Close your eyes. Find a quiet place. And Dream. Dream about what you want your business to be. Visualize what you want it to look like. Do you have a spacious, neatly organized office? Are the sounds that of an organized office, where you hear phones answered with a positive, upbeat smile? Is your building professional in appearance and well-identified? Are all your people in uniforms? Are your trucks uniquely branded?

Describe what your marketing looks like for both maintaining and growing customers. Are you paying yourself a good salary and are the profits reflective of the blood, sweat, and tears you’ve invested in the business?

Now that you have this vision adequately drawn and vividly colored in your mind, ask yourself the following questions. And if the answer to each one is yes, you are well on your way to making your dream a reality. And if the answer to any of them is no, adjust your overhead and gross margin for estimating today.

Q: When the selling price for an installation is estimated, is the estimated overhead not for covering the costs of the business today, but of your dream for what the business will be?

 

 

A: Too many contractors determine their current overhead costs and then add profit to determine what gross margin to use for pricing. (Even worse, some of you use a gross margin someone else told you was a good number.) The real overhead costs (and gross margin) used in estimating a selling price should include rent for a building, a salary for your spouse who does the books, marketing expenditures that develop your brand in the neighborhoods where you want business. The overhead used for estimating a selling price is for what the business will be — not what it is.

Q: Is seven percent of sales built into the overhead used for pricing for your salary as the general manager?

A: We recommend that if you are the general manager for your business, you should put seven percent of sales in the overhead used for estimating. This is in addition to any hourly wage for working in the field and 10% of sales for profit.

Having at least seven percent of sales for a salary built into your overhead for estimating allows you and your family to be more financially secure so that you can concentrate on fulfilling that dream. If seven percent isn’t built into the estimate, you may never achieve financial security.