Typically, general contractors bill between 10% and 20% of the overall construction expenditures for a project. A large general contractor firm may demand up to 25% of the project’s expenditures. The price your subcontractor will charge you should serve as the primary benchmark for your markup.
How General Contractors Estimate Jobs
Even once you begin a project, customers continue to ask you questions about how much things cost in the construction industry. As a general contractor, you are aware that providing your client with the appropriate responses requires time, expertise, and understanding.
Providing a precise cost estimate is the best method to accomplish this so that you can both decide on a reasonable price before beginning the job. Giving a precise estimate aids in ensuring client happiness, which encourages repeat business and increases sales for your company. The two most well-known techniques for cost estimation are:
Estimating By Stick
Stick estimation entails counting each component and calculating each labor hour. You’ll receive the most precise estimate using this method. However, estimating by the stick might be exceedingly time-consuming and consequently ineffective for some tasks.
If you don’t take into consideration potential difficulties, it might also result in errors and other issues. Many contractors begin by using this technique before switching to unit pricing estimation later on. Others find that their business procedures and computations work better with the accuracy of estimating by the stick.
Estimating By Unit Price
In order to estimate costs, unit price estimates require breaking a project down into its component parts. The entire cost of the building project is then determined by estimating the price of each component separately.
This method of estimation works well for straightforward tasks that need the majority of the same tools or in structures where the majority of the room area is taken up by uniformly sized units of a standard size. Here are some instances when estimating by unit pricing is the most effective technique:
- Roof: the price per square foot
- Cost per square foot for hanging drywall.
- Cost per workstation of a commercial office makeover.
The overall cost of the current project must be estimated using similar previous projects when utilizing this strategy. To get the most recent prices, these prior projects should not be older than one year.
Be warned that while this approach is effective and a decent way to get an approximate number, it is not the most consistently accurate technique to estimate project task expenses. Inaccurate cost estimates might result in an actual cost that is far different from the projected cost.
A smart location to save the average unit prices from previous projects is your general contractor pricing guide. If you have the cost of common materials and the labor rates of subcontractors, you may also utilize it for stick-based estimation. After learning about the various methods used by general contractors to estimate work, let’s move on to what information you should include in an estimate.
If you are interested in more articles like this, here’s one about how to find a structural engineer.