Calculate before you quote
Include labour at a realistic loaded cost, direct costs, an honest overhead allowance and a stated contingency. Keep margin and mark-up separate.
- Record observed hours
- Add direct costs
- Set a desired margin
- Test discount impact
- Record the decision and scope
Separate the cost model from the selling decision
List delivery labour, direct purchases, subcontractors and the overhead allowance used in your business. Explain how each estimate was obtained. Include preparation, travel, revisions and handover where they consume real capacity. Do not count the same overhead twice by including it in both the hourly rate and a separate allowance.
Keep the arithmetic separate from the market decision. A cost model shows what your assumptions imply; it does not establish that a customer will accept the price, that the scope is safe or that the whole business is profitable. Review your costing treatment with your accountant where appropriate.
Illustrative example: margin is not mark-up
Using deliberately simplified figures, suppose the costs included in your model total £800. Adding a 25% mark-up produces a £1,000 price. The £200 difference is 20% of that selling price, not 25%. To retain 25% of price above the same cost base, the calculation is £800 divided by 0.75, approximately £1,066.67.
These figures illustrate the distinction, not a recommended margin. What the remaining amount must cover depends on which costs you included. Tax treatment and actual payment terms need their own checks; do not treat the result as automatically available profit.
Test the changes that usually erode the quote
Run a second case with more delivery hours, a revision request or a proposed discount. Keep the cost assumptions visible so you can see whether the change is affordable. If the price falls but the work stays the same, the reduction comes out of the amount left after costs.
Record what is included, what is excluded and who can approve a change before accepting the work. After delivery, compare estimated and actual effort. Repeated differences should change the next estimate or scope boundary, rather than remaining a surprise on every job.