Job costing · 3 minute read
How to price the next job with your own numbers
Price the next job from three numbers in your own books: what an hour of labor really costs you, what your overhead runs each month, and how your past estimates compared with what jobs actually cost. Industry rules of thumb are a starting point. Your own numbers are the answer.
Bids built on gut feel copy last year's mistakes
Most contractors price a job the way they priced the last one, adjusted for how the last one felt.
If the last one lost money and nobody noticed, the new bid repeats the loss. Your books already hold the numbers to stop that. Here are the three that matter.
Number one: what an hour of labor really costs
An employee's wage is only part of what an hour costs you. Payroll taxes, workers' comp, insurance and paid time off all ride on top.
Say a carpenter earns $32 an hour. Add the employer's share of Social Security and Medicare (7.65%), state workers' comp, unemployment insurance and a few holidays, and the real cost can land somewhere around $40 to $44 an hour, depending on your state and your insurance rates.
Then count the hours you pay for that nobody bills: drive time, shop time, picking up materials. If 15% of paid hours are unbillable, every billable hour has to carry that cost too.
Bid labor at $32 an hour and you are paying for the privilege of working.
Number two: what your overhead runs every month
Overhead is everything that keeps the doors open whether or not a job is running: trucks, insurance, phones, software, office rent, and your own pay as the owner.
Add it up from your P&L. Say it's $14,000 a month.
Now compare it with your monthly job volume. If you bill $70,000 a month in jobs, overhead is 20% of revenue. Every job needs to clear a gross margin above 20% just to break even, before any profit.
That one number turns job costing reports into decisions. A job at an 18% margin looks fine on its own. Next to a 20% overhead rate, it lost money.
Number three: your estimate versus what jobs actually cost
Pull your last ten finished jobs. For each one, compare the estimate with the actual cost in four buckets: materials, labor, subs and other.
You're looking for patterns, like these:
- Labor runs 15% over on every bathroom.
- Materials come in under on decks but over on kitchens.
- Jobs under $5,000 always run over on time, because the setup and drive time don't shrink with the job.
Each pattern is a line item to fix in the next bid. This is exactly what our Bid Check does on ten finished jobs. It's included on the Job Profit and Back Office plans with a 12-month agreement and available on its own as an add-on.
Put the three numbers together
A simple, honest bid looks like this:
- Estimate materials, then add the overrun your history shows for that job type.
- Estimate hours, then price them at your true labor cost per hour.
- Add sub quotes.
- Add your overhead percentage on top of job cost.
- Add the profit margin you want to keep.
None of this needs special software. It needs books where every cost is coded to the right job, every month, so the history is there when you need it.
Your numbers are only as good as your books
If supplier bills land in a general expense account instead of the job, materials look cheap and labor looks expensive. If payroll isn't split by job, labor cost per job is a guess. Clean monthly closes are what make every number above trustworthy.
What to do next
Find your overhead number this week. It's the single fastest improvement most bids can get.
If your books can't produce job-level numbers yet, start with a free Job Profit Snapshot. Painters, drywall and flooring crews will find trade-specific examples on our pages for painters, drywall contractors and flooring contractors.