It’s tempting to look at what everyone else is doing to get a handle on costs, but market rates aren’t a real reflection of what that final figure should be.
Take a look at the 3 main reasons market rates don’t work.
You can’t get an accurate comparison.
Each company has different costs to consider. The price a two-man band provides will be totally different to the ten-person team. There’s no use comparing apples and bananas; you’ll never get the right reflection of what’s involved. Market rates can’t take those costs into consideration.
Fluctuations can’t be forecast.
The volatility of the market means we can’t always be prepared for eventual fluctuations in costs. With economic and political conditions impacting cost prices, logistics and supply chain, relying on market rates could leave you with inaccurate cost projections.
Prices are constantly changing, and keeping on top of this is key to giving an accurate reflection on cost without over or undercharging.
Fixed Rate vs First Principles.
The market rate is a fixed rate. It does not change or reflect potential increases in labour, plant, material, or a range of other costs. Using first principles is a far more accurate and transparent way of pricing than the rigid market rate.
Conclusion.
Using market rates can appear like a way to stay competitive in a demanding industry, but it’s not an accurate reflection of what’s really happening. You can end up being priced out of a job or left with cash on the table that could have been in your pocket.
By all means, keep the market in mind, but apply the first principles approach and consider company costs to create accurate, competitive pricing.
If you’re looking for detailed, accurate pricing on your next project, contact us at Carroll Estimating to find out how we make sure you don’t leave money behind.
