Pricing & Profitability
How low can you bid — and still be glad you won the job?
Bid too high and you may lose the work.
Bid too low and winning it may be worse.
The goal isn’t simply to win more jobs.
It’s to win work at a price where your company can actually make money.
Before you decide what to charge, you need to know what the work will cost you.
Material is obvious.
Labor seems obvious.
But what does an hour of labor really cost your company?
The wage is only the beginning.
Payroll burden. Workers’ compensation. Insurance. Vehicles. Fuel. Tools. Supervision. Office staff. Estimating. Training. Warranty work. Unbillable time.
And all the other costs of keeping an electrical company operating have to be paid by something.
Ultimately, the work you sell has to pay for the company that produces it.
If you don’t know what the work really costs you, it’s difficult to know what it really needs to sell for.
Knowing what you need to charge is only half the answer.
The market decides what it’s willing to pay.
You can calculate that a job needs to sell for $120,000 to produce the profit you want.
That doesn’t mean someone will pay $120,000.
Your competitors have something to say about it.
Your customer has something to say about it.
The market has something to say about it.
Your costs don’t determine the market price.
And that’s where things get interesting.
What happens when those two numbers don’t meet?
You know what you need to charge.
You know roughly what the market will pay.
And there’s a gap between them.
You can refuse the work.
Sometimes that’s exactly the right answer.
You can accept less profit.
Sometimes that’s a conscious business decision too.
Or you can ask a much more useful question:
Why does it cost us this much to produce the work?
You can’t always charge more.
So where can you cost less?
Not by blindly cutting.
Not by buying inferior material or expecting electricians to somehow work twice as fast.
By understanding where the money is actually going.
Is labor taking longer than you expected?
Are electricians waiting for material?
Are unnecessary supply-house trips eating hours?
Is material being wasted?
Are you buying well?
Are you doing rework?
Are changes getting performed without being captured?
Are your estimating assumptions wrong?
Are certain kinds of work consistently less profitable than others?
Are there parts of your operation costing you money without producing enough value in return?
If you know where the difference is coming from, you have something you can examine — and perhaps change.
Cutting costs isn’t the goal.
Producing the same or better result more efficiently is.
There’s an important difference.
If a crew installs the same work in 800 hours instead of 1,000, you want to know why.
If better material staging saves trips and waiting, you want to know.
If one installation method consistently requires less labor without sacrificing quality, you want to know.
If a particular purchasing decision improves your material cost, you want to know.
Profit improvement doesn’t have to come from charging the customer more.
Sometimes it comes from getting better at producing what the customer already agreed to buy.
But don’t only look for what’s costing you money.
Look for what’s making you money.
One job beats your expected margin.
Another doesn’t.
One kind of work consistently performs well.
Another seems to consume more labor than you expect.
One crew repeatedly beats the labor estimate.
Another job surprises you with an unusually good result.
Why?
Finding what’s going wrong gives you an opportunity to correct it.
Finding what’s going right gives you an opportunity to reinforce it.
If profits doubled last year, the important question isn’t only:
How do we do even better?
It’s:
What did we do right that helped them double?
Better estimating?
Better customers?
Better types of work?
Better crews?
Better purchasing?
Better production?
Better management of changes?
Fewer callbacks?
Something else?
If you can identify the causes of success, you have a better chance of repeating them.
Your estimate says the job should make money.
Did the job agree?
At the beginning, you have an expectation.
You expect a certain amount of material.
A certain amount of labor.
A certain cost.
A certain selling price.
A certain profit.
Then the job meets reality.
Material prices change.
Production is better or worse than expected.
Conditions differ.
Scope changes.
Things go unusually well.
Things go wrong.
The profit in your estimate isn’t the profit in your bank account.
The useful question is what happened between the two.
Don’t wait until the job is over to discover the answer.
Finding out that a job lost money after it’s finished is useful.
At least you can learn from it.
But you can’t go back and run that job differently.
What if you could see the departure while the job was still underway?
Labor beginning to exceed expectation.
Material moving differently than expected.
Changed work affecting the original plan.
Or production running better than expected.
The earlier you understand what’s happening, the more opportunity you have to act on it.
Profitability shouldn’t only be something you measure after the fact.
That’s where Operational Awareness becomes important.
Pricing doesn’t live by itself.
Neither does profitability.
To understand why the result changed, you may need to follow the question through the business:
What did we bid?
What did we expect it to cost?
What did we expect the electricians to accomplish?
What did they actually accomplish?
What material did we actually use?
Did the work change?
Did we get paid for the change?
What did we actually make?
And then:
Why?
Most software can give you pieces of those answers.
MEPTrax is being built to connect the relationships between them.
Learn about Operational Awareness →
Better information should make the next bid better.
Suppose you estimated a type of installation at 10 labor hours.
Over several jobs, your company consistently completes it in 8.
That’s useful information.
Or perhaps it consistently takes 13.
That’s useful too.
One might reveal an advantage you can use.
The other might reveal an estimating assumption or production problem you need to address.
Either way:
What actually happened should improve what you expect next time.
That’s how the business learns.
And it starts with knowing what’s on the plans.
Before you can decide what work should cost, you need to know what work you’re pricing.
That’s why MEPTrax starts with Takeoff.
MEPTrax Takeoff helps electrical contractors establish the work shown on the drawings using electrical assemblies and quantities.
Work directly from PDF electrical plans. Count devices and assemblies. Organize the takeoff by room or area. Review your quantities and export your work.
MEPTrax Takeoff
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30 days free. No credit card required.
Takeoff is where we’re starting.
Not where we’re stopping.
MEPTrax is being built forward from Takeoff to connect more of the commercial and operational story of the job.
MEPTrax Takeoff
AVAILABLE NOW
Know the work.
Plans → assemblies → quantities
MEPTrax Quote
COMING SOON
Know what you’re selling.
Cost → price → proposal → commitment
MEPTrax Business
COMING SOON
Know what’s happening — and what you actually made.
Production → labor → changes → money → profitability
MEPTrax Takeoff is available today. Quote, Business and other future capabilities described on this page are under development and are not included with a Takeoff subscription unless explicitly stated.
Your electricians worked all day.
What did they actually accomplish?
A timecard can tell you how many hours you paid for.
But profitability depends on something else too: