If you suspect there will be a significant lag between invoicing and being paid, factor this into your estimate so have a clear picture of the cost of the job. This lag is known as your carrying cost, since you are essentially carrying the debt instead of enjoying the money. Payment to contractors at every level is notoriously slow, which means you are likely to do without the money you have earned for months. Percentage-wise, they can total up to more than the profit you expect to make, so you have to be sure theyвЂ™re accounted for. Weigh this carefully before you agree to do a job.ДonвЂ™t forget taxes: ThereвЂ™s a tax on your payroll, a tax on the materials you buy, and a tax on the profit that you make.

A small, complicated project might demand much more from you than a large simple one, so your profit ought to be based on more than a simple percentage. (The actual average net profit for residential construction companies was 7.4% in 2017, according to the National Association of Home Builders.)Д«ut also rememberВ that 10% is an average. The industry standard is the 10-10 rule, meaning 10% for profit and 10% for overhead. That number ought to in your estimate, and ought to be the last thing youвЂ™re willing to adjust. Before you agree to take a job, you should know how much you should be leaving with in-pocket. This seems obvious, but a surprising number of small contractors donвЂ™t figure their own profit into their estimates. ItвЂ™s a lot to keep track of, but if you donвЂ™t include it on the estimate, youвЂ™ll end up paying for it instead of having your client pay for it. Other hidden costs include gas for trucks, temporary shoring, site utilities, saw blades, trash hauling, and more. Some contracts have the contractor pay for the permits, which can range from hundreds to many thousands of dollars. Small miscellaneous costs can be a killer. Even the office time spent on administering those things has to be paid for. Labor is more than just what you pay your crew per hour: Labor burden is a factor that represents all the various costs of hiring your workforce, like insurance, payroll taxes, benefits, Workers Comp, continuing education, certifications, safety equipment, etc. Make sure youвЂ™ve considered that the cost of materials can change significantly between the signing of the contract and the purchase of those materials. If a client wants в…ќ-inch thick drywall and youвЂ™re estimating ВЅ-inch drywall, you could end up eating the difference. Sure, youвЂ™ve counted the units of each material - but make sure you understand the details. Knowing exactly when the job should end saves everyone money and headaches. If your client makes changes, that can cost you in lost opportunity costs, additional labor, and additional supervision. You have to know in order to plan your next job (and the one after that) when your current job will end. We say it all the time, but time actually is money. By defining what is included in the work, youвЂ™re also defining what isnвЂ™t included, which can be critical if disputes ensue.

But if there arenвЂ™t - or if theyвЂ™re incomplete - your description of the work is the basis for the whole agreement. If there are drawings and specs included, this is already largely covered. Whether you use these templates, find one elsewhere, or create your own, a construction estimate should generally contain the following information. What construction estimate templates should include All of the costs of running your business ought to show up in some way on your estimate. You also have a business to run, and that isnвЂ™t free. Make sure you clearly communicate this to your client when providing an estimate or a proposal.ДЄ thorough estimate includes much more than just the value of the work to be performed. Clients see you - as they should - as an expert in your field, and put a lot of trust in your expertise and professionalism.ДЄn estimate is not a contract. In the heat of the job, with money on the line, honest mistakes can be misinterpreted as dishonesty and your reputation (and the reputation of contractors in general) can take a hit. Many, many disputes with clients begin as a simple misunderstanding of the scope of the work.

The biggest problem with an inaccurate estimate is that it leads to an inaccurate bid. If your estimate is inaccurate, it will be almost impossible for you to make money.ДЄn inaccurate estimate greatly increases the chances of payment delays, lien claims, and litigation. This is because the contracting game is won at the beginning, not the end. This may seem obvious, but it bears repeating - a good estimate is the key to success as a builder.

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