How are estimates done? This guide is for a landscaper starting out in Victoria BC.
Both homeowners and trades people alike often ask this question. What is precisely involved in doing an estimate? Is it an art? Is it a science? How does one arrive at a magical number? This article will seek to answer this for the Contractor. For the answer for homeowners, click here.
People often underestimate how much materials cost these days. With the changing political climate and trade relationships in North America, many materials such as lumber have skyrocketed in price due to disrupted supply lines. Obviously it is in both the landscaper and the homeowner’s interests to find the best priced materials without sacrificing quality, however, prices for materials generally account for about a third to one half of the final price. So for a $3000 job you are looking at anywhere between $1000 and $1500 of materials.
Everyone knows living in Victoria and in BC is expensive. Our wages have adjusted accordingly to reflect that. Just like it’s important not to cheap out on materials, it’s important not to rush jobs. At Triton we don’t wish to place unnecessary emphasis on speed but rather on quality. With that said anyone with some experience should have an idea of how long a job should take. Some simple arithmetic will give a ball park figure for how much labor cost will be involved. For example, I know that your average laborer can build a 100 sq ft paver in 25-35 man hours. At $25 an hour the labor cost would be between $625 and $875.
Overhead and Other Fixed Costs
After materials and labor, the estimator should keep in mind fixed costs such as insurance, licensing fees, leases, maintenance for vehicles and equipment, advertising, and have an approximate idea of how much per month that is. If you then know a job will take 1 week or a quarter of a month, you can price that in accordingly.
Generally speaking you want to aim for about a 20-30% profit margin. That seems to be the industry standard. This profit will cover any unforeseen circumstances during the project as well as your own personal living costs such as your own rent and food bills.
A Last Word
Ultimately you will also need to know what the market will bear. You can do all the math above, come up with a number, but if it’s way beyond what the market can bare, you will be out of business. On the other hand, if you don’t know your numbers like your fixed costs or how long certain jobs should take in your environment and climate, then you are going to have problems controlling cost.
In another article I will discuss some strategies to make an operation more efficient and ultimately more competitive.