Cost Based Estimating in Estimate Rocket

In Estimate Rocket there are a number of ways to do cost based estimating.

If you are using internal employees building the profit margin and overhead into the labor and into the materials you use is the ideal way to go. The actual profitability can then be tracked by hours worked on a project and material expenses.

If you are using subs, you can put the sub price into Estimate Rocket and have a percentage tacked on to the amount the sub would charge. The percentage can be different from category to category on the subs. Profitability would then be tracked by the expenses added for each sub.

Building Profit Margin into Your Line Items - Employee Work

Profit Margin on Labor Items

On labor items there is a price of the labor per hour and a cost of the labor per hour. Your profit margin is determined by the different between the price and the cost.  In this interior painting  services example the cost per hour is $35 (this is the average cost of what you pay your team members)  and the price is $65 per hour.  You can change your average labor cost from the Settings > Company Settings page.

From the screen shot you can see the margin is 46.15% or the difference between the price and cost divided by the price. For each hour that is estimated into the project you will have this margin.
Notice the labor is set for 60 min / hour, unless you can generate 1.21 Gigawatts at will and have a Delorean this should not be changed.

 


Profit Margin on Material Items

On material items there is a price of the material per unit and a cost of the material labor per unit that are both directly editable on the material edit screen. Your profit margin is determined by the different between the price and the cost.  In this interior wall paint example the cost per gallon is $48 per gallon and set directly in the line item and the price is $70 per gallon giving you are 31.43% margin on each gallon that is estimated into a project. 

 

Adding the labor and the material directly into your project will calculate the appropriate profit margin the same way that the Estimate Rocket assemblies calculating the needed labor and material based on room dimensions will.


Building Profit Margin into Your Line Items - Sub Work

Profit Margin on General Items

When pricing work that will be done by a sub there is a way in Estimate Rocket to automatically mark that up buy a specific percent and that percent can be different for the different subs.  In this case I have used a generic or general line item for my electrical work, units are dollars and for every dollar that I pass in it will add 25%.  The price being $1.25 for every $1.00 added (1.35 for a 35% markup and this pattern is simple). Also adding $1.00 into the material cost will be required for the margin calculate correctly (is this material - no, but labor calculations tend to push towards hours as the unit and we don't want that here)

Change the price to change the percent markup.

If my electrician tells me that work for the addition will be $2000 this line item would output $2500 and put in a nice description of the services. And the beauty part is that the client does not see these details so they don't see the markup.

 

Adding each of your subs in this way will give an accurate look at your profit margin directly in Estimate Rocket.

This could also be setup in such a way that the profit margin was actually calculated but the labor time was calculated also, to give you a better idea of how to best coordinate your project.


Other Interesting Education Articles

Cost Based Estimating

Using Project Hours Budgeting to Reward your Employees

Tracking Profitability and Sales in Estimate Rocket

Managing Scope of Work Changes in Estimate Rocket

Sensible Changes to your Profit Margin in Estimate Rocket

Managing Project Completed Free Follow Ups and Follow Up Campaigns



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