The Pros and Cons of Quoting Time and Material Versus per Project
Knowing how to quote a job is essential because if you overprice your quote, you will lose the job to the next bidder, but under-bidding costs you money. Figuring out the perfect system is complex, and the way you quote may change from job to job. If you are starting out, it may take some experience to learn the best method for you. The two most popular options for quoting a job is to quote based on an estimation of material costs and an hourly rate or to quote a lump sum price for the whole project. Both quoting time and material versus per project can have unique advantages and disadvantages.
Quoting Time and Material
Time and material quoting are usually invoiced with the materials itemized separately from an hourly rate and then combined for a total.
- Having an estimated time frame allows you to schedule projects better and prevents clients from dragging their feet.
- Hourly rates entice clients because they look less expensive than a lump sum.
- Hourly rates attract clients that want smaller jobs done.
- These quotes are simpler and easier to adjust as the scope of the job changes.
- Clients can run out of budget before project completion.
- You don’t get paid for efficient work. You undercut your hourly profit if you complete the job faster than expected or rush the job to move on to another one.
- You don’t have the flexibility to bring in more workers to stay on schedule when quoting time and material.
- If the project takes a long time, the client may think you are stretching it out to get more money out of them.
A per-project quote is a single lump sum quote that umbrellas time and costs.
- You don’t have to itemize your quote, so you can take advantage of certain cost-cutting measures, like using free dirt dump sites.
- The client knows the total ahead of time, so they shouldn’t run out of money.
- You have a better idea of your budget ahead of time.
- Even if the project is under schedule and budget, you receive pay the same.
- You make less money if projects go over time and budget.
- Clients may dispute what’s included in the bid.
- Clients may shy away from a project because the final number looks too big, so you need to have a solid portfolio to prove you are worth that number.
- Some clients will think they can haggle the price of a lump sum which wastes your time.
Which Is Better: Quoting Time and Material Versus per Project?
Every situation is different, and ultimately the choice is up to you, but here are a few situations where one option may be better than the other.
Time and Materials
- Best for long-term or ongoing projects.
- More enticing to clients who won’t hire you without an itemized quote.
- You are just starting and need to build a portfolio and reputation.
- Working with a client who may make multiple changes to the scope of the project throughout the job.
- Best for projects with a timeline that is difficult to track or estimate.
- Perfect for small projects that allow you to get in and out while making a profit.
- Great for projects that have a clearly defined scope.
- Working with a client who isn’t hands-on in the planning process.
Experience Will Guide You When Quoting Time and Material
Each project comes with its own unique circumstances, so you won’t always know the best way to quote until you have all the information. The more experience you collect, the easier it will be to understand the scope of each project and have a ballpark idea of the cost before you get started. There will always be variables that may drive you to change your quoting strategy, but as you gain experience, you will likely start leaning toward one option over the other.