PRICE FOR PROFIT. EVERY JOB.
Profitable job pricing takes three numbers: your actual direct cost for the job, your current overhead rate, and your target net profit margin. Everything else is a consequence of those three inputs. On $300K of direct cost at 15% overhead with a 6% net margin target, the math is $300K divided by 0.79, which sets the bid at $379,747.
Most contractors price with a markup instead, and a markup isn't a margin. A contractor who estimates $300K direct and adds 25% bids $375K, which looks close to the right answer. It's not. At 15% overhead and a 6% margin target, the markup he needed was 27%, so those two points cost him $7,500 on that one job. Run 20 jobs a year that way and you gave away $150,000 of margin without having a single bad day in the field.
WHAT IT MEANS.
Bid price is direct cost divided by one minus your overhead rate minus your target net margin.
The formula is simple and the discipline is all in the inputs. Each of the three has a common failure mode that produces bids which look right and price in a loss anyway. Get an input wrong and the arithmetic still balances, it just balances around a number that can't pay you.
WHAT KILLS MARGIN BEFORE THE JOB STARTS.
Pricing by markup when you think in margin terms
A 20% markup isn't a 20% margin. A 20% markup on $100 of cost gives you a $120 price, and that's a 16.7% margin. Most contractors who say they add 20% mean margin and apply markup, so every bid carries a three point margin deficit built into it before anybody sharpens a pencil.
Using a stale overhead rate
If your overhead rate was 12% two years ago and is 17% today, every bid priced at 12% overhead ships with a five point shortfall. At $400K of revenue per job, that's $20,000 of margin given away before the first crew hits the site. The rate has to be recalculated quarterly and the formula updated every time it moves.
Not pricing the owner's time on the job
If the owner is spending time in the field or running a specific job, that time has a cost. Either it's a direct cost and it gets billed to the job, or it's an overhead cost and it sits inside the overhead rate. If it's neither, if it's just free time the owner gives to jobs, then every bid is underpriced by the value of that time.
Shading price to win without a floor
Competitive pressure is a fact of the business, and shading a bid to win a relationship or fill a slow quarter is sometimes the right call. The bid still needs a floor, which is the minimum price at which the job recovers overhead and breaks even on net margin. Shading below the floor is funding a job out of your reserves.
WHAT IT LOOKS LIKE IN DOLLARS.
Bid price is direct cost divided by one minus the overhead rate minus the target net margin. On $300K of direct cost with 15% overhead and a 6% net margin target, that's $300K divided by 0.79, or a $379,747 bid. That bid recovers the $300K of direct cost, $57K of overhead, and $22.8K of net profit.
A contractor who estimates $300K direct and applies a 25% markup bids $375K, which looks similar to the right answer. At 15% overhead and a 6% target, the markup he needed was 27%, and those two points cost $7,500 on a $300K direct-cost job. Across 20 jobs per year, that's $150,000 of margin given away.
Labor burden typically runs 25% to 32% on top of wages for taxes, workers comp, and benefits. Leaving mobilization out of the estimate, or never estimating cleanup and demobilization, each looks small on its own. Together those omissions run 3 to 5 points of margin on many jobs.
THE FORMULA ONLY WORKS WITH ACCURATE INPUTS.
Direct cost is labor with burden, materials, subcontractors, equipment assigned to the job, mobilization, consumables, small tools, and cleanup. The failure mode is underestimating labor burden, which typically runs 25% to 32% on top of wages, leaving mobilization out of the estimate, and never estimating cleanup and demobilization at all. Each one seems small, and together they represent 3 to 5 points of margin on many jobs.
The overhead rate is total SG&A for the last 12 months divided by total revenue. It's not last year's rate and it's not an estimate. If you haven't recalculated inside 90 days, the number you're bidding with is probably wrong. The failure mode is bidding on a stale rate while overhead has been creeping, and that's the most common cause of shrinking margins in a growing company.
Decide your target net margin before you start pricing the job, rather than checking it at the end once the bid number is already in your head. For most commercial subcontractors, 5% to 8% net margin is a healthy target. The failure mode is setting the target after seeing the bid number and then adjusting the target to match whatever margin the bid happened to produce. That's rationalizing a number after the fact.
FLAT MONTHLY FEE. NO SURPRISES.
Three tiers, priced by your trailing twelve month revenue. Which one you're in depends on how much of the work you want off your desk. No hourly billing, no payroll, and no add-ons.
Pricing
| Last 12 months revenue | Monthly fee |
|---|---|
| Up to $1M | $1,900 to $2,900 |
| $1M to $3.5M | $2,600 to $3,900 |
| $3.5M to $6.5M | $3,800 to $5,700 |
| $6.5M to $9.5M | $5,100 to $7,100 |
| $9.5M to $12.5M | $6,100 to $8,500 |
| $12.5M to $15.5M | $7,400 to $11,000 |
| $15.5M to $18.5M | $9,400 to $13,500 |
| $18.5M+ | Quoted individually |
Range reflects the three tiers below. Which one you're in depends on how much of the work you want off your desk. No payroll. No hidden line items.
You stop guessing.
You get the CFO work. Job costing built against the way you estimate, a 13 week cash forecast, monthly WIP, and a meeting every month that ends in decisions rather than a report.
Your bookkeeper keeps doing the books.
You stop touching the books.
Everything in Core, and we run the bookkeeping and the controllership as well. Nobody in your office is answering coding questions or chasing a reconciliation at month end.
We do the books. No payroll.
Every job shows its margin while it's still running.
Everything in Executive, plus the job costing and WIP platform set up, loaded with your cost codes, and managed for you every month. You never have to learn it.
We do the job costing.
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