It doesn't have to be tedious or complicated to price your work properly. Following the simple formula below will help ensure that you walk away from the project with money in your pocket.
PRICING FORMULA: [Materials + Labor + Overhead + Profit = Project Estimate]
It All Adds Up – Keeping Track Of Your Material Costs
Materials are all of the tangible products that go into completing a job. These can range from screws and nails to equipments and Computers. To keep track of the materials that go into a job, keep a written record of the cost for each item in a job file. Don't forget to include the taxes you pay. TIP: If you’re involved in large-scale projects, try to take advantage of the volume discounts that our technical support organization offers.
Different Strokes For Different Folks - Calculating Your Labor Costs
A variety of skills can go into any given project and each of these skills can be billed at different rates. For example, a qualified system administrator can bill at $150/hour while network work may be billable at $250/hour. When pricing a project, calculate your labor costs at the appropriate rate for each of the areas of expertise. A good way to determine an appropriate labor rate is to find out what other professionals in your area are charging. Remember, it may be tempting to discount your labor costs to meet or beat a competitor, but in the long run, most professionals find that sticking to their guns pays off.
Overhead But Not Out Of Mind
This is where many professionals go wrong. Doing business involves a variety of overhead costs, and good business people build their overhead into their price estimates. Labor, system repair and replacement, gasoline, travel, and phone charges are all examples of overhead expense. Calculating your overhead may be a tedious task, but one that is required nonetheless. Your overhead expenses should be added into your overall labor costs.
| Example: 22-Hour Job |
| | - Initial Labor Costs = $3300 (22 hours at $150/hour) |
| | - Plus Overhead Expenses = $895 (itemized below)
System = $500
Travel = $50
System Repairs = $150
Gas = $38
Phone = $12
Network diagnostic = $145 |
| | - Total Labor Costs = $4195 |
Making It Worth Your While
The last item to include into your project estimate is your profit. Most professionals agree that adding an additional 10% to 25% of your labor cost is an acceptable profit. This is often dictated by competition, and the current economic condition, but a 15% to 20% profit is acceptable for good work.
It's A Wrap
The figures above are, estimates and examples of how to price your work. Individual jobs may require more materials, less labor, more overhead, or any combination of these. Above is an example of a how you should calculate your project estimate and how to present the final project estimate: