Question 1

How do I create an accurate project bid?

Accepted Answer

Accurate bidding requires systematic approach: STEP 1 - MEASURE AND QUANTIFY: Visit site, measure everything accurately, photograph conditions, note access challenges, identify existing conditions that complicate work. Create detailed material takeoff - list every material needed with exact quantities plus 10-15% waste factor. STEP 2 - CALCULATE MATERIAL COSTS: Price materials from your suppliers, not big-box stores (better pricing, contractor accounts). Include delivery fees, sales tax, and specialty items. Add 10% contingency for price fluctuations. STEP 3 - ESTIMATE LABOR: Calculate labor hours realistically based on your crew's productivity (not "perfect" conditions). Multiply hours by your loaded labor rate (wage + taxes + insurance + benefits, typically 1.4-1.7× base wage). Add time for mobilization, cleanup, and project management. STEP 4 - ADD OVERHEAD: Calculate your business overhead (insurance, licenses, office, trucks, tools, marketing) and allocate to project as percentage of job cost (typically 10-20% for established contractors). STEP 5 - ADD PROFIT: Apply profit margin appropriate for job risk and market (typically 10-20% for residential, 5-15% for commercial). STEP 6 - VERIFY: Total cost should be materials + labor + overhead + profit. Compare to $/sq ft industry benchmarks to ensure reasonableness.

Question 2

How do I avoid bidding too low and losing money?

Accepted Answer

Underbidding kills construction businesses - protect profits with systematic estimating. COMMON MISTAKES CAUSING LOW BIDS: Forgetting overhead allocation (office, insurance, trucks - adds 10-20% to costs), underestimating labor hours (use YOUR crew's actual productivity, not ideal conditions), missing materials or quantities (incomplete takeoff), not accounting for waste (add 10-15% to materials), failing to include mobilization and cleanup time, forgetting permits, fees, and disposal costs, not pricing for difficulty (tight access, occupied homes, delicate conditions). CRITICAL ITEMS TO INCLUDE: ALL materials with current pricing plus 10% contingency, LOADED labor costs (wage × 1.5-1.7 for taxes/insurance/benefits), overhead percentage (calculate annually, typically 10-20%), profit margin (15-25% residential, don't go below 10%), contingency for unknowns (5-10% on remodel work), permits and inspections, dumpster/disposal, project management time. PROTECT YOURSELF: Visit jobsite personally (don't bid from photos/descriptions), create detailed written scope (avoids scope creep), note exclusions clearly (what's NOT included), include contingency line item for unforeseen conditions, never match competitor price blindly (their costs differ from yours), walk away from jobs you can't bid profitably. BID TOO LOW INDICATORS: Significantly lower than competitors (30%+ below others suggests error), client accepts immediately without negotiation (sign your price was too low), your gut says it's tight (trust instincts), math doesn't match industry $/sq ft benchmarks. RECOVERY: If you bid too low and realize before accepting, withdraw bid politely blaming "scheduling conflict." If already committed, manage scope tightly, minimize change orders working in your favor, learn lesson and adjust estimating. Better to lose bid than lose money doing unprofitable work.

Question 3

Should I bid fixed-price or time-and-materials?

Accepted Answer

Contract type affects risk and profitability differently. FIXED-PRICE (LUMP SUM): You quote total price regardless of actual time/materials used. CLIENT PREFERS: Knows exact cost upfront, budget certainty, shifts risk to contractor, easy to compare bids. YOU WIN IF: Job goes faster than estimated (keep "savings"), materials cost less than estimated, no unforeseen issues. YOU LOSE IF: Job takes longer (you eat extra labor), materials cost more, hidden problems discovered, scope creeps without change orders. BEST FOR: Well-defined scope on new construction, standard straightforward work, experienced contractor confident in estimates, competitive bidding situations. PRICING: Charge more (15-25% profit margin) because you assume all risk. TIME-AND-MATERIALS (T&M): You charge actual hours worked at hourly rate plus materials at cost plus markup. CLIENT PREFERS: When scope uncertain, they want contractor motivated to be efficient, trust relationship exists. YOU WIN: Get paid for all time actually worked, material cost increases passed through, changes easily accommodated, lower risk of losing money. YOU LOSE: Client may question every hour, competitive disadvantage versus fixed bids, requires detailed time tracking and receipts. BEST FOR: Remodel work with unknowns, repair work, service calls, projects with undefined scope, working with repeat trusted clients. PRICING: Still mark up materials 15-25% and hourly rate should include overhead and profit ($75-$150+ per hour depending on trade). HYBRID (COMMON): Fixed price with T&M for change orders or unknowns. Or "Not to Exceed" price - T&M up to maximum. Provides client some certainty while protecting contractor. RECOMMENDATION: New contractors often start with T&M to build experience and avoid underbidding. Established contractors prefer fixed-price for larger profits and client preference.

Question 4

How much should I charge for small jobs and service calls?

Accepted Answer

Small jobs require different pricing than large projects. MINIMUM CHARGES ESSENTIAL: Most contractors have minimum service call of $150-$400 regardless of actual work time. Justification: Mobilization costs (drive time, fuel, bringing tools), administrative costs (scheduling, invoicing), opportunity cost (can't do other work), customer acquisition cost (marketing, estimating). WITHOUT MINIMUMS: Would lose money on every small job. $75/hour rate × 1 hour work = $75, but you spent 1 hour driving, 30 min scheduling, 30 min invoicing = 3 hours real time = $25/hour effective rate, below your costs. SMALL JOB PRICING STRATEGIES: MINIMUM CHARGE APPROACH: $250-$400 minimum charge for first 2 hours, then regular hourly rate after. Example: "Service call minimum $300 for up to 2 hours, $125/hour after that." FLAT RATE PRICING: Set flat prices for common repairs. "Faucet replacement: $275." "Outlet installation: $150." Faster than hourly and clients prefer price certainty. VALUE-BASED PRICING: Charge based on value to client, not just time. "Emergency water shut-off and temporary repair: $400" even if takes 30 minutes - it's emergency and saves them thousands in damage. TYPICAL SMALL JOB RATES: Handyman/small repairs: $250-$400 minimum, $75-$125/hour. Licensed trade work (plumbing, electrical): $150-$400 minimum, $100-$200/hour. Emergency service: Double regular rates ($300-$600 minimum). PRESENTATION: Don't apologize for minimum. State confidently: "My service call minimum is $300 which covers first two hours of work." Most understand and accept. Those who balk aren't your target clients. PROFITABILITY: Small jobs (under $1,000) need 35-50% profit margins to be worthwhile. They're proportionally more expensive to manage than large projects.

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Frequently Asked Questions

How do I create an accurate project bid?

How do I avoid bidding too low and losing money?

Should I bid fixed-price or time-and-materials?

How much should I charge for small jobs and service calls?