Pricing Estimates Profitably With An Updated Budget

Pricing estimates profitably with an updated budget

It’s that time of year where as contractors we’re just trying to keep our head above water. Keeping jobs on track, keeping clients happy, and getting estimates back out to prospects in a timely manner requires a budget.

Question for you: are those estimates you’re cranking out priced profitably?

Meaning are the pricing, labor rates, and markups still on point?

Sure, you may have sat down this past winter, built a budget, and dialed in the markups and rates you need to be profitable.

But now, a few months later, ask yourself this question: what costs have changed in your business since you last did that exercise of building your budget?

Does your budget show the changes?

Did insurance go up?

Bought another truck?

Hired a marketing agency?

The list goes on.

An out-of-date budget is …well out of date. Meaning it’s wrong. Meaning your jobs are at risk of no longer being priced profitably.

The solution is to stay on top of it, and constantly be updating your budget, so that the very next estimate you send out this afternoon, is dialed in for profit.

Get a new insurance bill?

Immediately go check what you had in your budget and update it to match the new bill.

Buy another truck?

Immediately add it to your budget.

Hired a marketing agency?

Immediately put that cost into your budget.

Every dollar that you company spends that isn’t in your budget, what was supposed to be your profit goes to pay for it.

You do that for too long? …

Well, you won’t have any profit left.

So, what to do?

If you have never built a budget to find out what your rates and markups need to be to allow you to be profitable, you can build one for free here.

That’s step one.

If you’ve built one, but it’s been a few months since you updated it, you can use that same free tool to simply review it and bring it up to date.

Or if you’re a SynkedUP customer and you’re using the budgeting tool in the app, you can book a call for free with our in house budgeting expert and have them looking over your shoulder and providing guidance as you work to dial it in.

What does the exercise of a budgeting update look like?

At its simplest, it’s basically pulling a list of your spending year to date (usually a P&L statement from your accounting software) reviewing that statement line by line, and making sure that your budget is in line with reality on what your company will spend this year.

For example:

The budget I built this past winter, I projected that we’d spend $20,000 in fuel this year.

It’s now coming up in June, halfway through the year. I check my P&L and realize that we’ve spent $14,000 already.

I haven’t exhausted the $20,000 on the budget yet, but…. Do you smell trouble?

I do.

Here’s why.

At $20,000 of fuel in a year, that’s $1,666 of fuel per month.

At my current spend rate which got me to $14,000 in 6 months, my spend rate is $2,333!

That’s $667 a month more than I had projected. If I keep spending at that rate, I’ll spend $4,004 more than the $20,000 budgeted by the end of the year.

So…

Tweaked budget

I’ll tweak that budget and update the fuel line on my budget to $24,000.

Now! We’re good!

My budget is dialed and in line with reality.

Had I not updated it, $4,004 of what should have been my profit, would have been sucked out to pay for that overrun on spend.

So, now I need to do that for each expense line in my budget.

Sound boring?

Yep.

The cost of not doing it?

Could put you out of business.

So just do it.

Cheers!

Weston Zimmerman

co-founder and CEO of SynkedUP