Don’t overlook overhead

Published On: October 4, 2019

Gary Westlund, of Awning Tracker, knows what he’s talking about when he says, “Overhead is a real cost. Unless you properly account for overhead on job bids, you are just guessing.”

Westlund gave a straight-talk presentation on Oct. 3 at Expo 2019, telling attendees he owned and operated his own awning business for 25 years, growing the company from $400,000 to $6 million in annual revenues. He has since sold the business and now works as a business coach to other awning companies.

He recommends that business owners accurately identify the true costs of a job. This includes costs of goods, direct and indirect labor costs and overhead. He cautions that using a simple pricing strategy of costs of materials times three is not good enough. He adds, “Learn to tailor pricing to the job and avoid bad jobs, if you can.”

Westlund discussed common methods of estimating jobs: percentage of project costs, cost multipliers and the billable hours methods. The billable hours method is what he recommends, which involves dividing the total cost by billable hours.

To build a successful company, Westlund suggests, “Stay out of trouble by doing what you do best; avoid jobs that you sense will be trouble.” And don’t try to price match your competitors, instead build alliances and outsource tasks when it makes sense—like digital printing.

Westlund ended with three take-aways: Calculate overhead accurately, price jobs with confidence and focus on achieving your profit goals.