How to Prepare an Estimate or Quote for Concrete Work
Every client wants to know how much you’ll charge for a job before you start. And it’s only fair, right? They’re about to spend their hard-earned money on your services. So what do you tell them? How do you figure out what the project will cost ahead of time?
It might take some time to get the hang of it, but figuring out how much you need to charge for a product is an important skill to learn. You can then give your prospective client a quote or an estimate.
We’re going to first look at the difference between an estimate and a quote. Then we’ll talk about how to put them together and what you need to take in account when preparing them.
Estimates vs. Quotes
First, let’s look at an important distinction. Understanding the difference between an estimate and a quote can save you a lot of headaches.
A quote is a fixed price you set for doing a project. Once it’s decided upon, you’re stuck with it, even if it ends up taking more work or materials to complete than you anticipated. It’s legally binding.
For instance, if you give a quote that says you will lay a driveway for $1800 dollars, then that’s what you’ll do it for. It doesn’t matter what unexpected circumstances arise.
The benefit of a quote is that it gives a client more confidence. They know they’re not going to be surprised by changes.
When it’s a project where you can reasonably predict all factors involved, a quote is fantastic. As you gain more experience, you may be more comfortable giving quotes because you can better assess all the factors involved.
An estimate, on the other hand, is just what it sounds like: an estimated cost of the project. It recognizes that costs may change as you go along. For instance, you can adjust the price if you discover a sinkhole after you’ve already started to work..
An estimate means you have a rough idea of how many labour hours it will take to complete the project. It also means you’ve got a pretty good idea of the materials you’ll need. But it allows you the freedom to be a bit off in your calculations.
Obviously, you want your final bill to the client to be as close as possible to the estimate; that’s good for customer relations.
The benefit of an estimate is that a client knows the price may change if there are any issues. Maybe more leveling is needed than you anticipated. Or maybe the price of concrete skyrockets before you begin to pour it.
An estimate is also more forgiving for you as the contractor. You can always bill the client for more when the situation warrants it. And you could bill them for less if the project turns out to be less complex than you thought. Now there’s a great PR move!
On the other hand, a client might not feel as comfortable with an estimate as with a quote, because it leaves costs more open-ended. It’s important to explain to them why you’re using an estimate, perhaps using some examples of what could cause costs to rise.
Putting it in Writing
It’s always important to put either a quote or an estimate in writing. That allows both you and the client to know what is involved and to make sure all the details are correct. And in the unfortunate circumstance that there’s a dispute afterward, it gives you something to fall back on.
One of the most important things to include is whether you’re providing a quote or an estimate. As we’ve seen above, it’s an important distinction. Be sure to define it clearly. That could be as simple as putting “Quote” or “Estimate” in bold print right at the top. Be careful to use appropriate language in the rest of it, as well. If it’s a quote you can say “will cost” while if it’s an estimate you might want to stick to “estimated cost.”
Also, detail what the costs will be for. Define the project – what’s the job involve and how many square feet/meters is it? But also try to give more detail. What type of concrete is needed? What other materials are involved? Break down the costs of materials and labour.
Finally, you probably want to include an expiration date for the proposal. There are a couple reasons for this.
First, you don’t want to offer the same price for an indefinite period of time because all the factors you used for your calculations are subject to change. That is, prices go up and there’s nothing you can do about it.
Second, you have to be able to schedule your time. Having a definite period that the proposal is valid for allows you to know if the client is serious and whether you should reserve time for the project.
Figuring Out What to Charge
Of course, your quote or estimate requires you to fill in the numbers. But how do you figure out what to charge for a project?
Obviously, this gets easier with experience. You’ll be better able to figure out the materials and time needed to do a project once you’ve done similar ones a few times. But let’s have a look at the factors you need to consider.
First, you’ll need to have the project well-defined.
Measure it off and calculate the volume of concrete you need (that’s length by width by depth). Then add about 10% to account for waste and spillage. Figure how many bags of concrete you’ll need, and multiply the bags by the cost.
If you’re doing small projects, you might be buying at a big-box store. But for large undertakings, you might want to deal with a ready-mix supplier. Get in touch with a couple and let them know what you need to see what price they can give you.
Then take into account other equipment you’ll need for the job. Will you be using rebar? Reinforcing mesh? Add those costs in too.
Next, add in the labour. How many work hours will the project take? This can take some experience to get down. How many hours will each member of your crew work and how much do you pay them? Don’t forget to include taxes you have to pay beyond what they make – like the employer’s share of FICA taxes in the US.
You’ll also have to add in an additional amount for your overhead. This means costs like running your back office, vehicles, tools, upkeep, advertising and other expenses. And don’t forget your time meeting with the client and preparing the estimate! That’s all part of what has to be billed.
Calculating overhead can be intimidating at first, but it’s not too difficult. First, you have to know what your overhead expenses are for a year. Include all salaries for anyone who works on the back end of the business, like the bookkeeper or secretary.
Also include equipment costs and prorate it per year. For instance, if you have a work van and you expect it to last 5 years, your yearly cost is 20% of the total cost (1 out of 5). But don’t forget to include its maintenance costs, too.
Once you know all your overhead expenses for a year, figure out what percentage of the work year you’ll be on this project. That is to say, if you work 50 weeks a year and this project will take two weeks, then it has to pay for 2/50 of your total overhead – 4%.
And of course, you need to make a profit. How much do you expect to make for the year, above and beyond your expenses? Divide this just like you did for the overhead. You can reinvest profit in the business or give everyone a bonus. You can save it in case you go through a bad stretch. Or maybe you can retire early with it.
Of course, when you write up your estimate or quote, you aren’t going to have sections called “overhead” and “profit”. These normally get included in labour costs.
Set Up a Spreadsheet
Does creating an estimate seem like a lot of math? In one way it is, but it doesn’t have to be. You can rather easily set up a spreadsheet with simple formulas where you can just plug in the numbers and they’ll all be added up for you.
It may take a while to get the knack of preparing estimates or quotes, but you’ll catch on. It’s important to know the difference between the two. It’s also key to be able to take all factors into account. Giving estimates that are realistic and clearly cover all parts of the project leads to happy clients. Happy clients lead to more business and more profit for you!