I recently had a conversation with a client who had noticed that he usually failed to sell jobs that were labor-heavy, but had no idea why this was happening. When I asked him how he put his estimates together, he described three main steps:

There are two problems with this method. First, it's a "hybrid": Some components of the sale price are based on costs (materials and subs); some are not (labor). Second, the markup varies, and the labor charge-out rate was a black box. To figure out what was causing his problem, we first determined what markup was underlying his charge-out rate....

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