How to bid a job based on hourly rate

Let's work on an Estimate based on the Hourly Rate bidding methodology. Bid accounts by projected hours with an hourly rate associated for each man hour worked. 

Let's work on a example for a janitorial service cleaning for a small office.

 

Hourly Rate Bidding Method

Let's begin! In the previous guides, we created an Estimate with 3 services: janitorial cleaning, VCT strip and wax, and window washing. Let's begin with the janitorial cleaning Service. This will be a recurring job. We will be using the Hourly Rate charge method. Click janitorial cleaning under Services on the left column. 

 

 

In the middle of the page, you will see 5 input boxes. Once these elements have all of the required information, your charges, costs, and profitability will display on the far right.

Let's break down the 5 elements as we enter information for this Estimate.

The first element is Charge Method. This is how you would like to charge your Client. There are 3 methods:

• Hourly Rate: Charge the client for each man hour worked by a fixed rate.
• Rate per Sq. Ft: Charge the client by a fixed rate for each square footage serviced.
• Rate per Fixture: Charge the client a fixed rate for each fixture that is serviced.

For this example, let's select Hourly Rate from the drop down.

 

 

The next element is Job Frequency. This is how often your Services will be performed for the Client. If the job is a repeating job (recurring) then check the Repeating Job checkbox. If it is a one-time job, leave it unchecked. 

If it is a repeating job, then select how often it occurs. Enter a number for the first field and then select the appropriate frequency from the drop down.

Let's say this janitorial cleaning job will repeat, and occurs 3 times a week.

Check the Repeating Job checkbox, and enter 3 for "this job repeats" and select "week" from the drop down. 

 

 

The next element is Labor. This is where you enter the number of man hours your employees will be working, and their pay rate to determine your employee labor cost.

There are two ways to enter your man hours and employee pay rates: simplified and advanced. First, let's cover the simplified method.

The first field is the "man hours repeat every" drop down. This is the frequency for how often the hours of work are performed. For example, if the job is always going to require 8 hours per shift to complete, then select "day/shift" from the drop down. If you know the total number of hours over a longer and more specific time period then you can select week, month, quarter, etc. Let's set this field to "day/shift".

Next, is the "Total Man Hours" field. This is the total number of hours of work that are required to complete the job within the time period defined above. Let's say we know that it will require 8 total man hours per shift. Set this field to "8".

 

 

Below those fields is "Hourly Pay". This is your employee hourly wage. Let's set our "Hourly Pay" to $12.

Note: Enter your loaded employee cost (hourly wage + overhead) in this field if you do not break it out under "Other Labor Costs".

Under "Hourly Pay" is an optional field called "Other Labor Costs". This field allows you to breakdown additional hourly labor costs other than the employee wage (also known as overhead costs). Some additional hourly labor costs could include health insurance benefits or liability insurance. Let's add liability insurance and say that it is $2 per hour. To create additional "Other Labor Costs", just click Add Cost to add more line items.

In this example, our hourly pay is $12, but we are including our liability insurance which is an additional $2 per hour. In total, our loaded hourly employee wage is $14 per hour.

 

 

There is also the advanced option to enter your man hours and employee hourly pay. This method allows you to enter your employees at different hourly pay rates and individual man hours.

Click Advanced to open up the menu.

 

 

Next, click +Job Role to begin adding your employees. This will allow you to add as many employees as you need. Enter their Position name, the Quantity of the employee type, their Man Hours (based on the frequency selected above), and their Hourly Pay.

 

 

Let's add a general cleaner and a manager.

 

 

Next, is the Supplies, Materials & Equipment element. This element accounts for supply costs. There are 2 types of costs to consider: Recurring and One Time.

Recurring Costs

Costs or expenses that repeat over the period of completing the job. Ex. For janitorial cleaning, you might want to include the cost of paper products, cleaning solutions, or microfiber rags and the quantity required for each month.

One Time Costs

Costs or expenses that occur only once. Ex. For janitorial cleaning, this might include the cost of a janitor cart needed for that location.

 

Let's add some Recurring Costs. Click "+ Recurring Costs" to add a line item. 

 

 

This will let you add as many line items as you need. To add a Recurring Cost, you must include the name, quantity, and the cost of the item(s).

You can group items together under a general name, or break them out as much as you desire. Let's add "paper products" as a general Recurring Cost. Let's say we are estimating that we will spend $30 a month on "Paper Products".

Click Name and enter "Paper Products", click Qty. and enter "1", then click Cost and enter $30.

 

 

Next, let's select the frequency of how often these recurring costs will repeat. Let's say that we will purchase the "Paper Products" every month.

Click the drop down for Recurring Costs repeat every field and select "month".

 

 

The next option is to bill your Client for these costs. If you would like to charge the Client, check the box "Recurring costs are billable". 

Additionally, if you want to add a markup percentage onto the costs, enter your percentage here. Let's add an 8% margin. Type "8" into the margin field.

 

 

Now we can start entering our One Time Costs. This functions very similarly to Recurring Costs. Let's say we need to purchase a janitor cart for this account.

Click "+ One Time Costs" to add a line item. Then, click Name to add the janitor cart, click Quantity and enter "1", and click Cost to enter the cost of the cart (let's enter $100). 

 

 

Just like Recurring Costs, you can also bill the Client for One Time Costs. Open up the options by checking "One time costs are billable". You can add your margin and also spread One Time Costs over any amount of payment(s). This is the number of payments you will invoice the client for these One Time Costs. Multiple payments spread out the cost.

In this example, we will not bill the Client for the janitor cart, so we will turn it off.

 

 

Lastly, let's add our Charges!

Since our selected Charge Method is set to Hourly Rate, we can directly enter our Charge per hour in the numeric field. This is the hourly amount that you will be charging the client for each man hour based on the Labor and Job Frequency elements above. If you know your rate, enter into the field.

Alternatively, you can check the Margin Based box to charge the client based on your desired margin of your labor cost. This is how much of a profit you would like to make on top of your employee costs.

Let's say we want to make a 40% margin. Check the Margin Based box and enter "40" in the % field.

 

 

Now here's the exciting part! We can now see our estimated Charges, Costs, and Profits in the upper right corner of the screen.

Let's breakdown the Charges. Displayed in the upper right corner of each element is the frequency that the Charges, Costs, and Profits repeat.

 

The Charges element is an overview of how much you should bill your Client. 

 

 

• Base Rate: The base amount to charge the client based on only the charge input.
• Supplies, Materials & Equipment: The breakout of how much the client will be charged for supplies, materials & equipment. This number will be zero if the client is not being billed for these items.
• Total: The amount that should be charged to the client.

 

🔢 How is this calculated?

• Tlc: Total labor costs
• M: Margin %
• Jr: Job repeats
• W: Average weeks in a month (4.33)
• Mh: Total man hours
• Cph: Charge per hour

 

Now let's review our Costs. These are your total costs for taking the account (employee costs and any supplies or equipment costs).

 

 

• Total Labor Costs: Total cost of your employee labor (includes the Other Labor Costs).
• Total Hours: Total amount of man hours.
• Recurring Costs: Total amount of your recurring costs.
• Total: Overall total of all of your costs.
• One Time Costs: The lifetime total amount of your one time costs.

 

🔢 How is this calculated? 

• Jr: Job repeats
• W: Average weeks in a month (4.33)
• Mh: Total man hours
• Hp: Hourly pay
• O: Other labor costs

 

Now let's review the juicy part: our Profits. This is your estimated profitability from this Service.

 

 

• Overall: Your profit from this job.
• Net Profit Margin: Net Profit Margin is how much profit is generated as a percentage of revenue (Overall Profit / Total Charge) X 100. 
  ex. A 25% Net Profit Margin indicates that a company earns 25 cents for every dollar it collects.

 

🔢 How is this calculated? 

 

• Tch: Total charges
• Tc: Total costs

 

Great job on that Estimate! Now let's review the two graphs below Profits. They are color coded to easily identify your charges, costs, and profits:

Blue = Charges
Red = Costs
Green = Profits

The first graph is One Year Billings. This graph identifies how much to invoice the client on a monthly basis and factors in one time costs.

 

If you move your cursor over the graph, it will show your charges, costs, and profits for that month. It also accounts for your One Time Costs. For example, since we entered a One Time Cost for the janitor cart, you can see your profit increase by $100 from month 1 to month 2 since by the second month the janitor cart has been paid off.

 

 

The next graph is your One Year Projections. This displays the rolling totals of your profits, charges, and costs on a monthly basis for a year.

Place your cursor over the points on the chart to see the totals at that point in time. If you hover your cursor over month 12, it will show the total profit for this account for a full year.

 

 

Let's save our Estimate. Click Save Estimate in the upper right corner.

 

 

👏 Great work! You have just completed an Estimate for janitorial cleaning by using the Hourly Rate charge method. 

 

▶ Let's keep going! Next, we will expand on this Estimate by working on our pricing for a VCT strip and wax job by using the Rate per Square Foot bidding method.