Quoting JobsUnderstanding your true cost and estimating
When it comes to quoting jobs, it’s hard to put everything into simple steps. Every area is different. To be as successful as possible it’s best to learn your area and where you want to fit in. Being the cheapest is one way to “win” jobs but you need to make sure you are not just working for a pay check but building a company. Be the most expensive and you might get pushed out of the market. Step 1 is knowing what your true cost of the job is. This cost has to take into account for everything needed to complete the job. This amount varies for each contractor. Some key things to consider are:
Per job costsMaterial cost To understand your material cost will take some time and spreadsheets. To get started ask you supplier the estimated real world board footage per set of material. Then divide your set price by your board footage. This will give you your material cost per board foot. This will very from manufacture to manufacture but will always put everyone’s material on the same playing field. Tracking your yields for each job will allow you to come up with a true consistent real world value to use. I know it might be hard to believe, but some sales people may exaggerate the yield their material gets. Because of this as well as some other factors (like spray technique), its always best to figure out what you average from your sets.
Labor When putting a board footage figure to a job, you need to set a realistic amount of foam that will be sprayed in 8 hours. For established company, a full set is typical. Since we already know how many board feet we get in a set, we would divide how much a sprayer will make a day (either per set, daily, or for 8 hours). That will give us our labor cost per board foot.
Fuel (generator and truck) This one all depends on tank size and engines types running. After the first couple jobs you will be able to figure out how much fuel you typically use a day. You can either use that as a base number or divide it out per hours. Typically jobs that are 2 hours or more away include travel costs to cover extra fuel and labor costs.
Prep materials Like fuel this will probably be a base price per job, unless excessive prep work is to be done.
Extras Extras are anything that you don’t see on the job site. They are things like warehousing, insurance, bills…pretty much anything that is a reoccurring monthly charge, as well as equipment maintenance and spare parts. The best way to get a board footage number that includes all of this is to monitor them over a year or so. After that you will have a good idea about how much foam you have sprayed as well as what the operating or “extra” costs are for your company. Divide the total “extras” by the board footage you sprayed and you will get a number you can use for your true cost. Now that you know the true cost of your material per board foot, you can take that and add what your desired profit is. Some people like to have this simply as a percentage other people prefer to have it as a dollar value per job.
Determining the square footage of a job
This is a simple step. To determine the square footage of the job, you need to find out the area that will be sprayed with spray foam. When measuring the area, typically the stubs are and windows are left in to account for over spray and to allow you to sharpen your pencil if needed. To determine a surface area you will multiple the height of a wall by the length of the wall. After that you are ready to apply that number to the following formula for costing a job. To find the total area of a job simple add up the area of all surfaces. This will give you the total square footage that you will be spraying. Next you have to account for the thickness of the foam. To do this simply multiple the square footage by the how many inches you need to spray. This will give you the total board footage. If you are working with a surface area that is not smooth or easy to measure (like a metal building) you can take a 10 ft piece of string, tape it to a corner and then let it follow the contour of the building. When the string runs out mark that spot. Now measure how far the string went along the way. That will tell you how much of the surface area is within the indents. For example it your 10 foot string only went 7 feet, divide 7/10. The will give you .7. This is the number you will use to account for all the contours of the wall. If your building measured 70 feet along the ground, you would divide 70 by.7. that will give you a total of 100 feet of wall space you need to spray. If you want to see this expressed as a formula it would be…remember to do whats in the brackets first:
(L/(S/10)) x T = B L = over all length of the wall S = distance the 10 ft string went T = Thickness of foam B = Board footage
Now that you understand your true cost, and how to measure out the board footage of the job, you can come up with a price for the job. The formula you will use for your final price will be one of two.
Formula 1 Percentage (M*1.X) * B = $ M = material cost X = percentage you want to make for the job B = Board Footage $ = Your price for the job
Formula 2 Set Amount (M * B) + X = $ M = material cost X = dollar amount you want to make for the job B = Board Footage $ = Your price for the job
Whats wrong with lowballing to get a job? Not understanding your true costs or lowballing just to get job is a great way to run a business into the ground. Yes you could be working everyday, but in the end if it’s all for nothing with a bunch of extra stress and headaches why are you even doing it? If you own your own company the idea is not to be so busy that you have zero free time to live a life, but to be able to have the extra freedom most people don’t. If all you care about is a pay check and leaving for work every day, you may want to reconsider running your own company. What I mean by all this is you do not need to be dropping pricing just to get a job to say you are working 5-6 days a week. You can make the same amount of money working 3 days a week. Let’s put numbers to this so its easier to understand. Let’s say we have a 1000 sqft job that needs 3 inches of foam and we know our cost is $.90 per board foot.
Scenario #1 Job sold for $.95 or 5% profit. Knowing our selling price means (M*1.x) = $.95 From using the formula above we know: (M*1.X) * B = $ M = material cost X = percentage you want to make for the job B = Board Footage $ = Your price for the job (.9*1.05)*3000=$2850
At that price we have $150 profit (.9*3000=$2700. 2850-2700=$150)
Scenario #2 Job sold for $1 or 11% profit. Knowing our selling price means (M*1.x) = $1 From using the formula above we know: (M*1.X) * B = $ M = material cost X = percentage you want to make for the job B = Board Footage $ = Your price for the job (.9*1.11)*3000=$3000
At that price we have $297 profit (.9*3000=$2700. 3000-2700=$300)
A 5 cent increase pretty much doubled our profit! That means if you were to do 5 jobs a week with numbers from scenario #1 you would get $750 profit To make the same profit from scenario #2 you would need to work only 2.5 days that week to make the same profit.
IF you think those numbers are too tight lets look at 2 more scenarios...
Scenario #3 Cost is $.80 per bdft Job sold for $1 or 25% profit. Knowing our selling price means (M*1.x) = $1 From using the formula above we know: (M*1.X) * B = $ M = material cost X = percentage you want to make for the job B = Board Footage $ = Your price for the job (.8*1.25)*3000=$3000
At that price we have $600 profit (.8*3000=$2400. 3000-2400=$600)
Scenario #4 Cost is $.80 per bdft Job sold for $1.10 or 37.5% profit. Knowing our selling price means (M*1.x) = $1.10 From using the formula above we know: (M*1.X) * B = $ M = material cost X = percentage you want to make for the job B = Board Footage $ = Your price for the job (.8*1.25)*3000=$3300
At that price we have $900 profit (.8*3000=$2400. 3300-2400=$900)
A 10 cent increase gave us 50% more profit! That means if you were to do 5 jobs a week with numbers from scenario #3 you would get $3000 profit To make the same profit from scenario #4 you would need to work only 3.3 days that week to make the same profit.
If you are an owner operator, this means you have more freedom, time to spend with the family or time to do anything you wish. Some may even take this extra time to shop around for the jobs that better fit your new business strategy. All while not wearing down your equipment as well as yourself. Basically if you are easily busy every day it may be because you are selling yourself and your company a little short. Being the cheapest only benefits the customers. It does nothing long term to help yourself or the industry as a whole. Not working everyday isn’t a bad thing. It allows you to find the jobs you want, instead wasting time with jobs you think you need.