When you’re pricing a job it can be easy to use market rates to come up with your numbers. It’s the quickest solution and makes sense if you think clients are accepting bids from different contractors. You might think it keeps you competitive.
But you might be doing yourself a disservice going down this road. Settling for market rates can leave you with less profits as they aren’t a real reflection of what the final figure should be.
Understanding the difference between market rates and project rates is essential to know which is best for business.
Market Rates vs Project Rates
Market rates are averages across the whole construction industry. They give you a general idea of costs but don’t reflect the specifics of your business. Every project is unique, and so are its rates.
When you ask a quantity surveyor (QS) if they know the rates, they might say they do, but they don’t know your rates. Your business is unique.
You could have ten direct employees, two machines, and an office, or you could subcontract everything and run your business from a van. At the end of the day, everyone’s overheads and profit margins will differ.
Using Project Rates to Your Advantage
Project rates are tailored to each job. By focusing on project rates, you can easily identify if you’re making your margin. It’s a specific and accurate method. In contrast, market rates might need re-engineering or stepping back to see if you’ve made your margins.
Make Use of Technology and Software
Using software can help you manage project rates more efficiently. You can use technology to your advantage to track, budget and calculate your project rates. Project management tools will keep your project organised and estimating software will help you to create detailed and accurate estimates for each project.
Conclusion
Market rates give you a broad picture, but project rates are unique to your business. By focusing on project rates, you set your business up to be more profitable and competitive. This isn’t just for construction. Understanding your unique costs and rates applies to every business. Tailored rates help you stay profitable and competitive.
If you need support with costing your next project, contact us today at Carroll Estimating to find out how we can help you grow your business and make more money with a seamless process from tender bid to final account.