Estimating formula

Methods of estimating how much to charge for your work. March 20, 2001

My pricing has always been materials x 3 for laminate work, or 3.8 for wood and finishing. Does this sound like a good system? What should I mark the retail items up to?

Forum Responses
This is a very dangerous way to estimate. I worked for three years for a shop which bid this way, grew very fast and then crashed and burned, largely from getting the wrong jobs at the wrong prices.

The only way to be sure of getting the right price for your work is to figure the materials, and then break each task down into labor hours, in as great a detail as you can bear. This starts with labor hours for drafting, field measuring, then making cut lists, cutting, machining, laminating, assembling, loading the truck, driving to the site, unloading and installing. Then you need to add your labor burden, overhead and expected profit. Every job has a different mix of these elements and the one that you misjudge may kill you.

The AWI cost book is a great help getting started. A rudimentary spread sheet cuts the time involved by a factor of ten as you create templates for the things you do over and over. Then there are some off-the-shelf programs that cost money but have done some of the legwork for you.

Try pricing a job with your 3x material factor method with all particleboard and then the same job with the most expensive plywood and lumber you can think of. See what happens?

Absolutely figure your time and charge for it. I messed around too many years thinking I was "competing" by using that formula deal. Charge for what your work is worth. People will pay for it if you're both serious. Be prepared to forego some of the jobs.

Figure your hourly shop rate based on a year that contains, say, 36 to 42 weeks per year. That gives you a cushion for everything else you have to do to have a cabinet business--all those hard-to-measure-the-time tasks.

Retail items? 20% markup.