world. So many of the notions are based upon the premise that you can’t trust your customer, they can’t trust you, binding contracts are absolutely necessary, yada, yada, yada, and so every precaution must be taken. That’s the very observation that I saw linked to the way that nearly every self-employed contractor I knew years ago, as well as most I know today, operate from. This, I concluded, was not the way I cared to live my life, nor conduct my business. After all, so much of my life is spent doing business; they are one in the same. I don’t want to spend even one moment running about with thoughts of suspicion concerning my client’s motives and their potential maneuverings in my head, and so decided that this was not for me. I have better ways to spend my mental activities, thank you very much.
I therefore decided to base my business on a different principle……(get ready now, as you’re likely about to be shocked)…………….. my business is based on the trust factor rather than the distrust factor. Yes, strange as it may seem, I decided that it was far preferable to have a relationship of mutual respect and trust with my clients than for all of us to eye one another from behind the bushes. Now I know this isn’t a very 21st century kind of a notion, but then I don’t find currently accepted approaches all that appealing, nor successful. Mind you, to me a super fat bank account coupled with a perpetually paranoid mind set doesn’t = success,….. but for some of you this equation may not be problematic.
Those of you who have read some of my musings about my business here already know that I haven’t run an ad for decades and didn’t have a business card until five years ago. The reason for this is that I don’t need either one. Instead of running around forcing clients to sign iron-clad contracts with quivering hand, I set about following an older principle…………do unto others as you’d have them do unto you. This may surprise many of you, but it worked and worked well. I can’t think of the last time I drew up a contract and had a client sign it or vice-versa. For what? We trust each other and have talked over their wants and needs and then set about together to accomplish this. I’ll float around $5,000-6,000 in materials for them at a crack before I request some reimbursement if it’s slipped their mind and they haven’t offered already.
Rather than putting the iron-clad contract to work for me as an enforcer, I put two seemingly even more powerful forces in my corner……………friendship & embarrassment. All of my business comes via repeats and referrals. That’s why I need no advertising. The advantage to this approach is that the referrals are always someone closely socially linked to the original client who is now a friend of ours, as well as a business client. This social link replaces the iron-clad contract as the new customer is not about to embarrass themselves by giving us a hard time or trying to take advantage of us and they feel completely comfortable using us because our reputation has preceded us. I haven’t been burned or had any trouble collecting this way for about the last twenty years since I adopted this approach. Nor have I spent anymore of my money purchasing, nor time reading such offerings as “Why You Should Be Paranoidâ€. Mind you, I don’t do large commercial work, but rather stay primarily in the residential scene because I know very well that the prevailing attitudes and practices in the commercial scene are not those I care to deal with. I don’t care to spend my life in a world where everyone is trying to “get over†on everybody else or on a basis of mutual distrust. There are other ways to put food on the table.
Perhaps I’m just a lucky idiot who doesn’t understand “ the way things workâ€, but then if that’s true, I don’t care because I’ve not had any problems doing business by my adopted standards. I guess I just prefer doing business the “old-fashioned way†as opposed to the “new, improved versionâ€. Seems that my clients do as well. The folks who own the residence where we’ve spent approx. 80% of our time in the last three years, went through 6 other contractors in a year’s time prior to our referral. They obviously prefer the way we do business even though we do “time & materialsâ€. As long as it continues to work for us, I have no intentions of changing. We’re currently booked out about two or more years while we’ve watched many contractors here go belly up.
Oh yeah, ……….my brother runs his business on the same principles and doesn’t have collection problems, either. I guess that makes two lucky idiots. His wife is the assistant dean in the business school at the state university. She says she doesn’t understand how this can work either because it flies in the face of all the currently accepted business practices. …………….oh well.
Knowledge is power, but only if applied in a timely fashion.
GOLDHILLER I've built my business around trust and integrity too but I'll tell
you that twice in the last nine year I had two clients stiff me for $29,000
(each time that's not a total) and one stiffed me for $4500. It happens. In
the most recent case I had my doubts regarding the client's integrity but I
wanted so badly to trust him and I did and I got screwed for it even in spite
of the ironclad contract! With regard to you and your brother when you say "I
guess that makes two lucky idiots." While the word idiot might be
a little strong the word lucky isn't strong enough. You do operate in the world
you were referring to regarding the 22 Reasons but you are just plain LUCKY.
Admittly luck can be control and directed somewhat by making performing due
diligence and then listening to what you gut tells you (I didn't listen to my
gut with that last screwing I mentioned).
In spite of that screwing a year and a half ago I recently did a small but
very difficult railing project for a builder who I became casual friends with
over the past couple of years and when I handed him a contract for his project
he like you told me he doesn't like contracts and he works with his subs based
on trust. I figured, well okay and since I liked him I went ahead with it on
a handshake. For a number of reasons I was late getting to the start on the
job and then stretched out with my labor resources it took longer than expected
too. The $8100 project had a balance due on completion of $4450 and in the interest
of wanting to develop a good future working relationship with this guy I told
him that since I personally performed all the labor on the project and didn't
use any of my guys so there weren't any direct costs related to them that I
would walk away from that $4450 because of my company's tardiness. Given that
my company and me personally are the only ones he knows that could have even
approached handling a project like that (like I said it was particularly difficult
and problematic) I thought he might have said something like "nah don't
worry about that, just work to avoid scheduling hang ups like that in the future"
and then he would pay me anyway or even pay me most of that balance or even
just some of it.
Nah, none of that happened. He took me up on the whole $4450 without even a
thank you for that kind of consideration or a call regarding another project
where I might be able to earn back that loss from him and that was 5 month ago.
He's still a nice guy and I still see him around every once in a while but all's
quiet on that front. I haven't brought it up, neither has he, and nothing's
been mentioned regarding it all. How does "mutual
respect and trust" figure in here? How would you apply "friendship
& embarrassment" in this situation? I haven't even gotten a
lead suggestion or referral to another GC from this guy. Was I a fool or am
I just an idiot in this situation, I actually haven't made up my own mind in
evaluating myself on this one yet.
Both the quality and the high level or artistic expertise involved in our (my)
work has never been called in to question. Certainly my own
pride and integrity is not to be questioned either given that example I just
illustrated. Even if I had a signed contract I still would have said the same
thing and behaved the same was as I am doing now.
What do you think? How do you think that all fits in to the grand scheme of
things?
View Image
I don't paint things. I only paint the difference
between things.--Henri
Matisse
Very interesting thread. Just like to throw in my 2 cents.
I also get most of my stairwork from word of mouth advertising. It has worked well for me in all my years of stairbuilding..
I do have the client sign an agreement stating the price..style..species and so on...mainly just to avoid lapses of memory on either myself or the clients. I usually am juggling several curved stairways at once..and just am much more confident having a signed agreement to look at when I am wondering if the treads were supposed to be red oak..or were they white oak? etc.
I always receive half payment upfront...the middle payment is due after I set the stairway..and this is configured so that usually $2000 is held back until I am completely done with all the railing. This assures me a nice steady cash flow..and if I should ever encounter a less than honest client..I will only be stiffed the last payment at worst. By the way...I will have made a satisfactory wage if I do not receive the final payment.....but not the desired wage.
The people I deal with like this more laid back approach instead of a legal binding contract. It works simple for me...if they do not want to pay half up front...fine....there are plenty others that will.....if they refuse to pay the second payment...then the whole stairway is shutdown...with the curved railing and balusters still in my shop...not to be delivered until payment is made. If the last payment is not made.....then....I would just take action to get what I can. But...to date ...none of the above has happened.....nothing but happy clients so far.
One other thing I do...is always try to underpromise....and over produce. This is the single most important method I have found to continue the word of mouth advertising. I try to do something special on each stairway that is an extra detail that either requires extra labor or material...and not charging for it.
Don't let me interupt anything. I just dropped in with a link.
http://www.hometechonline.com/gorman/Excellence is its own reward!
Jerald,
First let me say that after reading many of your posts, I’m certain that you are the consummate professional; and I mean in every regard. Not only am I sure that your workmanship and artistic endeavors are of the very highest standard, but you’re also willing to give of your time to help others. That alone tells me much about a person’s character.
As to your losses on several occasions, I’m in no position to judge what you did or didn’t do or perceive correctly as I wasn’t there and don’t know the other parties involved, but I do know that getting bit in the butt like that can certainly bias one’s opinion of human nature in general. I do think though that you said a huge mouthful when you acknowledged that you had trepidations in your gut, but wanted to believe so badly that you decided to proceed anyway. It took me years, but I finally learned to look to myself as equally responsible when I had distasteful experiences. These became invaluable lessons as a result.
I think we’ve all learned as we’ve aged that not everyone is trustworthy and post reflections remind us that we did indeed have a “gut feeling†about encounters with untrustworthy characters. And yes, I do use due diligence and intuition when selecting whom I will enter a business arrangement or even a social relationship with, and whom I will not. I’ve spent a considerable amount of time in my life turning to books written by supposed gurus on such topics when indeed all I had to do was listen to myself because the same knowledge is contained there, as well. These trips to the bookstore where usually preceded by a distasteful event in which I failed to act upon what I suspected and then subsequently looked frantically and bitterly for an answer to what had happened. If the main thrust of the author is “How To Run Your Businessâ€, it always includes “the iron-clad contract†and the “big down payment†as your main protection against unsavory characters. Authors of such business related books rarely, if ever, talk about intuition as a reason for deciding not to do business with a particular person. They will instead encourage you to do a financial credit rating check. The focus is always on landing more business, and making larger and larger profits, but trying to protect yourself in the process. They are admitting up front that their particular approach to acquiring “more and more and more†(which we’re supposed to agree is among the highest of humanly goals) is fraught with problems. They are warning us that our clients may try “ to screw you†while you are about the “noble quest†of trying to extract the highest possible profit from their wallet that you can get away with. Coupled hand in hand with this, in modern society in general, is the notion that you are what you own……..nothing more and nothing less. This leads people to attempt to live beyond their means in order to “be somebody†and makes the business world all the more precarious and dangerous as a result. To this notion, I would reply by repeating an old axiom………â€The love of money is the root of all evil†(not to be confused with making a living). From my vantage point…….. the determined, frantic, focused attempt to an unending accumulation of money by whatever means necessary and the material goods it can purchase never leads to true self-satisfaction or happiness, but rather just leads to more of the same in a swirling circular fashion reminiscent of a toilet flushing. Ah, but now I have severely digressed. Please forgive my rantings.
My main protection against the suspected unsavory character is to decline doing business with them. If I have any doubts about my gut feelings, then I do a bit of detective work amongst the people that have had business and/or social relationships with the prospective client. If I then still have any feeling whatsoever that I may have need of an “iron clad†contract, I simply don’t do business with them.
My second line of protection, I guess, is to stay small so that I’m not forced or more inclined to do business with the unsavory and thereby I think, much less apt to find myself simultaneously licking my wounds and grinding my teeth. Having had some experience in this realm, I discovered years ago that those extra dollars you can make by having a number of employees to whom you felt responsible were those that were most likely to extract the greatest final cost from one’s own mind and spirit.
My third line of protection is that we are very diversified. We are licensed to do virtually all phases of construction, including plumbing and electrical, but we rarely get involved with HVAC. We also build the furniture and architectural details for their homes as I was a furniture-maker long before entering the home remodeling/renovation/construction business. By being diversified, we don’t have to have the big turnover of clients that specialty firms do. We do it all, so to speak, and this saves our clients much time and aggravation hunting down numerous contractors and coordinating their schedules with any particular phases of the construction that needs doing. If there are any problems upon completion, they and we know who’s responsible……the buck stops here.
They say it’s a dog eat dog world out there. My approach is to let the dogs eat the dogs and just stay out of it. There’s other folks to do business with. I am trustworthy and my clients know this. My clients are trustworthy and I know this. Consequently we can both act confidently on each other’s best interests. This may all seem like a strange or even impossible arrangement in a modern day business environment, but it works for us nonetheless.
Ya know, when I think back on my earlier days and some of the times that I found myself on the short end of the stick, I have to admit it was because I had it coming. What goes around, comes around and I was simply being repaid for actions I had previously taken. Maybe that’s why I gave up the idea that I could be successful by adopting a predatory business mentality and have been much more successful and satisfied by choosing my clients carefully and then trying to be a friend, as well as a paid contractor. So far, so good. Knowledge is power, but only if applied in a timely fashion.
Jerrald,
I have found that when you cut your price as you did with this particular builder,(or client) they believe that you were just charging to much in the first place. They WILL not use you again, and if they do they will expect a deal or try to beat you down before you start.
David
Jerrald,
As a general contractor I believe the same. Occasionally I'll list some small extras just by their material costs and a list of 'freebies' at the end of a bill if the timing of the job extended for reasons in my control. I have never been reimbursed for them. At the same time when a sub comes to me with a question about a detail that he's not willing to talk to the client about and states that it can still be covered in the original estimate, I take him/her at their word.
I like your markup approach. I've recently bumped up my rates to $60/hour for my guys plus 20%, 20 % for subs and the money seems to cover my time.
We do alot of high end remodelling, a high learning curve and lots of specialty items and lots of odd things to think through on every job. We tend to get it done on time and have great friendships with the clients.
I have also been burnt though in much the same way you have. Right now I'm working for a couple of lawyers and a commercial real estate guy here who all share ownership of this house. They came over once a day, disappointed with the schedule of events and wanting another thing here and there; often just telling the subs and not me. I tried to speed it up and didn't keep track of the billing and of course things are now twice what was originally quoted, for three times the work. I've cut hours out of the project and they are still grumbling. Its such a lesson to me in keeping adequate records.
Jerrald - what types of record keeping do you do on a job? Daily reports of worker time and materials? My brother and I share management responsibilities and things get out of hand so quick!
does your markup of 20% (materials) actually cover your time to obtain the materials? Phone calls, ad checks, isle walks, lumberyard contacts. Supply house? price checking? 20% seems kinda low for that figure.
Assume a sheet of 1/2 inch sheetrock is $5- and you charge 20% markup. Does the time it take you to get that sheet of rock to your site actually cost you $1? either your call, and its delivered on site in a timely fashion? or your time to drive down to the supply get the sheet, load it and transport it back to your job. You can deal with getting one dollar for that time and service?
How to bill... depends.
I do a lot on a 'project' basis. I have a spreadsheet with three pages. First is a project listing with sub-projects/tasks broken out to some degree and the status of those tasks. The next page is a materials/supplies page with two totals at the top and individual prices down the page. It has pretty much the same project listing, but instead of tasks it lists parts. I give 'em nails and stuff unless it's something fancy like a custom chaulk or hinge I have to order. The totals are paid and outstanding on the materials page. The paid amount comes from the third page. This page has again pretty much the same list as the first page, but in a condensed form with a pair of entries for each payment that shows labor paid, materials paid and the projects covered by the payment. Usually my constant folks pay me about every two weeks unless we discuss something else first. I also do free stuff too for them. As an example I hung some drapes in three windows with custom made rods, took day and 1/2, no charge.
Anyway, I put a copy of this SS at a web address and email them the address and a notice when it is updated.
Newer folks just get a contract of std boiler plate and a regular bill. Especially those that are one-job type customers. (ie. a bath remodel, a fence, an out building, some 'one' thing) No web service if they don't repeat, repeat, repeat.
Of course, I do ANYTHING they need done, so it's a little different. I'm more of a man-Friday or rent-a-husband. (get all the stuff #1 hubby not do, but those 'wives' all talk nice about me, and to their friends too) I've done everything; appliance repair, floor refinishing, bathroom repair/remodeling, furniture rebuilding and even once or twice kid ferrying all for a single family. (I was headed to the store anyway...)
A link to the article:
22
REASONS WHY YOU SHOULD NEVER DO COST PLUS (C+) or TIME &
MATERIAL (T & M) Contracts or Billing for construction projects.
While the subject of Cost Plus/T&M vs. Fixed Price is somewhat arguable
I religiously avoid cost plus situations. For example when I do the pricing
for some of the railing parts that we will custom fabricate I can sometimes
charge $600 to $2400 for some of the hand carved pieces we'll make. While some
of our other guys aren't as good at the freeform hand carved stuff as I am I've
made some pieces that worked out to $220 per hour. While a client may be entirely
willing to fork over $2400 for a hand carved wreath turn there is absolutely
no way in a million years that they would agree to pay T&M for a carpenter
contractor to shape the piece at a $220 per hour billing rate. The example is
an extreme one but it illustrates my point and my thinking regarding T&M.
So RUSTYTOOLS is Westchester County out of your range or is it still worth
considering?
Forum hint:
View Image
"Experience is a hard teacher, because she gives
the test first, the lesson afterwards." ~ Vernon Saunders'
Law
I do both. I like to bid on small jobs and ones I know by heart.But on big remodels I charge by the day plus materials and if I am going to be responsible for the whole job I expect at least 10% charge for all labor and materials.I keep adaily log of everything on the job and I give the home owner a running total every thursday and he pays me friday then I pay the subs and send the checks for the materials.This has worked out great for me and the home owner he knows exactly what he's paying for and I don't get stuck with any unexpected surprises.
ANDYSZ2
Andy what's the distinction or difference you draw between big and small jobs.
In other words why not do small jobs T&M/Cost Plus and the bigger ones with
a fixed price. If I was going to do T&M that would make more sense to me.
Did you have a chance to read Michael Stone's 22
REASONS WHY YOU SHOULD NEVER... What's you take on what he's written? (
Michael Stone by the way for anyone who doesn't know is the author of Markup
& Profit: A Contractor's Guide. Not a bad book at all.)
I was also wondering when you wrote " if I am going to be responsible
for the whole job I expect at least 10% charge for all labor and materials"
what did you mean by that? It sounds like you mean you markup labor cost and
materials 10%? I guess what I am getting at is what constitutes "labor
cost" in you mind? In The AGC contracts for T&M Cost Plus projects
which are based on AIA contract language just what constitutes "cost"
and what does not is pretty well defined. Do you spell out your definition of
what constitutes "labor cost" in your contracts? Are you working with
any employees, employees and subs or do you sub out everything?
Yup that's a lot of questions but I'm hoping to open up this topic to some
broader discussion.
View Image
Maybe it's in the basement, let me go up stairs and check--M. C.
Escher
Hey Jerrald,
I believe we started something like this a few months ago about estimating. Do you add a overhead / profit on top of the labor hours or is it factored in like mentioned in the JLC article about markup.
The JLC article basically has a guy charging $40 over his workers time to cover overhead, profit, management, supplies, based on a yearly average.
I like the idea of having all the costs covered inside the hours the guys are at the job site and not having to deal with materials, but as a general contractor, a good percentage of time is spent researching and purchasing supplies.
A T & M contract doesn't seem to cover enough but it also doesn't threaten clients that much. It just presents alot of problems if you don't have your paperwork together and presented very often.
Mike Butler
Berkeley Craftsmen Builders
Ya know Mike I went searching last night for I think that same discussion.
I think we were just starting to talk about estimating but I couldn't find it
to see what happened. Do you happen to recall what we were saying or doing?
What the discussion was about (keywords I could use to search with)?
As for that JLC article you mentioned are you referring to the article How
To Charge For Overhead -September 2002- by Les Deal? I'm thinking maybe
you read the discussion about it over on JLC (Lets
deal with Les Deal -- John Clark -- 9/6/02 20 responses)??? While I do figure
and plan markup along the lines of what Les Deal is describing I didn't like
the article and thought it was vague and didn't explain his methods and reasoning
very well like my friend Peter Bush who commented in that discussion "I
wish Mr. Deal had been a little more technical in his presentation. The whole
concept was really popularized by Irv Chasen and is called PROOF (Proof Reasearch
On Operating Factors)."
Unlike Michael Stone and Walt Stoppleworth who advocate applying one markup
( the same markup) on both labor and materials I come from the PROOF school
of thinking regarding markup. Years ago I took a PROOF seminar sponsored by
the magazine New England Builder (now JLC) and it changed my business life and
just in the nick of time I might add. If you are applying one markup accoss
the board like they recommend and all of a sudden you switch from supplying
labor and material to just labor as I once did years ago when I took on a pile
labor only contracts to provide interior finishing to a bunch of new home being
built. Without really thinking about it I went from a position where materials
were contributing to 45% of my overhead to where they were contributing to ZERO
and I didn't recognize or see the grave I was digging for my company until I
took that PROOF seminar.
I markup my internal labor a minimum of 65% over cost and my subcontracted
labor and materials 35% (multiplying my costs by 1.65 and 1.35 respectively).
Underneath that markup strategy I try to see my operation as two different businesses;
one that provides labor (our own employees i.e. internal) and one that provides
subcontractors (external labor) and materials for projects. When you say "I
like the idea of having all the costs covered inside the hours the guys are
at the job site and not having to deal with materials, but as a general contractor,
a good percentage of time is spent researching and purchasing supplies."
I think my way of thinking works for that.
In the case of the " (Internal) Labor" company my labor COST and
then my MARKUP is figured as in following example:
Trade
Base Rate
Comp Rate
Fixed OH
Labor Cost
Markups for
Total OH & Profit
Total Hourly Billing Rate
OH
Profit
20.6%
16.8%
50%
15%
65%
A General Carpenter @
$25.00
per hr.
5.15
4.20
$34.40
17.20
5.16
$22.36
$56.80
In the case of the Subcontracted Labor and the Materials the figuring looks
like:
Markups for
Total OH & Profit
OH
Profit
SubContractors
20%
15%
35%
Materials
20%
15%
35%
I've shown them on two separate lines because while I do apply the same markup
to both of those that's really just by coincidence and in reality I treat them
separately. The markups could just as easily be 38% for SubContractors and 35%
for materials (which is something I am considering now). My thinking is the
20% OH applied to Materials (and Subs) is related to and covers that "good
percentage of time is spent researching and purchasing supplies"
that you mentioned. Am I making sense? Whereas the 50% of OH Markup that I have
on labor applies to the costs associated with that end of my operation.
As for " A T & M contract doesn't seem to cover
enough but it also doesn't threaten clients that much. It just presents alot
of problems if you don't have your paperwork together and presented very often.
" I really agree with the paperwork being a potential problem area and
from what I have heard from peers that have had problems with T&M clients
that's often the case. The other downside being that when you are doing "unique
premium" work like the handrail wreaths I mentioned above you can't really
recover for the "value-added" that kind of work deserves.
View Image
I don't paint things. I only paint the difference
between things.--Henri
Matisse
Jerrald first small jobs are small enough that I know I can do them in a couple of days or less so I bid them by the labor and materials and then double that figure for a bid . This seems to work real well for me and most of these jobs are for builders who need it done yesterday and probably should have been done by there subs.
As for big jobs these are usually large remodels I have never had a contract and what I mean is that at the end of the job they pay me a lump sum of 10 % of all the construction costs this seems to work well for both parties as I dont take abig hit for an omission and they can make any changes knowing that they're paying for them.This method is for my repeat customers and friends. This seems kind of risky but I haven't had a financial problem with this method in ten years and I am booked up for the next year plus.
I will say this I try to be extremely cost conscious on their behalf and show them where I saved them money and I show them where I might have done better ,this has been my edge along with being part of the family while on the job[babysitting,dog rescue home sitter etc.]
ANDYSZ2