Quoting jobs by gut feel? Build a pricing formula that holds up
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If your quotes come from a rule of thumb or a spreadsheet only one person understands, two people can price the same job differently, and nobody can explain the number when a customer pushes back. Some jobs lose money; others lose the bid. A formula built from your real costs and past jobs fixes both: the same job gets the same price, with a reason for every dollar.
Why quotes drift
- One rate for everything. In one sign-makers' forum thread, a veteran warns that a quick area price taken from recent banners must be checked against real time and materials (source). But setup, travel and site visits don't grow with size, so a flat rate per m² underprices small jobs and overprices big ones.
- The real cost drivers aren't written down. Your best estimator knows a curved wall takes twice as long. The spreadsheet doesn't.
- Nobody compares quotes with real costs. Without estimated vs. actual hours, the same mistakes repeat.
Example: flat rate vs. formula (made-up numbers)
A shop charges a flat $40 per m² for installations. Materials cost $10 per m², labor $50 per hour. Its finished jobs show 1.5 hours per job, plus 0.12 hours per m², plus 2 hours for a site visit (both jobs below need one).
| Job | Hours | Real cost | Flat quote | Formula quote (30% margin) |
|---|---|---|---|---|
| 5 m² | 4.1 | $255 | $200 (a $55 loss) | $364 |
| 50 m² | 9.5 | $975 | $2,000 (easy to underbid) | $1,393 |
Cost × 1.3 ($332 and $1,268) is a 30% markup, which is only a 23% margin. A 30% margin is cost ÷ 0.7. The fit also measures how much real hours scatter, so a fixed price can carry a buffer from past data (say, enough for 8 jobs in 10), not a guess.
Ways to fix it
| What it does | Good for | Limits | |
|---|---|---|---|
| Rules of thumb | A price per unit, or materials times a markup | Simple, repeatable work | Misprices small, big and complex jobs |
| Cost-plus spreadsheet | Adds materials, labor hours and overhead, then a margin | Most businesses | The hours are still guesses |
| A model fitted to your past jobs | A regression of real hours and costs on job features (size, complexity, distance, rush), with their spread | Businesses that record real job costs | Needs those records; fitted to past quotes, it copies old mistakes |
| A quote calculator | Staff or customers enter the job's features and get a price with its breakdown | Several people quoting, or online quotes | Costs and rates need updating |
What I've worked on
I've built formulas and statistical models for clients, from regression models and variance calculations to the odds behind games of chance. A pricing formula uses the same tools: a regression on your finished jobs and a probability view of the risk. Setting price tiers or a minimum job size around your capacity is an optimization problem, and I model those too (see my optimization case).
What I need from you
Past jobs (a spreadsheet export is fine) with what you quoted and, ideally, the real hours and materials. Your rates, overheads and current method. Who will quote with it. Won and lost quotes help too.
How to start
Email me at cdesivo92@gmail.com with a few lines about how you quote today, or hire me on Freelancer.com if you prefer the platform's contracts and payment protection. I'll tell you honestly whether I'm the right person for it, and how I'd approach it.