I am in the twilight of my career having worked coast to coast and in foreign countries as a prime and/or as a sub-contractor. I have posted several times on this subject. Here it goes again.
I was taught that the last thing you talk is about is money. But with prices so low, I start the conversation with Money because I don’t want to waste my time or the time of the company I’m attempting to work for. I ask this very easy question, "Could you make any money at the prices you offer and would you work for these prices?" You would be surprised at how many time I’m told that the prices are not very good. Sometimes they try to tell me how great the bad prices are. Sometimes they just lie. But at least I have a base point. I tell them that I need to make $x.xx. Sometimes I’m told I’m crazy. Of course I know I’m not crazy because I would only be crazy if I took a job below cost and tried to make it up with volume.
Bottomline is, know what your expenses are and know where your profit margin needs to be. Your expenses must include everything and I mean everything! Here is a partial list to get you started (finish the list with your particular needs), it is in no particular order; payroll, payroll taxes, worker’s compensation, general liability, FUTA, SUTA, annual filing fees, state contracting license fees, fuel, DOT inspections, Dot filing fees, hotel, mobilizations, accounting,legal, banking fees (interest), equipment purchases, equipment depreciation, support staff, office supplies, advertising, PPE, traffic control, equipment repair, AND some jobs require special permits, background checks, drug testing. As mentioned above, this is not meant to be an all inclusive list but to demonstrate how many hidden cost there really are. It is up to you to hire a CPA to help you with this. If you can’t afford a CPA , you are not ready to be a contractor.
Best advice I can give, it is STUPID TO WORK BELOW COST PLUS PROFIT MARGIN and DONT UNDERCUT YOUR BID PRICE TO GET THE JOB”. The result will be just exactly what has happened. Prices go lower and lower until only the idiots are left to work!
