A poorly estimated job may damage your company’s reputation when you have to re-quote the customer. It can also negatively impact your bottom line if the cost of the project is not accurately reflected.
Consider these FIVE costs before determining the price for your next project:
- Material Costs: Usually up to 25% of the total costs. Includes the cost of wood and hardware such as hinges, accessories, fasteners, mechanical parts etc.
- Labour Costs: Hourly production labour wages multiplied by the total number of hours it may take to complete the job. This can make up to 50% of the total project costs.
- Overhead Costs: Includes the rental and utilities of equipment, tools, glue, sandpaper, shop, finishing material and more. Overhead is usually 15% of your material and labour cost.
- Selling Costs: Selling costs are used to cover the cost of sales and admin staff, time spent plus commissions or bonuses.
- Profit Costs: Yes, you heard the right – add profit as an expense. Once you’ve calculated the accurate manufacturing cost for your product, set your sell price markup as an expense. For eg. $1,000 project @ 20% margin should be $1,250 not $1,200.