Sid Warren, with Michigan Builders License, is back to share his insights on estimating job costs.
One of the things he wants to draw to your attention right now is estimating your job costs on a particular job. Let's take a simple 24 by 24 garage. Just the slab and the rough framing.
If you were to build that garage today, the materials would cost $12,000. That's the OSB that trusses, the concrete slab, and the footing. Not the driveway, not the siding, just the rough framing and slab.
Normally, with our materials, you'll add at least a 10% markup to cover shortages or mistakes you make in estimating. But one problem has been how to determine labor costs. There are estimating programs out there that help you define labor costs.
Now, if someone were to ask you how much it will cost to build a garage, you would come up with a number. Well, how do you know that that covers your costs? So, estimating programs like the one Sid uses, RSMeans, will give you a cost modifier per square foot.
For example, on a 24 by 24 garage, just the slab and for framing the wall. When you look at that program, it'll give you your material cost. But then it tells you to modify per square foot times 0.047. If you multiply 0.047 times the square footage, it'll tell you it's going to take 36 hours with one person. If it's two people, it's 18 hours.
So, if you're paying somebody $20 an hour, multiply that by 36 hours, and you’ll come up with $720. That's for labor in the estimate.
In estimating the roof, we use the footprint of that roof if it’s a gable roof. It would be 624 square feet. For roofs with one story with trusses, it would be 624 square feet; it takes 0.058 of an hour to do one square foot, so we multiply that times the square footage.
Again, we get 36 hours. 36 hours times the $20 a square foot gives me $720. These would be the direct costs, labor, and materials, your direct costs.
So far, we're at $14,640. For an average company working out of their house, you would at least need 25% for overhead. So, 25% of $14,640 is going to give you $3,660, which covers your insurance, taxes, fuel, rental equipment, and your typical cell phone on the job. You have to have some costs to cover our overhead.
So what you have is 25% normally for a small company operating out of their home. When you add that, that gives us $18,300. And then the last item you want, you want to have profit in there. Normally that's at least 10%. If you add 10% profit, that's $1,830. The total is $20,130. And remember that is only for the slab and the rough framing.
Hope this helps with calculating costs. Having an estimating program to enter those costs and hours helps you avoid mistakes. Most estimating programs on the market now have a cost modifier.
So, for example, in the Detroit area, the cost modifier would multiply $20,130 by 1.40 and that would give you the true cost of building that garage in the Detroit area.
And you're estimating programs have cost modifiers for the entire country.
Hope this helps you out. Thank you.
Looking for more steps on how to improve your pricing? Read our blog on Pricing Mastery here.
