Why $25 an hour installer pay turns into $55 on the quote
Because the crew only bills the hours it's building fence, and those hours carry everything else. $25 an hour is a fair installer wage in many places. But the company also pays for the lumber yard runs, the measure visits, the drive, payroll taxes and workers' comp for a crew that digs and runs saws all day.
In the example company, the owner spends much of his week measuring, quoting and ordering, so he bills far fewer hours than the two installers. Put all of that over the hours actually spent on site and the rate lands at $55.27. The true hourly rate guide walks through the formula once; here it's the fence numbers that matter.
Is a 1.5 overhead factor enough for a fence crew?
For our example company, no: $25 times 1.5 comes about $17.77 short of break-even on every crew hour. A factor like 1.5 is quick, and it may fit the shop that came up with it. It is a guess about someone else's overhead, though, not a measure of yours.
On a 50 ft job with 2 men for 2 days at 8 hours, or 32 hours, that gap would be about $570 on a $2,435 quote, most of the profit on a job that size. The fix is to replace the factor with your own number once a year, using the free true hourly rate calculator.
Where a fence company's $41,000 of overhead goes
Mostly to the yard and the insurance. The example company carries about $41,000 a year that doesn't belong to any one fence: a yard to store lumber, liability and vehicle insurance, phones, measuring and quoting software, bookkeeping and marketing.
Fence work adds a long tail of small lines. Homeowners are often told to ask for at least $1 million of general liability, so that premium is a real line. A busy estimator can wear out several measuring wheels a year, and layout paint, flags, saw teeth and driver bits get used up on every job. Fuel for measure visits belongs here too, since you drive to jobs you don't win.
Pricing the auger, trailer and skid steer by the hour
Each machine gets its own hourly cost, charged only on the jobs that use it. In the example, the truck and trailer, the 2-man gas auger and a small skid steer with an auger are each priced as their yearly cost divided by the hours they actually run.
That keeps a 40 ft backyard repair from paying for the skid steer it never needed, and makes a long farm run with hard ground pay for it. A machine that sits most of the year needs a higher hourly cost, so be honest about its hours. On the example 150 ft job, labour and equipment together came to $2,747.67.
Turning the hourly rate into a fencing day rate
A 3-person crew for 8 hours is about $1,326 at the example's break-even, and about $2,324 at what the sample job earns. That's 24 crew hours times $55.27, or times $96.83.
Day rates are useful as a gut check when you're standing in a customer's yard. If a 150 ft job will take your crew two long days plus a trip back after the concrete cures, and your price doesn't clear two or three crew days at your earning rate, something is missing. Use it to check a quote, then price the job properly on the fence pricing guide.
What markup do fence contractors use on lumber and outside costs?
Between 25% and 50% on materials in what we found, with 30% on hotels and miles. Each row is one owner's number, not an industry average.
| A | B | |
|---|---|---|
| 1 | Number | On what |
| 2 | 50% markup | One owner's lumber, screws and hinges ($822 became $1,235) |
| 3 | 30% markup | Hotel nights and truck miles on far farm jobs |
| 4 | 25 to 35% profit | A coach's target for the whole job; 10 to 15% was the old norm |
| 5 | About a third as deposit | Taken after tear-down, to cover the lumber |
| 6 | 25% on materials, 30% on dump fees and permits | Our example, plus profit and a cushion on the whole job |
The reason for marking up a hotel bill is simple: you booked it, paid for it and carried it until the customer paid you. Everything you buy for a job should make you some money, not just pass through. Some experienced contractors won't take a job under 40% for the same reason.
Profit margin on a fence job: 27% in the example
The example job keeps $2,244.13 of an $8,201.18 price, a 27% margin. Markup and margin use different bases, so a 30% markup keeps only about 23% of the price; the markup vs margin guide has the table.
| A | B | |
|---|---|---|
| 1 | Markup on cost | Margin on the price |
| 2 | 25% | 20% |
| 3 | 30% | 23% |
| 4 | 38% (the example, all in) | 27% |
| 5 | 50% | 33% |
That 27% is profit for the business after the owner's own wage is paid in the labour line. It sits inside the 25 to 35% coaches ask for. Installed cedar stained both sides runs about $45 to $60 a foot in one owner's market, and the example's $54.70 a foot lands in the same place, a useful check that the rate isn't out of line. For how overhead and profit fit together, see overhead and profit.
Know your costs and you know your profit. Set the rate up once and every fence quote uses it. The Fence Pricing Calculator keeps your rate in Shop Setup, so every fence quote starts from it.