What Exactly Am I Paying For Anyway?

Would you buy a pizza without knowing what toppings we’re included? Okay, maybe you would depending on how hungry you were. But nobody likes a decipher a bill that has undisclosed amounts. It sends the message that something might be hidden in those numbers. While we can’t speak for all contractors, we can say be bit about our own fees and how we work.

What Am I Paying For?

 

Projects and Contractor Fees-  What am I paying for?

For starters, every job is different and every contractor has different specialties. So just like ingredients in a pizza, some staples items don’t really change in the recipe.

There are certain items that are included in every quote, I call these base items.Think of base items as demolition and disposal, electrical and plumbing, or framing and drywall. These are the guts of every project, large or small.The next part of the pie, since we’re going with a pizza visual, is the specialty toppings. This is the part of the project that makes it personal. Items could include lighting, flooring, tile, custom wood work, stain or paint and so on. The costs on these will vary greatly depending on your taste, style, wants and needs. Not all toppings are for everyone. And not all projects get all the special toppings, but most projects have a few that are a must straight from the beginning; for example, a bathroom remodel that desperately needs new floors because the existing floors had damage. Since the homeowner was getting the bathroom floors redone anyway, she upgraded to heated tile floors since the space is a bit drafty in the winter, due to a large window. This part of the project obviously has the most variation. Pepperoni with extra pepperoni please!

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Finally, the smallest percentage of your proposal is the overhead, profit and contingency.  Lets chat about common overhead costs for contractors. To list a few, we have business and liability insurance, staff salaries, transportation, transportation maintenance, office expenses, rental expenses, etc. But lets not forget everyone’s favorite expense, TAXES. We pay state and local taxes for our business. (yeah, I’m missing a few overhead costs in there somewhere, but you get the idea.)

I should also explain what CONTINGINCY is and why it’s crucial to every contractor. Contingency  is like a safety padding. Some stuffed crust, if you will?  This actually benefits the customer AND the contractor. A contingency amount is usually around 5% – 10% of the overall costs. This number isn’t put in the quote to fill our pockets and get lucky. It’s a necessary amount for unexpected expenses; a safety net for emergencies. And honestly, nearly all projects have a few set backs. It’s the unfortunate part of the job. Whether its the weather, or anything unseen that may will set back the project or add costs, you never want to go in unprepared. Sometimes these unexpected dilemas are higher than the small amount set aside, which would add to your over all cost of the project. Nobody likes costly surprises. Therefor, it’s never a bad idea to set your budget a bit lower than your maximum amount, incase a need should arise mid project.

The last percentage of your estimate is PROFIT. Just like any other business with the intention of growing and building, a profit margin is a means of intentionally doing just that. Profit margin is defined as a ratio of profits earned to total costs over a defined period (e.g. a quarter, a year, etc.). Each industry generally has its own average profit margin due to the differences in costs and materials needed for different products and services. To finish tying in my pizza analogy, I’d say profit is

We hope we have helped shed some light on the confusion of the contractors estimate. We truly understand the need to have clarity on what you’re paying for. And just like you, we want to know what we’re paying for!

What sort of questions would YOU like us to answer next?