Estimating – Overhead, Profit, Margins, & Markups workshop Presented by: Rex Davis & Associates, LLC

REVIEW !! Keep your Bid due date foremost in the back of your mind. Break the job into manageable parts (phases) as if your were building or delivering the project. Take-off done exactly as your would build or deliver.

REVIEW !! Have a well defined scope of work and this should mirror your company goals. Use RFI’s and RFP’s to collect all the information you need. Always get this information in a permanent type of record (paper, email, or fax). Be sure you have all information available before starting your estimate

REVIEW !! Number each line of your estimate. Mark your drawings as you work on your take-off. Make your take-off as accurate as possible, NO Guesstimates. Labor & Equipment cost as individual items/ men or do you develop crews. Don’t forget your other added costs on labor and equipment.

REVIEW !! Information needed on your take-off: Quantity Description Size Specifications Extra needed for waste Where are you adding markup?

Pricing Materials, Labor & Equipment (examples)   $141.90 $3,405.60 $50.00 $23.75 $13.15 Hr $55.00 24 Backhoe Totl$/UOM Total $ Maintenance Lube Fuel ($/#gal/hr) UOM Cost/UOM Qty. Equipment $15.22 $532.51 $0.65 $0.91 $13.00 35 Laborer $27.82 $1,251.66 $1.25 $25.00 45 Journeyman 401K Vacation Health Labor $0.94 $2,921.00 $67.18 $1,200.00 SF $0.53 3200 Drywall Local Tax (2.3%) Surchrge Ship Material Materials (Example) Pricing Materials, Labor & Equipment (examples)

FIGURING OVERHEAD!

OVERHEAD Overhead – Administrative wages/ costs and other costs that are the non-direct costs of doing business.

Include in Overhead These items are included in your overhead: Administrative salaries Office equipment and supplies Rent/ Mortgage Depreciation Licenses, taxes, liability insurances

Two Types of Overhead Corporate (General) Overhead Job Specific Overhead

Corporate Overhead Administrative salaries This is your typical overhead for your main office (as before): Administrative salaries Office equipment and supplies Rent/ Mortgage Depreciation Licenses, taxes, liability insurances

Job Specific Overhead This is the administrative costs for the job site: Site Administrative Staff Temporary Power Temporary Phone & Data Lines Water Waste Disposal Temporary Toilets A lot of these will fall into General Conditions.

Rules for Overhead Overhead costs are annual or monthly cost. This will be a dollar amount!!

Rules for Overhead Dollar amount: If you know your actual monthly overhead costs, you will be able to come up with your dollar amount of overhead costs for each project.

Gross Overhead / Gross Annual Income Rules for Overhead Percentage amount: Overhead is a dollar yearly amount divided by the total yearly gross sales. Gross Overhead / Gross Annual Income These may be projected amounts. You will get a percentage of annual sales for your overhead costs.

Rules for Overhead Use the dollar amount rather than the percentage amount, it is more accurate.

PROFITS, MARGINS, & MARKUPS - WHAT ARE THEY?

MARGINS Margins – A spare amount, measure, or degree allowed for contingencies.

USING MARGINS Where might you use margins in your estimate? Why use margins? Margins could be called contingencies, differing on how they are used.

YOUR MARGINS What might determine the margins you use on your estimates? Upper management Market volume Market fluctuations How much you want to make Competitors pricing

MARKUPS Markup – An amount added to the price of an article to determine the selling price.

USING MARKUPS Where might you use markups in your estimate? Why use markups? What is the reasoning for using markups on your estimates?

DETERMINING MARKUPS What might determine the markups you use on your estimates? Upper management Market volume Market fluctuations How much you want to make Competitors pricing

MANIPULATING MARKUPS These may vary from job to job. Why? Manipulation of these may be key to your getting the job during the Bidday or negotiation process. If you can determine these quickly they may help you get the bid.

PROFITS Profit – The excess money left after the selling of your goods (product) after all costs have been accounted for.

PROFIT MARGIN VS. ACTUAL Profit margin is determined on the basis of the amount of money necessary to maintain operating expenses and a positive cash flow between projects. Actual profit is the money remaining after all wages, taxes, fees, materials, and equipment are deducted from the gross estimate or contract price.

PROFIT AMOUNTS The actual profit may be as little as 2% - 3% after all is said and done. This may be the level you need to bid in order to get some jobs. Do you want to combine your overhead with your profit? Why? Why not?

DETERMINING PROFIT What determines profit: Upper management Market volume Market fluctuations How much you want to make Competitors pricing

Innovative and accurate estimating could be the difference in your profit margins.

ESTABLISHING YOUR MARGINS & MARKUPS

WORKING WITH MARGINS & MARKUPS How do you establish you margins and markups? History Competitors bidding habits Upper management Market volume Market fluctuations How much you want to make

Next Step Preparing your estimate for presentation. Next session this afternoon. If there are any specific questions you want answered write them down.