Marc Watters - Construction Business Blueprint

The Construction Business Blueprint #004 - Profit First Pricing for CBOs

• Marc Watters • Season 1 • Episode 4

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Want to price construction jobs with profit built in, not crossed fingers? 


n this video I walk through a simple, proven process contractors can use to quote accurately, protect cash flow, and grow margins without racing to the bottom.


What you’ll learn

  • Scope clarity: gather drawings/specs, timelines & client expectations so profit doesn’t leak before you start.
  • Contracts & risk: spot payment terms, retentions, LDs, back-to-back clause, and when to walk away.
  • Overheads first: calculate your overhead % and add it before your markup (why “cost + 20%” fails).
  • Market-current costs: get 3 quotes for labour & materials and price worst-case, not wishful.
  • Cash flow protection: deposits, payment schedules, notices, how to stay liquid and sane.
  • Winning proposals: include what’s in/out, photos, and talk clients through your quote live.
  • Profit-first mindset: don’t chase every job, win the right jobs at the right margins.

If this helped—and you want templates, overhead calculators, or a pricing checklist comment “PRICING” and I’ll send you the resources.


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SPEAKER_00:

In today's video, we're going to discuss something that is a bit of a hot topic. How to price a project and make profit. Because at the end of the day, profit is why we're all in business. Turnover, all these metrics are kind of irrelevant. Turnover is for vanity and profit is for sanity. And that's what my clients are in the game to do, make profit. Most construction business owners are still pricing jobs with hope instead of clarity. They send the number, cross their fingers, and just hope for the best and pray that there's money left at the end of it. But that's not a strategy, that's just guesswork. In this video, I'm going to show you how to price a job or project properly, protect your cash flow, and make sure the profit is built in from the very very beginning. Let's just quickly walk through how we'll do that. So, first protocol is clarity on the scope. So it's really, really important. The devil is in the detail here. Okay, so before any number is put on a page, before any topic is discussed, you need to get absolute clarity on the full scope of the works that are required. What draw-ins is there, specifications, what types of materials, and also the client's expectations is all part of the scope of the project. So we need to get really clear on what's required here. And you need to make sure that you have got the time, the manpower, and the skill set in order to deliver that job to the client's expectations. That's all before you even think about price. And missing detail here is where profit leaks out before the job even starts. So it's absolutely crucial to make sure that the scope is there. And that's that's where you really need to spend a lot of the time here. There's a couple of topics here we'll touch on, but clarity on the scope is important because if you overlook a certain specification or if a client wants something done in a certain timeline, it means you're going to have to accelerate works like maybe have twice the man on the job or work weekends or whatever else. Missing that and pricing it just as standard hours is going to bite you in the ass in the long run. So you need to get really, really, really clear and get as much detail as possible. That starts from when you go to even before you even go to price the job. But you know, it's all on the information provided. Make sure that the information you're provided, the drawings, the scope, the details, all in there. If that information isn't there, don't even start to price it. You need to go back to the client or back to whoever it is and get as much information that's missing as possible. Then what I would do is I would even just follow up with a quick call and say, Are you sure this is all the information provided? I've got this, this, this, and this. If they haven't provided you with any sort of tender document ticking off exactly what's uh included, I would always recommend putting one together yourself and just sort of sit sending a WhatsApp or an email of exactly what you've what you've been given and make sure that's all the information provided. Make sure that you are starting with the right information. Number two then is contracts. So risk versus reward. Some of the domestic guys may not be used to working with contracts, but in the commercial space, this one's definitely uh a no-brainer. So contracts are vital, and if there's a contract in place, you need to check the terms and conditions. So that is vital here. So again, we're not even putting pen to paper, we're not even talking money, we're not even talking anything else. You need to first look at the payment schedules. So, what are the payment terms? And are those payment terms in line with your business cash flow can afford to do? So, are you somebody that needs deposits up front? Are you somebody that needs um fortnightly payments? Can you work on 30 days? Can you work on 60 days? You really need to reevaluate that and see what there is. And you need to, you know, have a look at the clauses. What I mean by clauses is is there any like any lines in there about liquidated damages, retentions, variations, anything that could maybe catch you out? And if you're not familiar with this, then look, it's definitely something that you need to look up on, or even get touch base with somebody who is an expert in these things. There's plenty of guys out there, myself included, could easily help with those things. So certain clause to look out for would be those things the liquidated damages, the retentions, the variations, or any sort of talk around back-to-back contracts. So maybe if you're working to a contractor and they're they've got a contract with somebody else, and if they don't get paid, you don't get paid, those things can really make or break your business and really leave you, you know, standing and lost and sort of on the back foot because you've no no real defense there or not a leg to stand on because you haven't you haven't done your homework and you haven't reviewed things before the job's even priced. So what you need to do is you need to evaluate risk versus reward, and it's really like if it's all stacked against you, walk away. If it's not something it's something you just feel uncomfortable with, trying to get clarity on it. If the if the if the answers are coming back, they're not clear, then just let it go. You know, it's sometimes it's not worth the risk, and not all contracts are a good contract. Another big tip here in terms of contract that a lot of people fall down on, a lot of construction business owners fall down on is well, I didn't sign the contract, so it doesn't apply to me. That's not true. This is where a lot of guys get caught out, like I say. If you're issued a contract and you start works, you've accepted the contract. So a lot of people don't know that, but any contract terms and conditions that are in that, you've deemed to have accepted them and you've commenced work. So unless you actually read the contract and you go back on that contract and you know state anything that you're not happy with, then it's deemed to be accepted and everybody moves on and it is what it is. Also, another thing to look out for in terms of contracts is if you have terms and conditions in your quotations and they have then sent you an order or their contract and or their order states that it's their contract over your contract or whatever else, or maybe they just have terms and conditions and they've sent that after you've sent your quotation. Your terms and conditions are null and void, they're irrelevant, and what will deem to be included is what they say to be included in the contract that you have either signed or not signed. So if you've started works and there's a contract in place, then you need to make sure that you've read that in full or give it to somebody who will. Okay, so now number three is the pricing side of things. So obviously you can see there's a lot of work to be done before we even put pen to paper or type a number into a calculator. This is where most people again will fall down, where the mistakes are made. Pricing a project actually starts with your business overheads. If you're not familiar with what overheads are, overheads are any cost of your business that cannot be directly proportioned to a project. So labour, materials, anything outside of that that cannot be directly related to a project is an overhead. So think your office, your salary, maybe if you're not on projects, vans, maintenance, any insurances, all those things are overheads, okay? Rent things that needs to keep the lights on. So you need to do a quick exercise here, and I'll really break this down for you in a simple format because I could talk about this all day, and we have many lessons of this inside the blueprint program. But to make it simple for this video, what you need to do is say even take for the last three months, you'd need to work out what your turnover was, and then you would need to work out the cost of every overhead. So if you track your overheads there of what the costs are for your insurances, your vans, all those things, and say, for example, your turnover was 100k for that for that month or for those three months, and your overheads were say, for example, 10k, that means that your overheads are 10% of your turnover. So what that means is when you go to price a job, you need to price at a cost, add 10% for overheads, and then add your percentage markup. So a rule of thumb in this industry is is pretty weak in my opinion, which is 20%. It's something that everybody talks about 20%, 20%. And where a lot of guys will go wrong is they'll price the job at a cost. So your labour, your materials, okay, you might have a wee bit of scope in there for things going wrong, or wee bit of wee bit on the materials, but at the end of the day, if you want to talk about clear and absolute profit, you need to price your job at a cost, so what it's going to cost you, then you need to add your overheads, in other words, everything to keep the business going, your wages, any admin, any any office staff, anything to keep the lights on, and then you're into the profit. When you price the job at a cost and add your 10%, for example, as overheads, you're only breaking even at that point, and only when you surpass that are you breaking into the profit margins. So when you're pricing the job at cost and adding 20% on and your overheads are 10%, you're not making 10%, or you're not making 20% in that job, you're actually only making 10%, and that's why you have no cash flow, and that's why the profit margins aren't there. 10% to me is not leaving a lot of room for error. So as we know, this is construction and it's not all roses and things go wrong. So you filter your own or falter the client or something, shit happens, and you need to have contingency in there. So a 10% margin definitely would not help me sleep well at night. Again, you need to add the profit margins there. So you need to get very, very clear. There's other guys here who will try to price a job just covering their time and covering labour and whatever else. So you need the only way to price a job is to price on cost. So whether you're a builder or you're a larger contractor or whatever else, and you have subcontract labour, go out and get your quotations, get three quotations for everything, get quotes for all your materials because prices increase time and time again. So if you're still working off an old price for something, that's where you get caught out too. So go for three price in the market for your labour and your materials, take a worst-case scenario, add your overhead percentage, and then add your profit percentage markup. That's how you price a job built from the overheads up. Number four, then would be cash flow, usually linked back to the to the contract stage. So what can damage the cash flow on these projects and really really hurt your your profit margins on projects is you need to make sure that your payment terms align with your cash flow. So I touched on it briefly there in the other point about the contracts. So you need to make sure that your if you're a business that requires deposits up front in order to cover materials, then that's what you need to do. So you need to make sure you've got your deposits up front, your payment schedule in place. If you're fortnightly or you're monthly, or maybe you're a bigger guy who can take on 30 or 60-day contracts, then you need to make sure that those agreements are in place in order to protect your cash flow and protect your profit margins. If your terms don't match your cash flow, then you'll only choke your business. And if payments aren't met, then do not ignore it. Okay, so this is where your profit margin erodes to. If your clients are missing payments on invoices due, address it immediately. Don't feel awkward about asking for money because at the end of the day, that's what makes your business a business. That's what makes the profit. You need to make sure that your cash flow is protected. So if a client doesn't stay in the end of the bargain, you need to address it head up, straightforward, and just get it solved. If it's becoming a problem, you know, if you need to pull off site or whatever else, you need to bring in somebody, take advice of an adjudicator or somebody who knows their way around contract law to really um experts and issue to issue payment notices or delay notices, things are really going to keep you um legally in the right position. So number five would be the winning proposal. So when you're submitting your quotation, when you've read the when you've reviewed the contracts, when you've reviewed everything else, and you've got your price together, you need to really put your best food forward here. So provide as much information as possible to the client. So a lot of guys like to just put a figure on a page or on a WhatsApp and just send it through, but that's leaving way too much ambiguity between you and your client. So you need to be crystal clear on what's included and what's excluded. You can use tools like Site Auto Pro or plenty of photographs to go along with your quotation to show the areas and break down what work you're going to do and how you're going to do it, etc. etc. This will give you full clarity on your approach and also this will give full clarity and confidence to the customer or your client to know exactly what they're getting for their money. And again, that leaves no room for ambiguity at all. The clearer your proposal, the more it protects your reputation and your relationships. Never just send in hope. So what I would always suggest is call the client and then send a quotation. Say if you just jump in front of your laptop there, whatever it is, I'm going to send a quote through and we'll have a walk through it. That's a great tool to use to get any questions out of the way live on the spot. And you can walk them through how you came to the conclusion of the price, and then you can handle any objections or any queries at that point in time. And remember, it's not just a price, it's confidence in your ability to deliver. So you have to let them know and talk them through and show them exactly how you're doing it and why they should choose you to do the job. And number six is a final point. It is a profit-first mindset. So it if it doesn't make financial sense, then don't do it. You need to go with your head here and not your heart. It is not a race to the bottom. A race to the bottom is a race that you want to lose. You don't want to get involved in that. And if you find that you're in front of the same type of clients all the time that are second guessing your expertise, that are trying to pull things out of a job, that are trying to cut corners, then they're not the right clients to be in front of. And it's not a pricing problem, it's a client problem. So the goal is not to win every job, it's to win the right jobs with the right profit margins built in. If you want complete control over your pricing and to price jobs with profit, then do these things. Check clarity on scope, check the contracts, build in from your overheads up, protect your cash flow, deliver a winning proposal, and importantly, keep a profit first mindset. Get this right, and every project becomes an opportunity to grow, not just a gamble. If this video resonated with you and you want help with any of the resources or anything I've spoken about today, or more clarity on the topics that I've discussed, feel free to like, follow, make a comment, or reach out to me on any of the social media platforms, and I'd be happy to get a chat with you.