Electrical work is one of the few home maintenance tasks that homeowners should never attempt on their own. Residential electrical work is not only illegal without a permit in many areas of the United States, but it is also extremely hazardous if you are not suitably qualified.
Most homeowners are aware of this danger, which is why they hire a professional electrician to complete the task correctly.
Estimating expenses is a vital aspect of your business’s success as an electrical contractor. Precise estimates aid task management, enabling you to complete any electrical task with ease.
This article, like any other trades pricing guidance, will show you how to estimate domestic electrical work in a way that earns your clients’ trust and helps you develop your business.
Why are estimations so crucial?
Estimates are essential in any sector, from vehicle repair to building. And, because an estimate is generally a customer’s first impression of your company, you don’t want to make a bad one.
Although the pricing you detail in your estimate may differ from the final invoice, it reflects poorly on your company if the project’s final cost is significantly more than your initial estimate. It’s critical to give your customer a fair and accurate estimate so there’s no “sticker shock” when the final invoice is presented.
What is the distinction between a quotation and an estimate?
Quotes and estimates are two concepts that are frequently confused. While the phrases are similar, they cover to two distinct ideas.
A quotation is a precise price for your services that your customer will pay. When you provide a quote to a customer, you are contractually required to provide the services at that price.
Estimates, on the other hand, are not contractually binding and allow for some flexibility once the project is started. You don’t want the final price to stray too far from the estimate, so keep that in mind.
Before you begin any work, make sure your customer understands whether you’re providing them with a quote or an estimate.
The basics of estimating electrical wiring for a residence
Residential electrical work is likely to make up the majority of your sales, whether you’re giving a homeowner an estimate or competing in a bidding process to wire a group of new homes. As a result, understanding how to estimate household electrical repair is an important skill to have.
Although preparing an estimate might be time-consuming, it is important to take your time to ensure accuracy before beginning any electrical repair. Making a mistake in the middle of a project could cost you additional time and money.
Here are some guidelines to help you produce accurate, detailed estimates for your customers:
1. Pick the best jobs for your skillset
You should not accept every electrical project that comes your way, even if your objective is to bring in as much cash as possible.
Instead, be honest with yourself and your clients and refuse to do any assignments where you lack experience or are unable to appropriately estimate prices. Until you have more experience, stick to projects that are within your scope and those you are confident with.
Take the time to assess each job’s requirements and inform your customer if you are unable to accomplish it in a timely manner.
2. Double-check the details
If you’re bidding on anything, make sure you read the parameters in the request for proposal (RFP).
Make sure you understand the present electrical wiring of the house you’ll be working on to guarantee the success of your RFP. It’s critical to point up anything out of the norm or a potential omission in your proposal.
3. Go through the sketches carefully
Drawings, plans, and graphics are frequently included with the RFP during the bidding phase. These visual representations are crucial because they show you the whole breadth of the project.
When you’re working with a homeowner, find out if they still have their home’s original blueprint and documentation of electrical work completed since the initial build. Otherwise, you’ll have to complete a walkthrough to figure out what must be done.
4. Estimate materials requirements
This list, also known as a material takeoff list, allows you to produce a material cost breakdown.
5. Work out your labor expenses
The most straightforward approach to price for domestic electrical work is by the hour, which makes labor expenses simple to calculate. The median compensation for an electrician, according to the Bureau of Labor Statistics, is $27.36 per hour, so you’ll probably pay your staff (or yourself) something comparable.
Calculate how many employees are required to finish a task, then add up each of their hourly pay rates to arrive at your total hourly labor rate. Multiply your hourly labor rate by the number of hours you expect the work to take.
Total labor rate = hourly labor rate x number of hours
The formula above will help provide you with an accurate estimate of labor expenses.
6. Produce a rough estimate
Now that you know the extent of the task and how much material and labor it will take to finish it you can start putting together your estimate.
Make sure each of your materials is listed as a separate line item in your estimate. Using a template for this ensures a consistent approach, allowing you to complete estimates faster for each new customer.
7. Calculate profit and overhead
If you only compute how much the work will cost you (labor plus materials expenses), then you will not profit from the work. In reality, you’ll be losing money since you’re not covering all of your business costs, including transportation and insurance.
Every estimate should include overhead expenditures in your budget to account for all of your business’s expenses. Depending on your business expenditures, overhead is approximately 13–20 percent of your overall sales cost.
The final aspect to include in your estimate is a profit markup. This markup is determined by the typical price of electrical work in your region and the amount of profit you intend to generate on each project.
8. Double-check all your figures
Make sure that all the information on the estimate is valid and that nothing has changed since you started the process before giving it over to your customer.
Ensure you include the following details:
- Name and address of the customer
- Materials and price list
- Hours and expenses of labor
- Total daily cost
You can redo some of the calculations if required to verify that the final amount you provide your customer is accurate.
How detailed should an electrical estimate be?
As a general guideline, you should provide as much detail as possible in your residential electrical work estimates.
Customers expect to see the following on an electricity estimate:
- Their full name and mailing address.
- The work’s description.
- Your company’s name and contact information.
- An in-depth analysis of the work.
- Breakdown of the task should include labor, materials, and any additional expenditures.
- Sales tax (where applicable)
We hope that this guide will help you accurately calculate electrical job costs for your small business. Once the estimate has been accepted and the project begins, you may need ways to protect yourself while on the job. Business insurance is one way to do this.
BizInsure makes it easy for electricians to find coverage that fits their needs. Learn more about electrical insurance cover and start comparing policies now.