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

3. 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.

4. 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, , or fax).
Be sure you have all information available before starting your estimate

5. 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.

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

7. 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)

9. FIGURING OVERHEAD!

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

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

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

13. 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

14. 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.

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

16. 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.

17. 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.

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

20. PROFITS, MARGINS, & MARKUPS - WHAT ARE THEY?

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

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

23. 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

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

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

27. 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

28. 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.

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

31. 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.

32. 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?

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

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

36. ESTABLISHING YOUR MARGINS & MARKUPS

37. 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

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