How General Contractors Can Price a Job

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Pricing Contractor Jobs: What to Consider Before Giving a Quote

Carefully accounting for various factors to ensure profitability means taking into account all the overhead costs you have to contend with, including:

The Scope of the Work

Multiple factors come into play when determining the scope of the project, including the location of the site, site hazards, the size of the job, your services, the project deadlines, and any special requests by the customer.

Labour Costs

Time is money, and labour drives the bill. Consider what you’ll need to pay the number of full-time employees and subcontractors for the job, including any overtime, the schedule to complete the project, and factor in payroll taxes and workers’ compensation expenses. If hiring subcontractors, think about how many you need, their experience and skill levels, and the scope of the work you need them to do.

If you charge an hourly rate, evaluate your desired annual profit margin or income and divide it by the number of working hours over the course of a year to calculate an hourly rate.

Cost of Materials and Supplies

The cost of materials and supplies needed for the project is among the most expensive, and depending on the raw material, the price can fluctuate (for example, the cost of lumber). Nevertheless, know what materials you need, how much, and the costs for things like lumber, concrete, drywall, sealants, and other materials.

Cost of Building Permits

Check with local authorities to learn what building permits you’ll need and the applicable fees. Also, evaluate the cost of scheduling building inspections.

Equipment and Tools

What equipment and tools will you need to complete the project? Are you using equipment you own, or will you need to rent additional equipment? Account for wear-and-tear and maintenance costs of equipment, as well as transportation for heavy equipment like a backhoe if required.

Market Conditions and Competitor Rates

Research your competitors’ prices to avoid underbidding on a job. Also, know the general market conditions based on the state of the economy, seasonality, and customer demand for general contracting and construction services in that region. 

The Job Site Conditions

What are the job site conditions? Is it a new build or a renovation? Inspect the site to identify any accessibility issues, factor in travel time for your crew and equipment, and additional site preparations, such as storage for materials or demolition and waste removal requirements.

A Contingency Budget

Remember, a contingency budget is not a luxury, but a necessity. It’s crucial to account for unexpected delays in the construction project, such as material shortages or supply chain delays, poor weather conditions, and unanticipated costs due to issues that may arise during the job. 

You need to protect your profit margin, so add the totals of your combined costs and profit margin and then add a contingency percentage to get a final number. It’s generally recommended to have a buffer between 5% and 15% for such circumstances.

Environmental and Regulatory Compliance

Environmental liabilities are a fact of life in the construction world. Remember the pollution liability risks you face for each job and ensure you comply with relevant laws. Also, know the building safety codes and regulations you must adhere to.

Customer Payment Terms

When drafting your customer contract, it’s essential to clearly outline your payment terms and deadlines. While being flexible, it’s important to ensure that you have the necessary cash flow upfront to cover material and labour expenses.

Your General Overhead Costs

Account for indirect expenses that can determine whether or not you’re profitable by factoring in the cost of rent for your office space, gasoline for vehicles, utility bills, and equipment maintenance.

8 General Job Pricing Tips

Here are eight general tips for determining the price of your next construction project and winning the customer over:

1. Do a walk-through of the property or job site before offering an estimate or quote.
2. Ask the customer if they have any special requests or job specifications for the project.
3. Know how many and the type of subcontractors you’ll need.
4. Know the travel times and where you can park vehicles and store materials and equipment.
5. Will the customer occupy the property while work is done? Are daily clean-ups required?
6. Keep abreast of any supply chain issues and special materials needed for the job.
7. Find out if there’s any prep work required, such as moving furniture out of the way for renovation and painting jobs.
8. If possible, deliver the quote to the customer in person and answer their questions upfront.

Critical: Get Contractor Insurance to Protect Your Assets

Before embarking on any construction or renovation project, ensure you have adequate contractor insurance to cover you and your customer for unexpected damages and losses. Providing your customers with a valid certificate of insurance will inspire their confidence in you and can help you win bids.

Zensurance specializes in helping contractors and builders across Canada get low-cost, customized liability insurance. Fill out our online application for a free quote in less than five minutes.

Our team of knowledgeable brokers provide worry-free insurance solutions for contractors, renovation experts, and skilled tradespeople. We can shop the market for you, answer your questions, ensure you’re adequately covered, and set the foundation you need to be successful.