There’s a basic equation to determine your baseline project minimum:
Fixed costs per job / gross margin percentage = project minimum
So why do you need this number? Isn’t that what markup is for?
For any project that you do, there are a set of tasks that have to happen every time. The exact list depends on your business, but might include:
- Drive time to and from the sales meeting(s)
- Creating a proposal or estimate
- Following up with the prospect to close the deal
- Creating a contract
- Setting up the job in your system
- Making sure you have the right people, materials and tools, in the right place, at the right time
- The crew’s drive time to and from the job
- Invoicing
Depending on who does these tasks and how dialed your systems are, this could be a few hours to a full day or more. That’s for any job, whether you’re getting paid $100 or $100K for the job. If you’re trying to cover all of this under a percentage-based markup, you’ll lose your shorts on small jobs and won’t know it.
By identifying your break-even project minimum and saying “no” to jobs that don’t meet the threshold, you will save time AND boost your profits simultaneously.