Is Your Estimating Tool Fooling You?
In this week’s issue…
Checking Labor Attachments
460 words, total reading time 3 minutes
Like a line out of a The WHO’s song, “Won’t Be Fooled Again”. we trust in our labor attachments provided by our favorite proposal software tool. Truth is how did we get there?
Take a simple in-ceiling speaker install; one speaker for instance. Most companies use from .25, .33, .5 and even .75 hours per speaker as their estimating attachment. How do you know which is right?
Now, some may want to say well to go up the ladder, cut the hole, grab the speaker, wire it up and set it in the hole, put the grille on is “X” time and move the ladder. That’s is precisely the point.
How did the speaker get there? Who pulled it; loaded it on the truck; drove it to the sire; unloaded it; unboxed it and then the above. Or, and who disposed of the box; terminated the wire at the head-in, may be attached banana plugs or then made a compression fitted cable between the amp and the multi-room switcher and were there trips to the van involved? You see where this is going?
Let’s start on the other side and assume it’s a $500 retail speaker pair or $250 a speaker. We know there will be labor and miscellaneous parts involved. So what is minimally required labor? We think $125 in Labor and perhaps $31.25 in parts? That would give you a delivered price of $406.25. The mix breakdown would be 30.8% labor, 7.7% consumed parts and 61.5% equipment. At $100/hour billing rate (some of you are higher; some less) the labor unit factor would then be 1.25 hours. Some might ask then is the labor attachment $75 or .75 on a $300 speaker pair?
Here is the point; the attachment factor might be not be the end all. The key factor is that before the proposal goes out the door, it must pass the margin test. Begin, by creating a bid factor using the retail price as a guide or baseline. Divide it by 2 or 1.5 to get your labor component; then divide that number by 4 to get your miscellaneous and parts estimate. Before you say 6-8% for parts is too high; consider showing this as: part project mgmt., part parts and site clean up.
Using this bid checker you get to 30%+ Labor Mix using the divide by 2 and 36%+ Labor Mix using 1.5.
What happens if you are not doing this?
You are giving labor away free. You are often giving parts away free. Companies that bid below these levels rarely achieve 60% margin on labor and in many cases fall short of 50% margin on labor.
Don’t be fooled into thinking the labor attachments you are using are well grounded. Make the change today.