If you have worked with general contractors in the past, or researched what to expect when getting an estimate from a contractor, the one thing you know for sure is that there is no “industry standard” when it comes to how contractors price their jobs. Heck, even contractors struggle with which approach to use when bidding on a project.
When contractors get together, debates rage about how to price jobs. Should a flat markup be applied across the board, or just on labor? What about materials and subcontractors, do we dare mark them up? Don’t even get a contractor started on whether or not to itemize those costs to you the consumer!
The truth of the matter is that when putting together an estimate, every well-intentioned contractor is trying to do the same basic thing. Come up with a price that will earn your business and:
- Cover the cost of materials and labor that will be needed to finish your project to your satisfaction.
- Contribute proportionally to the overhead costs of the business (like trucks, tools, and insurance).
- Contribute an acceptable amount of money to the owner’s bottom line to compensate them for being in the construction business.
After a contractor calculates the dollar figure that meets those criteria, the next step is to figure out how to present it to you. The tough part is to find a way that communicates the value of the work, sets their proposal apart from others that you will likely receive, and lay down some parameters for what happens when the scope of the project changes. As you will see, Macktown Construction Group proposals include exacting details of the project, the terms of payment and final cost, and the process for making changes to the details of the project once things get started.