Expenses for General Contractors

In pricing of a product, companies usually consider all the expenses that have been incurred for the product to be designed, manufactured, marketed, and sold to the customers. After cost consideration, firms will include markup on top of the expense, which is usually their profit. This also applies to services including the service of general contractors. Before giving the price of their work, they will consider the cost of materials, design, office space, taxes, and more. They will then include a markup, which will cover unexpected expenses before becoming profitable.

Here are the top business expenses for general contractors:

1. Office and Employee Expenses

General contractors normally rent offices, own their workspaces, or work from home. These offices usually incur a number of expenses. In addition to the space cost, other numerous bills are associated with an office. These include security, utilities, landscaping, phones, and more. When a general contractor has a number of employees, their time can be billable to projects or overhead may underwrite them. All these depend on their contracts. Offices provide contractors with numerous benefits, including the fact that there will be more trust from the client who knows that there is a physical location they can find a contractor if the need arises.

2. Taxes

General contractors incur a variety of taxes including city, county, federal, and state taxes. You can pay more or fewer taxes depending on the region you operate in. In particular states, contractors are retailers, meaning they get and remit taxes as they pay their sales-based state taxes. If a general contractor has office staff, they will be remitting their portion of Medicare, unemployment, and social security taxes for their employees.

3. Insurance

General contractors incur overhead costs related to general liability insurance as well as other types of insurance related to worker’s compensation insurance, tools, leased equipment, and more. Specific organizations deem their general liability insurance as an estimate item since it is linked directly to sales, whereas numerous other contractors like roofers use their markups to cover it. General homeowners insurance policies normally cover the operations of a contractor after a loss. Some policies insure roofing and homeowners, offering them extra protection under the general contractors insurance policy.

4. Transportation

Before the construction of a building, workers and materials need to arrive at the site. Some general contractors own vehicles that can be used to transport debris, employees, and materials. Others normally lease massive equipment such as dump trucks and backhoes, which need extra insurance coverage. When it comes to employees who drive their vehicles to work, the general contractors will pay them the miles they drive to the site and add insurance coverage for these vehicles.

5. Communication

General contractors will communicate with their clients in a number of ways including email, phone, SMS, and more. These methods of communication will require an Internet connection, computers, office phones, backup drives, backup services, software and software updates, stamps and envelopes, smartphones, and tablets. All these communication methods and means will be part of the communication expenses to a general contractor. Since many customers will not always be on site, communication is unavoidable.

6. Salary of the Owner

In numerous contracting firms, the salary of the owner of the firm is normally not billed to particular projects since they have employees who manage the projects. Hence, their salary requires being covered by overhead. In big firms that have dedicated employees for sales, project development, design, and estimations, their salaries can also be covered by the markup obtained from the projects.

7. Warranty

The project proposal does not usually have a line item for warranty. This is because the warranty work is financed by the net profit generated by the contractors. Since no contractor is looking to redo construction work at their own expense, most general contractors will offer work that leads to few or zero warranty calls.

Conclusion

From salaries and rent to warranty, insurance, and the other costs, general contractors will ensure that they are covered in the contract price. If a client is not aware of these costs, they might find it hard to accept the contract price. But with this knowledge, a customer can negotiate for a reasonable price that is within their budget and one that the contractor can accept.