Now that Tonya and Duane have taken us through how to get paid properly with pay, cost, and billable rates-- how do we use them to get accurate estimates on the job site?
Crew base rates should become your best friends.
They'll give you the ability to bag more job and make more money! If you're doing them right.
Plus with this formula, they're easy to calculate too.
We now understand all of the rates to calculate, to have on hand, to really understand how to charge people for money and how to make it.
But if I'm out on a new job site, customer calls me and I show up on a Thursday afternoon and I've got seven different trades I need to do. I need to do some demolition, I need to take out kitchen cabinets, I need to do some cleaning, I need to do reframing, I've got to put new plumbing in, run electricals, flooring, you name it. How am I going to remember all of the cost rates for that, all of the billable rates for that while I'm there and the customer's like, can I get an estimate? What do I do in that situation?
You can create a base rate. So even if that crew includes a foreman, a journeyman, whatever your different roles are with on that crew, even if their cost rates are varied, you can still create a base rate for the crew. You get all the right data in there and then you can figure out, and that makes your budgeting and your estimating so much easier. You can always say, OK, this drywall job, this drywall portion of the job's going to cost us X and we're going to build it at this base rate because we know that we have the same crew, we know how they work, we know what their hours are. And we know based on what we've calculated of our billing rates, exactly how to put a base rate together.
No now we simplified it a little bit. So we know all the individual cost rates. We understand what the billing rate is. And so now when we go out there, we can say, OK, we've done a job just like this many times before. It's taken us five days. We have five guys. Now we have our crew base rate, and that'll enable us to walk on a jobsite and give a pretty accurate estimate, is what you're saying?
Absolutely. If you know what that base rate per hour is, you also will want to know because you're doing it over and over and over. You should know typically how that one crew how long does it take them to pay x square feet of wall? Right? You know, that crew typically takes so much time to paint that size of a wall, then you're able to do the calculation based on. I know it's going to take them six hours. This is our crew base rate. Here you go, Mr Customer. This is your bid.
It's a super simple process, but you just have to know what that base rate is. Even if it's like I've got a two entry level laborers. I've got a guy who's been with us for four years and then the crew lead. So there's four, four or five guys on there and you've got four different pay rates technically. So your suggestion is to develop the base, so what would a base rate be?
To break it down and make it super simple about what a crew base rate looks like, hopefully you have already calculated what your pay rate is. You will hopefully learn to calculate your costs and your billing rate. Before you start trying to build your crew base rate, you really want to know what your billing rate should be for each one of those guys with the markup and everything. So you want that for every one of your guys. What's my billable rate for every one of the guys on this crew? Then you can take that billable rate and basically, again, to just make it a super simple. We would walk you through a whole larger formula, but you just start with when you do it, you're basically going to take an average of those guys and build out a crew rate based on the average of all of those costs.
That's not taking the highest rate and just multiplying at times how many guys there are, right?