Cost, overhead or margin?
Every price is built from three kinds of thing. Sort each item into direct cost (the job itself), overhead (running the business) or margin (the profit). Get this and you understand how a quote is built.
Direct costGoes straight into this job
OverheadRunning the business
MarginThe profit on top
Sorted 0 / 9
Copper pipe & fittings
Direct cost. Direct cost — materials that go straight into this job.
A fitter’s day on site
Direct cost. Direct cost — labour doing the actual work.
Digger hire for the week
Direct cost. Direct cost — plant brought in for this job.
A subcontractor’s bill
Direct cost. Direct cost — a specialist paid to do part of the works.
Office rent
Overhead. Overhead — a running cost of the business, not this job.
The company’s insurance
Overhead. Overhead — you pay it whether this job exists or not.
The estimator’s salary
Overhead. Overhead — the office team is a business cost, shared across jobs.
The profit added on top
Margin. Margin — what the business earns for taking the job on.
The slice kept to invest and grow
Margin. Margin — profit is what lets the firm buy kit, train people and survive lean times.
0/9
Know your price?
Sort all nine and check your answers, then mark this complete to add the stamp to your punchcard. Knowing cost from overhead from margin is what stops a “cheap” job from losing money.
Check your answers to unlock. Done — you’re good to go.