Have you ever worked hard on a job only to find out you barely broke even…or even worse LOST MONEY. There’s nothing worse than working hard on a job not to make money especially when 99% of the time it can be avoided. It’s crazy the amount of roofing contractors that go out of business because they don’t know how to properly price a job. Today I want to share with you how to price a job to ensure profit. So let’s dig in.
There are really only two ways to price a job. There is a fast way to do it and a much more time consuming method. If your focus is closing deals on the spot then the fast method is the way to go, however you have to be confident in your numbers to use this method. Let me explain:
How To Price Roofing Jobs The Slow Way
With this method you prepare a detailed list of material, labor and other costs to produce the job. Then add a markup % to hit the profit you’re trying to hit. If you’re not sure how to do that you can use a Margin / Markup table to calculate it for you. For example a 25% markup will give you a 20% margin.
Using this method to price a job is a great way to ensure you’re going to hit your profit target because you’re taking your true costs and marking them up to hit the profit you want.
The downside to using this method is that it is extremely time consuming and nearly impossible to do a one call close when you’re estimating this way. This means more jobs lost to lack of follow up or timing of getting estimates to customers.
The Fast Way To Price Roofing Jobs
The fast way to estimate a roofing job is create an estimating system. With this method you plug a few variables into your estimator and it spits out a price for you. The downside to this method is you’re not getting your true costs. Your putting together a quick estimate based on a few variables. This method is great for creating quick estimates but it is not as accurate as the slow way.
The fast way creates an estimate based on variables you give it. For a roofing estimate it might be inputs such as:
- How many squares the roof is
- How many layers for tear off
- Is the property one story or two
- What is the pitch
- Etc.
Then you have a per square price that is calculated to hit the margins you want based on your per square cost. When building a quick estimating system you will first want to calculate your average cost per square. Then put a markup on it to hit the profit target you’re trying to reach.
For example:
Lets say your cost per square is $300 and you’re creating an estimate on a 20 square roof. So your cost comes out to $6,000.
Next you do a markup of 25% which gives you a multiplier of 1.25 which shield produce a 20% margin. That would mean your price per square is $375 ($300 x 1.25). So you would price the job at $7,500. That would net you a profit of $1,500 ($7,500 – $6,000).
That is a 20% profit on that job ($1,500 / $7,500 = 20%.)
Using a markup to margin calculator you can hit any profit target you want using the multiplier it gives you.
Standard Estimating System
Whichever method you use you want to make sure you have a standard estimating system in your company that you use every time. This is especially true when you have a large sales team. You want to make sure everyone is estimating the same way to ensure you’re hitting the profit targets YOU set for your company.
If one person is estimating for 5% margins and another is estimating at 30% margins its not good. As a business owner you want to set the parameters for the profit you want to make and make sure your entire sales team is using those parameters.
When you have your own estimating system you need to make sure you stay on top of keeping it up to date to keep up with price changes in material, labor, and other costs of doing business. Just this year alone there has been major price increases that will have a dramatic effect on your bottom line. If you don’t stay current with the changes you won’t hit your profit targets.
Build The Extras Into Your Estimating System
When creating an estimating system for your business don’t forget to factor in all the other expenses. Job costs don’t just include Material and labor. There are overhead costs, permits / fees, sales commissions, lead costs, etc. Make sure you capture all that and adjust your prices accordingly.
If you want to learn more about how we help contractors make more profit check out the Contractor Growth Accelerator program. Inside you will find all the tools and training you need to run a profitable business.
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