Can a quote template help with your project profitability?

by Adina Luca, July 20, 2023

Lots of useful things can be built with a simple Excel template and some basic Excel skills. One of them is a quote template that helps you quote a price to your client that safeguards your profit margins.

Even if your clients are used to you quoting a fixed price for a job, knowing what you included in your calculation is helpful as it ensures your profitability. You can still quote a fixed price, but you will know what is in scope and what isn’t.

So, what are the prerequisites to build a quote template?

What you need to know about your business – TIME:

  • You need to know how long it takes to do every job of your projects. Your own experience is very useful, but only in so far as you yourself will do the work – which is probably not the case, so whatever benchmark your own timing offers, it may be skewed.
  • Ideally, you should have completed timesheets by those who do the job because there is much to learn from their timesheets. And you should analyse the timesheets and determine some averages per type of job and any other conclusions you could extract from the data.
  • In essence, you will always underestimate how long a job takes, but by how much makes the difference between a good profit margin and loss.

Here are some real-life findings from a company’s timesheets:

  • The projects that finished with a good profit margin (50% or more) still underestimated the time it took by 15%
  • The projects that had a lower profit margin (under 50% but over 30%) underestimated the time it took by 50%
  • The projects that were run at under 30% profit margin or at a loss underestimated the time by 100% or more, i.e., the project took double the time expected

What you need to know about your business – OPERATIONAL COST PER HOUR:

  • Identify what your business spends operationally, i.e., expenses that are not directly related to whether you do a project for a client or not. Also known as Indirect Cost. That can include your own pay as manager, all office costs and related to office, marketing, and sales expenses.
  • Download your last 12 months’ profit and loss from your accounting system – if you don’t have one, take a look at what your accountant put together for the end-of-year accounts – and you will be able to identify your annual operational costs. That will also include any depreciation of assets, which is helpful to include in the total cost.

a) How to calculate operational cost per hour – by project billable hours, best method:

  • Assuming that your company runs five big projects in a year, and each project’s work requires 1000 hours = 5,000 hours billable in the year
  • Divide total operational costs over 12 months by 5,000 = your indicative operational cost per hour

This method requires that you have monitored the number of billable hours per project in your business, i.e. you have some form of timesheets.

b) How to calculate operational cost per hour – by available working hours of FTE, not so good method:

  • Assuming that your company employs three people full time (yourself as the Director, one Admin and 1 Project Manager) = 1,750 hours by 3 = 5,250 hours
  • Divide total operational costs over 12 months by 5,250 = your indicative operational cost per hour

This method is a rule-of-thumb method, which is better than nothing. However, it most likely underestimates the operational cost per hour worked because it assumes that all staff working hours are utilised fully. In reality, no one is busy 100% of the time, and the billable hours are fewer.

What do you do with these calculations?

  • To build a quote template – you plug in hourly estimates for project stages to determine the cost of sales (or direct cost and labour cost), and you plug in the operational cost per hour by number of hours of the project to determine the operational cost to allocate for the respective project (or indirect cost).
  • The total of the two types of costs gives you the total cost of the project, to which you can then apply a desired profit percentage and, therefore, the price to quote to the client.

Build your quote templates and see how they work with real-life examples (and spreadsheets 😊)

We’ve created a free online workshop for business owners of companies in construction and refurbishment, with whom you will get the opportunity to share your experience should you want to.

Our places are limited to 10 – we want to have a small number of people so we can have personalised responses to questions and ensure space for sharing. Right now, only five places are left. Click on the link below to claim your free spot now.

What to expect?

1. Drafting a quoting template that suits your business

2. Use quoting templates to ensure profitability for each project

3. Case studies and real-world examples

4. Q&A session: Have burning questions? We will be happy to have a chat!

📅 𝗠𝗼𝗻𝗱𝗮𝘆 𝟐𝟰 𝗝𝘂𝗹𝘆 𝗮𝘁 𝟭𝟬:𝟯𝟬 𝗮𝗺, register here >>