How Much Should Boston Contractors Charge Their Clients? Chris Rapczynski Weighs In.

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Key Factors that Determine How Much Your General Contracting Company Should Charge

When you run your own contracting business, you have a lot of decisions to make that impact how much you spend and how much you earn.

I’ve been working in the construction industry for 35 years and understand very well the financial challenges that contractors face. One critical piece of getting your business off the ground is knowing how and what to charge your clients. You want to earn enough to keep your business in the black, but not so much that you become unaffordable. You must price correctly so that you can deliver on the expectations that you are selling to.

If you’re a general contractor just starting out, I have some advice to help guide you when deciding how to charge your clients.

  1. Consider what you need to do the job right.

The cost of delivering quality work you can stand behind varies depending on what type of contracting business you’re running. You need to determine how much profit and overhead you need to charge to cover your expenses.

  • General Contractors: You will likely need an office and a few individuals to take phone calls, manage schedules, and track progress. This type of business requires you to make a lesser percentage of profit and overhead to cover your expenses, but enough volume to make it all work.
  • Subcontractors: Being able to carry out quality work for your network of contractors requires investment in equipment and materials. You will have operational expenses such as a warehouse, trucks, and machines and tools. This type of business typically requires a higher percentage of profit and overhead to cover these additional burdens.
  1. Factor all aspects of the job into your price.

Missed scope in estimating is always a concern for eroding contractor margins. Certain types of work, like painting, are jobs homeowners typically feel they can do themselves. Detailing your estimate is paramount to both you knowing and the client knowing what you are agreeing to charge for.

  1. Don’t let the client set the price.

Other types of work, like tiling a shower, require a great deal more work than homeowners tend to realize. As the contractor, you’re the expert. Don’t let the client set the price, and charge what you believe you’ll need to do the job right. Consider marking up a percentage of your cost based on any unique factors that could make the job more challenging or involved.

  1. You’ll need to play the “trial and error” game.

No cost for any given project will remain the same across the board, so you will find yourself relying on a strategy of trial and error to settle on educated estimates for work. As Founder, Principal, and President at Boston-based Sleeping Dog Properties Inc., I’ve witnessed how the business has changed over the years. When I started the business, I was more flexible and inclined to reduce prices to better align with client budgets. Over time, I’ve gained a better understanding of what my price needs to be to keep me in business and have set client costs around that knowledge.

  1. Be discerning about the work you accept.

Having a lot of work is great for business, but not if you’re unable to make a profit from it. As you better understand what you need to charge for your work, you will also understand that not all jobs are worth it. Set standards for the jobs you take based on what your company is willing and able to do for a specific cost.

  • DON’T take jobs that compromise you and your company’s ability to perform the work and make your clients happy. Doing so can put your reputation and relationship with your clients in jeopardy.
  • DO take jobs your company can execute to the level of quality your clients expect, and on which you can make a profit. When your clients are happy, you increase referral opportunities for similar jobs.
  1. Hire according to your values.

When you’ve worked hard to establish the standards by which your company operates, and you understand your company’s worth, it’s important to hire employees who share in that mindset. Good representatives of your company’s values and capabilities reflect well with clients and help build upon a reputation that is critical for staying afloat in this competitive industry. Consider developing an employee handbook or tear sheet that defines these values and sets expectations.

As a business owner, you understand better than most the importance of earning what your work is worth. Consider your costs and charge the most appropriate price for the work you’ll be doing. When you know what you need to do the job, you can meet client expectations, make a profit, and gain quality referrals in the Boston area.

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