Start Your Own Construction Business - Pricing Your Work
By Stephen Bucaro
Construction is a popular choice for people who want to start their own business.
Construction business revenues are over $1 trillion annually, and over $100
billion of that goes to small, often one-person, construction businesses. Common
construction businesses are; carpentry, concrete, drywall, electrical, flooring,
masonry, painting, and roofing.
A construction business is good for people who like to work with their hands and
are not afraid of a little hard work. The startup costs for a construction business
are relatively low, usually requiring a truck and some tools. Some types of
construction businesses require specific skills and licenses.
If you've ever been arrested, you'll find that any company where you apply for
a job will do a background check, and no company (except possibly fast food)
will hire someone with an arrest record. However, customers who hire contractors
usually check the Registrar of Contractors or the Better Business Bureau, but they
don't usually do a background check on the business proprietor. In other words;
if you have an arrest record, your own construction business may be your only
option for earning a decent living.
Pricing your work is a critical aspect of being successful in the construction
contracting business. Price your work too high and you lose the job. Price your work
too low and you could work for free, or lose money. It would be wonderful if all
projects could be priced by time and materials, but few customers will risk such an
open ended proposition.
Estimating a Job Price
Estimating the price you should charge for a job boils down to the five steps shown below.
1. Estimate the number of hours the job will require
2. Determine the hourly rate that you desire
3. Multiply the hourly rate times the number of hours
4. Add the cost of overhead
5. Add the cost of materials
28 hours X $50 per hour = $1400
$1400 + $280 overhead + $800 materials = $2480
In the example shown above, 28 hours to do the job is multiplied by a rate of $50
per hour. To the result of $1400, is added $280 of overhead costs plus $800 of materials
costs. An estimate of $2480 for the job would be presented to the customer.
Here's how to determine each one of the items used in this calculation:
Estimating the Time that the job will require
• Keep a log of time spent on each job you do to help with future
estimates of similar projects. How long did it take you to do a similar project?
• Talk with fellow contractors to learn how long similar projects took them.
• Things always take longer than you expect, so add ten percent to the
time for complications that will inevitably arise.
• After you have gained some experience you'll be able to make accurate
time estimates. But to start out, you may need to just make a guess.