One of the biggest questions when it comes to individuals hiring contracting services is “how much will it cost?” The answer to this question determines whether or not you will be hired to create someone’s dream, be it an entire home remodel or just a bathroom. There are so many factors that go into determining price. And while you want to give your clients the best price, you also want to make sure that you and your employees are being paid fairly. So what is the best way for a general contractor to determine price? Well, it depends on the size of your project.
Small project? Try fixed pricing.
Fixed pricing is a great option for contractors working on small projects, like a simple bathroom remodel or flooring replacement. These projects are more unlikely to have issues than larger-scale projects, so it is easier to predict how much the final project will cost.
When you’re determining your fixed pricing, you obviously want to account for the cost of materials and licensing fees. However, you will also have to account for labor costs. If you have full-time employees, try to figure out approximately how much they would make hourly on their salary. Figure out how many full-time and/or hourly employees you will need to work on the project, and approximately how long it will take. Multiply those numbers together and add the cost of the materials to get a base amount. You will want to take this cost and add about 10-20% of that to get your fixed price. This extra 10-20% will provide some wiggle room in case you do have issues that arise. Anything left over will be a profit.
Larger project? Give an estimate.
For a larger project, it’s easier to give an estimate. You are more likely to run into issues with a large project like a home remodel. In providing an estimate, be sure to include itemized estimates for every material you plan to purchase, the licensing, and all of the labor. Estimates require more detail than a fixed price bids because they are subject to change.
If you have issues arise and need to adjust your estimate, you will want to make sure to get your client’s approval first. While this will require more communication and paperwork than fixed pricing, it protects you as the contractor. You will not be stuck bearing the cost if you need to purchase more materials or provide more labor.
Make payment more manageable.
Whether you choose a fixed price or estimate as the best way for a general contractor to determine price, you are still going to have clients that need help affording their home projects. The best way you can do this is by offering home improvement financing. And there is no easier way to offer contractor financing than by partnering with HFS Financial. All your clients have to do is fill out our 60-second application, and we’ll fit them with the right loan so you can get to work. Give us a call at 1-800-254-9560 to get started today. “You Dream It, We Finance It.”