Determine Your Operating Expenses
Calculate the outgoing costs of operating your business each month. This will help you determine the kind of profit margins you need to realize from each job in order to keep your business running smoothly.
Include all operating expenses such as utilities, rent, inventory, marketing budget, insurance, gas, service labor costs, and other overheads that your business requires.
If the outgoing costs are more than the incoming profits, your electrical business will struggle to stay afloat.
Review Specifications and Plans
If you are estimating the price of a small residential job, you may not require any building plan. However, to provide an accurate quote, you do need to go over and assess the problem to determine the amount of work that is required.
When you receive a service call from a potential client, avoid providing estimates over the phone when you are unsure about the specifications of the job.
When bidding for larger jobs, thoroughly review the building plan to understand the scope of the project and the amount of electrical work that may be required.
Perform a Material Takeoff
Undertake a material takeoff to outline the types and quantities of materials you will need to complete the job. A comprehensive material takeoff will allow you to deliver an accurate bill of materials.
Pay close attention to the symbols on the building plan to determine the precise number of electrical components required for the job. Carefully count everything including the number of circuits, switches, fixture, and service equipment.
When undertaking the takeoff process, determine the right estimation sequence to save time and to ensure accuracy.
You could develop material estimates one page of the building plan at a time. Start with estimates for service equipment and then estimate the lighting fixtures, or start with estimates for the lighting fixtures and finish with the service equipment estimates.
Calculate Labor Costs
Labor costs are especially important to your bottom line. Estimate labor costs carefully to avoid outpricing or underpricing yourself.
To evaluate the labor costs, first, determine the approximate number of hours required to complete a job. Consider the onsite working conditions, the scope of the project, and any extra labor the job may require.
Next, determine the labor rate using the shop average or the job average method. Multiply the per hour labor rate by the estimated labor hours to calculate the true labor costs.
To estimate the shop average rate, divide the labor cost by the labor hours for the past twelve months.
If you do not have past labor experience to go with, use the job average method to determine labor costs. If you have a crew, consider their expertise, the corresponding average wage for the entire job, and the scope of the job.
Finally, factor in the additional costs of retaining employees including sick and vacation pay, pension, insurance, and payroll tax to arrive at the final labor bill.
Pricing can make or break your electrical business. Consider using estimation software to help you develop accurate quotes, offer your clients transparent pricing, and ensure sound financials for your business.
To take your career in the electrical construction industry to the next level, get in touch with Independent Electrical Contractors of Greater Cincinnati to find out more about our training programs.