At Buy Manufacturers Direct, we are often asked what a good rate to charge for polished concrete is. While there’s no set answer (wouldn’t that make things easier?), I want to use my own experiences as an example of what NOT to do when it comes to setting your prices.
Factor in Overhead
This is going to sound crazy (because it is), but when I was starting in the contracting business, I didn’t factor in profits or overhead when it came to setting my prices. Perfect example – I was bidding on a contract that I knew I could win for $250,000, and with that price, of course I’d make a profit. Here’s what I factored in:
- The job would only take a few weeks.
- I only needed a few people to pay.
- Our STI equipment wasn’t going to break down.
What all else did I need? Well, everything. I didn’t factor in any overhead, ie: the cost of doing business, into my pricing besides what I’d have to pay people. Overhead can take all your profits if you don’t factor them in correctly, and they include:
- Property cost
- Vehicle operation
- Office and sales staff
- Consumables, like epoxy or fuel for a grinder
Miscalculating Profits on a Polished Concrete Floor
In order to set accurate pricing that builds in a profit, you have to know your tangible, fixed costs of doing business. For example, let’s say you only set in your means of production into your cost – around $3.00 per square foot. The market rate is around $3.50 but does that mean you’ll be making $0.50/sf in profit? Unfortunately, no.
That $.50/sf has to go to paying your office phone, website costs, toner cartridges, insurance, and everything else. If your overhead is around 10 percent, you’re $0.50 profit just dwindled down to about $0.15/sf in profit. So if you polish a concrete slab that is 5,000 square feet, assuming nothing goes wrong, you’ll have $750 left over.
Don’t Let the Market Set Your Price
My attitude regarding setting a selling price has nothing to do with the market. I have to factor in my unique product costs, overhead, and the quality of equipment I need to have in order to provide the best results. I can’t be concerned with what the market says I should charge because I don’t know what kind of quality my competitors are offering. Instead, I set pricing based on what my product costs, the costs of equipment needed to achieve the quality I want to put out, and making sure my team is paid a fair wage.
How to Avoid Overpricing Your Work
You need to be competitive, but you also need a profit, so what should you do? While you could negotiate a better rate for things like consumables, labor, and equipment, in this line of work that almost always means losing quality.
Think about your diamonds – if you want your abrasive tools to be a lower cost, you’ll have to buy a lower quality diamond. Unfortunately, it won’t be as effective or will close more quickly, which means the job will either take longer or won’t be the quality you wanted to produce.
On the other hand, what if you hired inexperienced people to work on your crew to save money on labor costs? You would have to factor in training time which, could set back your deadline as well as concerns about whether or not your crew would have the skill to get the results your clients expect and deserve.
When you’re lowering cost, one of the most effective methods is to partner with a trusted supplier who can provide quality products closer to wholesale prices. Also, investing in high-quality, durable equipment and machinery will mean that you’re not having to constantly shell out money for repairs and replacements – costs that invariably hit your overhead.
Contact Us for the Concrete Grinders and Tools You Need
At Buy Manufacturers Direct, we’re dedicated to helping contractors maximize their profits while working with the best equipment on the market. If you need a floor grinder, diamond tooling, or other surface preparation equipment to polish a concrete slab, reach out to us today at (815) 472-9715 or by filling out our contact form to get started!