The four cost buckets
Materials, labor, equipment and subcontractors. Price all four and you have your true job cost, before overhead and profit.
In this series
Every dollar lands in one of four buckets
Once you know the quantities, you price them. Every dollar of direct cost, the cost of actually building the job, falls into one of four buckets.
| Bucket | What's in it |
|---|---|
| Materials | lumber, fixtures, finishes |
| Labor | your crew's true hourly cost |
| Equipment | rentals, tools, fuel |
| Subcontractors | trades you hire out |
Materials + labor + equipment + subcontractors = your direct cost. That's what the job costs you before overhead and profit go anywhere near it.
The buckets exist so nothing hides. A bid that feels thin usually has an empty bucket in it: the equipment nobody priced, or the sub whose quote never came back in writing.
The bucket that hides the most
Labor is the one that catches people, because the number you pay your crew is not the number a job costs you. That gap gets its own chapter: Estimating labor — the real cost.
- Chapter 6 of 13
Estimating labor — the real cost
An employee who earns $25 an hour costs you far more than $25. That gap is labor burden, and forgetting it is a silent profit-killer.
- Chapter 7 of 13
Overhead and profit — markup vs. margin
Markup and margin are not the same percentage, and the difference is where new contractors quietly go broke. Set the margin first, then back into the markup.
