This of course varies from region to region ranging from the “high end” paradise to “everyman’s” backyard oasis. The common feature should be the builder’s price book. As I read about not selling below cost or not sacrificing quality to reduce a bid, I think of the many builders I have talked with over the last 15 years – very few of them had their construction costs down on paper; let alone factoring in overhead expenses! Is this changing? How up-to-date is your price book?

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  • I use a spreadsheet for each job and make sure the prices are up to date. Also, I watch my overhead on a monthly basis to make sure I don't miss anything. Sometimes I feel that I loose jobs precisely because the other builders don't know how to
    figure cost.

    As to warranties it seems that half the time the customers don't read them. Lawyers don't even read the contract!

    It is getting quite here in Texas. Still interest by not much commitment. How do yall see it?
  • Precisely, Scott. There are some jobs you don't want.

    Scott Heusser said:
    I know most builders in this area do a lot of "shotgun" bidding. They know what concrete costs, they know how much a stick of rebar costs and they know the hourly wage of the guys they put in truck and drive around. I doubt that many of the builders know what their labor AND BURDEN calculate out to be. They simply absorb those costs into the profit margin, and wonder why they don't make the kind of money they think the should be making.

    As a rule I update my bid program database monthly for items like concrete costs, pumps, filters, heaters, etc. These days I get a quote on all automatic covers as well as anything non-stock such as illuminated deck jets. Every quarter I examine our fuel costs and adjust that cost for transportation. I update labor & burden about twice a year as our workforce size and their rates of pay change. At least once a year I pester our accountant for our overhead numbers. Finally I look over the job costing as much as possible to try and recognize patterns where the program logic (or my own guesstimate) needs tweaking.

    Merry is also correct, there is no way to factor in "Good Guy" warranties or the client is insane and can't make up her mind. Every time I try to do that it inflates the price of the pool so much we couldn't sell it. Maybe we didn't want that job anyway?
  • I know most builders in this area do a lot of "shotgun" bidding. They know what concrete costs, they know how much a stick of rebar costs and they know the hourly wage of the guys they put in truck and drive around. I doubt that many of the builders know what their labor AND BURDEN calculate out to be. They simply absorb those costs into the profit margin, and wonder why they don't make the kind of money they think the should be making.

    As a rule I update my bid program database monthly for items like concrete costs, pumps, filters, heaters, etc. These days I get a quote on all automatic covers as well as anything non-stock such as illuminated deck jets. Every quarter I examine our fuel costs and adjust that cost for transportation. I update labor & burden about twice a year as our workforce size and their rates of pay change. At least once a year I pester our accountant for our overhead numbers. Finally I look over the job costing as much as possible to try and recognize patterns where the program logic (or my own guesstimate) needs tweaking.

    Merry is also correct, there is no way to factor in "Good Guy" warranties or the client is insane and can't make up her mind. Every time I try to do that it inflates the price of the pool so much we couldn't sell it. Maybe we didn't want that job anyway?
  • I agree with both of you and may I add that the answer to this question is almost always "more than you think". It is vital to learn all you can from Rex about how to "metri-cize" your business but there are always some intangible factors you should figure in.

    There is "warranty", for example. It is abundantly true in the pool business that the "best laid plans of mice and men go oft awry" and no matter how good, how careful, how high quality you are, there is always the doodoo happens factor that results in unexpected warranty expenses. And there is the factor of "warrantying something that isn't REALLY warranty just to keep 'em happy" factor, too.

    There are also some "unmetricizable" costs, too. There is the " hassle" factor. There is the "she keeps changing her mind" scenario. There is the "customer who is just plain nuts" factor. There is the "equipment broke" factor. And the "personal crisis that changed plans" factor. There is the " customer gets a divorce or dies before payment completion" factor. Yes, it does happen!

    So, despite the fact that no matter what you do you can't anticipate every cost, Rex is so very right about metricizing everything you can and then realizing you need a little fudge factor to try to alleviate some of this other "pita" factor stuff. And some of what you give may still end up just adding to your crown in heaven and not your bottom line!
  • Indeed Karen! Metrics are all but missing from our industry. We "shoot from the hip" but the "wild west" days are long gone. One of the key business principles I teach is... "everything measured improves, everything measured and recorded improves exponentially". We need to know every detail, and it needs to be in writing. Thanks!
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