Bidding and estimating tips for contractors

1. Know your real hourly cost

Add up a year of overhead: insurance, bond, vehicle, tools, phone, software, licensing and your own pay. Divide it by billable hours, not 40 hours a week times 52. Most small contractors bill far fewer hours than they work.

2. Markup is not margin

A 25% markup on $10,000 of cost is $12,500, which is a 20% margin. If you want a 25% margin, divide cost by 0.75 ($13,333). Decide which one you mean and use it every time.

3. Line-item the estimate

Break out materials, labor, subs, permits and fees, disposal, equipment rental and contingency. Line items make the price easier to defend and change orders easier to price.

4. Put scope in writing

List what is included and what is excluded. Unclear scope is the top source of disputes and unpaid extras.

5. Change orders before the work

Get every change priced and signed before you do it. Use the same form every time.

6. Deposits and payment schedule

Tie payments to milestones. Check Oregon rules on residential contracts and required notices on the CCB website before you finalize your contract.

7. Follow up

Follow up on every bid within 3 business days and track your win rate. If you win almost everything, your prices are probably too low.