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Hello Everyone. Thought I would put up some relevant articles for those who are trying to figure out how to price their bids/quotes. Many people on TGS and other bulletin boards have asked the question; How do I figure out my price? The responses have been varied but the most common have correctly been to find out what YOUR costs are and price yourself in respect to them. Other contractors prices may seem like a good gauge or a way of being competitive but their pricing structure may be wrong or not inclusive of the many necessary costs of doing business and as a result we see those companies disappear in a short time because they weren't properly covering their costs and ran the business literally into the ground and went broke. So when it comes to competitive pricing, one must consider there will be many aspects of a competitors price that they won't be aware of and as a result, it becomes a shot in the dark when applying their pricing to yours. But how does one determine their own pricing? Overhead is the first part of it. It all starts with the constant costs or recurring costs of doing business. These costs are the underlying basis of what has to be paid to operate a business and are seen in the forms of: -phone bills, internet service and possibly cloud based services with a monthly fee -utilities (electric, water, etc) -insurance(s) (Business, workmans comp, vehicle, liability, health and equipment etc) -Space/building rent/lease and maintenance fees -Administrative staff -Equipment rental/payment and repairs -Licensing and in some localities, taxes. These are the most common and come with a regular billing cycle and as such can be quantified into monthly averages or increments which can be factored into a unique cost percentage that becomes part of the overhead equation. Some of these are direct costs while others which occur as a result of operational requisite become indirect costs. One way and typically the easiest way to derive an overhead cost is to gain an average. Taking all these costs and any others your business may incur into consideration, add them all up together. Divide them either by the number of months if they occur quarterly, semi annually etc and then divide by the number of days in that period relative to their billing. This gives you a daily cost. Take all others which occur on a monthly basis and divide by the number of days in a month if they are billed in that manner. This gives another daily cost. Add these costs together and get a cumulative cost for all. This is what you need to make per day to cover these expenses. Let's break that down into some examples. Monthly costs; rent/maintenance fees-$3000.00 utilites-$450.00 (avg) phone-internet-cloud based subscriptions-$1000.00 Insurances (combined for this example) $5000.00 Administrative/staff-$20,000.00 State/local taxes (average for this example) $1500.00 Equipment/vehicle payment/repairs-$1500.00 Total Monthly payments:$32450.00 Divide that by 30 days (365/12=30.41666) =$1081.00 This is the amount of money you need to bring everyday to cover your operational costs. Now, you can look into other costs that will be added into your overhead figure and broken down to equate to a price you can use towards bidding/quoting a job. Employee wages for the work as a start. Do you have any measure of productivity to apply towards gaining an hourly price? For example, how long does it take to wash X sqft of ____________? You can use a couple of ways to determine that but most people who have been in the business know how long it takes to wash anything they bid. They time it or they use the results in the time taken in previous jobs similar to it to create an average by the hour or sqft. or even sqft/hour and that will be based upon the equipment being used or not used, the number of employees on that job and include set up and break down times. Some will even factor a travel time based upon a service area they designate and anything that falls outside of that area, an extra cost will be added in the form of a percentage of labor/fuel and any other expenses such as tolls and metering fees if they need to attach to a hydrant. Many companies make the mistake of solely pricing by time and materials in which time is the wages of the employee's on the job and not necessarily those of the owners and administrative staff (if any) creating a negative pricing structure which leads to a company working into debt. This is why knowing all your costs up front helps to keep your company profitable and helping to create a price that not only covers all your expenses but also contributes to profits and incidental cost coverage without which can hurt of cripple a company. I will provide a small example of a pricing model, but realize this is but an illustration for the basis of helping you to determine how to go about creating your companies unique pricing guide. Only you know what those costs are because you are the one that has set them up, and your responsibility for paying them on time and regularly depends upon accounting for them in all bids and prices you give. Earlier, we arrived at a price of $1081.00/day the business needs. Let's assume you have enough business under your belt to have a record of previous jobs which are recorded for start and end times, the number of employee's on those jobs and the expenses that went into completing them. 1. Travel time: 20 minutes city driving/15 mile radius 2. Time of the job: 4 hours 3. Employees active: 2 4. Wage of each employee: $14/hr and $16/hr 5. Fuel for the power washer at $2.59/gal and the power washer runs for 5 hours on a 7 gallon tank 6. Plus diesel fuel for the burner at $2.99/gal and it's duration is dependent upon temperature required X time in use. 7. Avg at same 5 hours of gas used and heated to 150*=6 gallons/5 hours=1.2/gal/hour 8. Vehicle fuel at $2.59/gal and your mpg is 15X15 miles=1 gallon of gas used to transport vehicle and employee's. 9.Set up time=15 minutes 10. Break down time=15 minutes 11. Chemicals used @ $3.00/gallon X 1 gallon and downstreamed 1 -> wages for travel (butt time) 14/hour/60=.23/minute X 20 minutes=4.66 + 16/hour/60=.26/minute X 20 minutes = 5.33 which equals $9.99 2, 3 and 4 -> job time; 14 X 4 =56, 16 X 4 =64 which equals $120.00 5-> 7/5=1.4gal/hour X 4hours = 5.6 gallons X $2.59 = $14.50 in gasoline fuel used 6, 7 -> 1.2/gal/hr X 4/hrs = 4.8 gallons X $2.99 = $14.35 in diesel used 8 -> $2.59 for vehicle fuel 9 and 10 ->.23 X 15/minutes = $3.45 + .26 X 15/minutes = $3.90 which equals $7.35 X 2 (break down time added here) = $14.70 11 -> $3.00 chems. Total-$179.13 direct job cost (time/materials etc) Average this for a regular day at 8 hours equates to $358.26 Add in the overhead figure-$1081.00+$358.26=$1439.26 For simplicity sake, divide by 8=$179.90/hour Break that down by sqft if you like by dividing that number in the total sqft covered. Let's put a figure out there of 3500/sqft / 4 hours = 875 sqft/hr that 2 employee's can cover in a 4 hour period 875/4=218.75sqft/hr 218.75/2 employee's = 109.37 sqft/hour Now, we have broken this down to the hour and sqft. Do we know how much we need to charge per/sqft to cover a days expenses? 3500sqft x 2 = 7000sqft a crew can cover in a day. $1439.26 is our direct cost including overhead. 7000/$1439.26=.20/sqft BUT!!! that doesn't cover any margin we need to make also known as profit. What is the percentage you wish to make to help your company grow? 10%, 15%, 20%? Take your total expenses and multiply it times the percentage you need to make. Remember though, this can affect serveral things. One is your competitiveness in pricing. The other is your revenue tax bracket. An accountant would be best served to advise you on this subject. Below, I have provided some links to the topic for the benefit of supporting documentation and reference in case something is not clear here. Remember also, that in a service business, many examples provided in the links will be based upon selling a product. I have tailored the examples here to apply towards a service business like our industry has and it is from that basis that I hope to have covered as many bases as possible. Feel free to ask questions, make suggestions, post examples and any other relevant information or ideas. After all, this is where people come to learn. http://smallbusiness.theprivatebank.com/how-to-avoid-three-common-profit-mistakes/ http://www.wikihow.com/Calculate-Overhead Rod

From time to time you hear about instances where people attempt to influence the outcome of a bidding process by way of working with others to set pricing for a group and then bidding together, the outcome of course is that the work is shared and the job was a lock to begin with. Below is information on this practice, which is against the law. It is worth reading no matter how long you have been in business. Price fixing - Wikipedia, the free encyclopedia Price fixing is an agreement between participants on the same side in a market to buy or sell a product, service, or commodity only at a fixed price, or maintain the market conditions such that the price is maintained at a given level by controlling supply and demand. The group of market makers involved in price fixing is sometimes referred to as a cartel. Price fixing may be intended to push the price of a product as high as possible, leading to profits for all sellers, but it may also have the goal to fix, peg, discount, or stabilize prices. The defining characteristic of price fixing is any agreement regarding price, whether expressed or implied. Price fixing requires a conspiracy between two or more sellers or buyers; the purpose is to coordinate pricing for mutual benefit of the traders. Sellers might agree to sell at a common target price; set a common minimum price; buy the product from a supplier at a specified maximum price; adhere to a price book or list price; engage in cooperative price advertising; standardize financial credit terms offered to purchasers; use uniform trade-in allowances; limit discounts; discontinue a free service or fix the price of one component of an overall service; adhere uniformly to previously-announced prices and terms of sale; establish uniform costs and markups; impose mandatory surcharges; purposefully reduce output or sales in order to charge higher prices; or purposefully share or pool markets, territories, or customers. Price fixing is permitted in some markets but not others; where allowed it is often known as resale price maintenance or retail price maintenance. In neo-classical economics, price fixing is inefficient. The anti-competitive agreement by producers to fix prices above the market price transfers some of the consumer surplus to those producers and also results in a deadweight loss. In the United States, price fixing can be prosecuted as a criminal federal offense under section 1 of the Sherman Antitrust Act.[2] Prosecutions may be handled by the U.S. Department of Justice or by the Federal Trade Commission. Many State Attorneys General also bring antitrust cases and have antitrust offices, such as Virginia, New York, and California. Private individuals or organizations can bring their own lawsuits for triple damages for antitrust violations and also recover attorneys fees..[3] Colluding on price amongst competitors, also known as horizontal price fixing, is viewed as a per se violation of the Sherman Act regardless of the market impact or alleged efficiency of the action. In 2007, the U.S. Supreme Court ruled that vertical price fixing by a manufacturer and its retailers, also known as retail price maintenance, is not a per se violation. Under American law, exchanging prices among competitors can also violate the antitrust laws. This includes exchanging prices with either the intent to fix prices or if the exchange affects the prices individual competitors set. Proof that competitors have shared prices can be used as part of the evidence of an illegal price fixing agreement.[4] Experts generally advise that competitors avoid even the appearance of agreeing on price.[5] In Canada, it is an indictable criminal offence under section 45 of the Competition Act. Bid rigging is considered a form of price fixing and is illegal in both the United States (s.1 Sherman Act) and Canada (s.47 Competition Act). In the United States, agreements to fix, raise, lower, stabilize, or otherwise set a price are illegal per se.[6] It does not matter if the price agreed upon is reasonable or for a good or altruistic cause; or if the agreement is explicit and formal or unspoken and tacit. In the United States, price-fixing also includes agreements to hold prices the same, discount prices (even if based on financial need or income), set credit terms, agree on a price schedule or scale, adopt a common formula to figure prices, banning price advertising, or agreeing to adhere to prices that one announces.[7] Although price fixing usually means sellers agreeing on price, it can also include agreements among buyers to fix the price at which they will buy products. “Antitrust” redirects here. For the 2001 film, see Antitrust (film). For laws specific to the U.S., see United States antitrust law. Competition law, known in the United States as antitrust law, are laws that promote or maintain market competition by regulating anti-competitive conduct.[1] The history of competition law reaches back to the Roman Empire. The business practices of market traders, guilds and governments have always been subject to scrutiny, and sometimes severe sanctions. Since the twentieth century, competition law has become global. The two largest and most influential systems of competition regulation are United States antitrust law and European Union competition law. National and regional competition authorities across the world have formed international support and enforcement networks. Modern competition law has historically evolved on a country level to promote and maintain competition in markets principally within the territorial boundaries of nation-states. National competition law usually does not cover activity beyond territorial borders unless it has significant effects at nation-state level.[2] The protection of international competition is governed by international competition agreements. In 1945, during the negotiations preceding the adoption of the General Agreement on Tariffs and Trade (GATT) in 1947, limited international competition obligations were proposed within the Charter for an International Trade Organisation. These obligations were not included in GATT, but in 1994, with the conclusion of the Uruguay Round of GATT Multilateral Negotiations, the World Trade Organisation (WTO) was created. The Agreement Establishing the WTO included a range of limited provisions on various cross-border competition issues on a sector specific basis.[3]

Hello All.. I live in Kansas outside of KC. I have a very large deck job to do and have no clue what the current going rates are. I used to run a pressure cleaning biz back in 01 and do have experience restoring some decks but have been out of it for quite some time now. This job is for a friend "of a family friend" at their private lake house. It is a 2 story deck with the bottom being all cedar siding and trim. It has a screened in porch off the main deck, about 200 feet of hand rail and ballasters, a 30' ramp leading to the deck from the front and a small 6' stair case off the back.The deck it self is in a L shape about 12' wide and goes about 30' then turns and goes another 12' to the screened in porch. all the upper trim around the deck and porch is cedar as well. It is supported by four 6X6 rough cut cedar post and the hand rails are supported by 24 6X6 cedar posts.. This is a complete resto... The floor will need stripper applied and washed then several boards replaced and the rest will need sanded as they are in VERY rough condition, the hand rails will need about 60+ feet repl and the rest also sanded. They have requested that I cut in blocks under the hand rails spaces to keep the wasp from building nests. Everything is to be stained with a semi cedar tinted stain.. I have no idea where to start on this estimate... PLEASE HELP Thanks