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Direct costs

Direct costs are the costs that can be traced to a single job, such as the labor, materials, subcontractors, equipment rental and permits for that job.

If a cost wouldn’t exist without the job, it’s usually a direct cost. Lumber delivered to the site, a plumber subcontracted for the rough-in, a dumpster, the permit fee and the hours your crew spent there all count.

Labor is a direct cost at its full burdened rate, not just the wage: the payroll taxes, workers’ comp and benefits for those hours belong to the job too.

Direct costs are the base of every estimate. Price them carefully from a takeoff, add a waste factor for materials, and don’t forget the small items that add up: fasteners, adhesives, disposal fees, delivery charges and equipment rental.

After the job, compare actual direct costs with the estimate line by line. That comparison, called job costing, shows which parts of your estimating need work.

Indirect costs and overhead come on top. A price that covers only direct costs leaves nothing for running the business or for profit.

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