As a general contractor, it can be tricky to figure out exactly how much your services are worth. Go too high and you may lose business. Go too low and you may cut into your bottom line. If you are having trouble finding a happy medium, try these quick pricing tips.
5 Quick Pricing Tips for a General Contractor
1) Do Market Research
Before getting started, take some time to survey the landscape. See who your competitors are, what types of projects they are working on and how much they are charging.
Try talking with another general contractor or contacting a trade organization.
2) Consider Overhead
Early on, you need to figure out how much it costs to keep your business up and running. You’ll need to tally up all your yearly expenses, including:
- Office space
In you’ve been a general contractor for a few years, you can estimate this year’s overhead based on previous expenses. New contractors can use industry standards as a point of reference.
3) Pick a Profit Margin
As the general contractor, you have the opportunity to set a profit margin for each job. With this percentage of money, which exceeds salary and overhead expenses, you may choose to invest in the expansion or development of your business.
A typical profit margin ranges from 10 to 20 percent.
4) Watch out for Price Fluctuations
Since changing prices can impact the bottom line, it’s important to prepare for the likelihood of price fluctuations. When you set a budget, build a cushion just in case prices for goods change.
One way to deal with this phenomenon is signing up for contracts that lock down prices with suppliers for 30 days or more.
5) Inspect Each Job Carefully
Smart general contractors always inspect each job carefully before agreeing to complete it. By looking at all the specifications, you’ll be able to preserve your profit margin and likely will not have to adjust the project’s pricing in midstream.
Although setting the right price will take some trial and error, these tips provide a solid foundation for a general contractor to follow.