How to put a price tag on a building site: an essential step in the construction sector

Are you a company in the building and civil engineering sector wondering how to put a price tag on a project effectively?

It's an essential stage in your construction project, and there are a large number of criteria to be taken into account in the process.

Determining costs, drawing up an estimate, evaluating a project- we're going to tell you how to unravel the mysteries of costing a project.

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The 5 steps to follow to put a price on a job effectively

#1 Get to know the project

During this stage, get to know the customer's needs, their vision of the project and what they expect from you. You need to gather the information you need to make progress on your project:

• the nature of the project (renovation, construction, refurbishment, etc.),
• the size of the project
• the equipment and materials required
• the deadlines to be met
• your customer's budget.

💡 Tip : always make sure you visit the site before accepting or drawing up an estimate. Not only does this allow you to determine more precisely the work to be carried out, but above all you avoid your company any unpleasant surprises.

#2 Determine the costs

This stage enables you to estimate the total cost of your project. You need to put a figure on it that puts you on a par with your competitors, while remaining as profitable as possible for your company.

To do this, take into account two categories of costs:

Direct costs

These are all the costs directly linked to carrying out your project, also known as the outlay :

1- The cost of materials: bricks, cement, wood, etc.

👉 Determining the cost of supplies is not something you can do on your own; you'll need your supplier to help you work it out. In general, the margin on materials is around 30%. The trick? Negotiate with your supplier. The lower the price, the bigger your margin.

2- Labour costs: your workers' wages, charges, etc.

👉 To ensure the profitability of your project, it's also vital to establish the cost of labour. This is made up of two elements:

• The hourly rate: this represents the cost of your service per hour. It varies according to your profession. Electricians, painters and tilers all have different rates. So it's important to be aware of the rates already charged, particularly by your competitors, in order to establish your own.
• Number of hours worked: this is the amount of time you'll spend on your job. Establish the total number of hours to be allocated to the various tasks on your site.

Once you've collected these two elements, simply multiply them and eureka 💡 you'll get your labour cost.

3- The cost of equipment, not to be confused with the cost of materials.

Here, we're talking about the tools needed to complete the project: scaffolding, machinery, etc.

☝️Le should not include your company's overheads such as rents, charges, salaries and margins, which will be included in your price estimate.

Indirect costs

These are costs that are indirectly linked to your work, also known as price calculations.

1- Travel costs

There are 2 ways of calculating your travel costs:

• Calculating mileage costs, as the name suggests, involves calculating the number of round trips you make and the number of kilometres you cover.
• Fixed costs: you determine a price for your journeys, which you apply to each of your jobs.

2- Insurance costs

Select the insurance that best protects you and your customer by identifying the potential risks associated with the job.

3- Marketing costs: online advertising, flyers, etc.

It's easy to forget, but marketing for a building project is an essential part of your business. It allows you to promote your project and therefore attract new customers.

🤓 When you add up the direct and indirect costs, you end up with your cost price, i.e. the total amount needed to complete the project.

How do you set your costs?

As a building and civil engineering professional, it's up to you to advise and guide your customers as best you can, and it's also up to you to come up with a quote that's both correct in relation to the market and consistent with your own skills, and to ensure you're profitable.

💡 Here are a few tips to help you:

• Carry out a market study to get an overview and identify how you can position yourself;
• Find out what your competitors charge so you can establish a price range;
• Diversify your sources of information to gather as much data as possible;
• Your experience justifies higher prices.

To help you determine your prices, there are several software packages that give you access to a pricing library. This provides you with a regularly updated set of data on labour and materials prices in your sector.

🛠️Le Graneet's commercial and financial monitoring software is an excellent aid for your site costing, in terms of disbursements or selling prices. Designed for SMEs, it lets you :

• control your budget
• get an overview of your business,
• draw up your estimates.
• manage your customer relations.

Graneet also works in partnership with the Batiprix costing library. This collaboration enables you to produce even more accurate costings and simplifies the production of your estimates, even the most complex ones.

#3 Determine your profit margin

The profit margin is an essential element in measuring the profitability of your business. There are 4 types of margin:

• The sales margin is the difference between sales and the cost of goods sold. It is used to measure your company's commercial profitability.
• The gross margin is the difference between sales and the purchase cost of products sold. It measures your company's direct profitability.
• The net margin defines net profit after tax divided by sales. This is how you measure your company's net profitability.
• The profit margin is the ratio of profit margin to sales. This enables you to measure your company's profitability as a percentage.

☝️ In order to choose the most appropriate method, you first need to determine the type of business your company is in and identify the data available to you.

#4 Draw up an estimate

Drawing up an estimate enables you to summarise all the elements of the project. This document includes :

• the price
• payment terms
• deadlines.

It must be clear and precise, and signed by both you and your customers before the work begins.

👷Example of an estimate for building and civil engineering work :

#5 Choosing the right costing method

There are different methods for costing building sites :

Costing by the square metre

This is the simplest method. It involves determining a unit price per square metre, which is then applied to the entire surface area of your work, whatever the service.

👉For example:

On the same site, if you install tiling on a certain surface and electricity on another surface of equal size, the price will be the same for both services.

Task-based pricing

Job-by-job costing is a very precise method, but also a very time-consuming one. It involves breaking down the job into tasks and then estimating the time and resources needed to complete them.

👉For example:

Building a swimming pool involves a number of different tasks, such as earthworks, plumbing and liner installation. For the earthworks, for example, you determine how long it will take and multiply this by the number of workers required to carry out the task and by the price of the labour. By doing this calculation for all the tasks involved in building a swimming pool, you get an accurate cost figure.

Schedule costing

Scheduling involves listing all the elements of the project and assigning them a unit price.

👉For example:

To renovate a kitchen, you need to install a new sink, repaint the walls and demolish the old worktop. By assigning a unit price to each of these tasks, you can calculate the total cost of your project more accurately.

Parametric costing

Parametric costing uses more specific software and allows you to calculate costs more precisely by taking several factors into account:

• the surface area of the building
• the type of construction
• the materials used.

👉For example:

You're building a 60m2 flat consisting of a brick frame with tiles on the roof and parquet flooring. By entering these parameters, the software calculates the cost of the construction quickly and accurately.

This is a very important step, because it is this choice that determines a reliable costing and thus guarantees the profitability of your business.

What are the mistakes to avoid when estimating the cost of a project?

Costing a project is a lengthy and complex process, so it's quite possible to make mistakes. Here is a list of some common mistakes to help you avoid them:

• Not taking all costs into account. A large number of costs are taken into account when calculating the cost, so make sure you have listed them all.
• Underestimating costs. Researching the market and your competitors will enable you to position yourself better in terms of the prices you should charge.
• Having too low a profit margin. If it's not high enough, you won't be able to cover your costs and therefore make a profit.
• Writing an imprecise estimate could lead to misunderstandings between you and the customer.
• Not taking deadlines into account. It is vital that you meet the deadlines set by your customer.

What are the risks of poor costing?

A job costed too low

An under-costed job means that you have estimated the price too low and you end up having to spend more than the estimate originally provided.

Unfortunately, once your estimate has been signed by the customer, it's very difficult to go back.

Unforeseen circumstances can arise, which is why you can renegotiate an estimate with your customer. However, if it's your mistake, the customer may be much more reluctant to review the terms of your quotation.

This can have serious consequences for your business. An unhappy customer is more likely to talk about it, and your reputation may suffer. What's more, if you don't manage to renegotiate the estimate, you'll have wasted time on a job that won't earn you any money.

A job estimate that's too high

On the other hand, you may have overestimated the cost of the work. This is another problem.

If a customer considers that he has paid too much for your services, he may strongly criticise them, and this will damage your company's reputation. What's more, if your prices are too high, you could drive potential customers away. And without customers, there's no money!

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How to put a price tag on a job: the key to your company's success

Rigorous costing of your project will help you win contracts and ensure the profitability of your business. By investing in reliable, effective tools and methods, you can ensure that your business develops profitably and with peace of mind, over the long term.