As an entrepreneur, one of the most important things you need to understand is the ratio of labor and material costs for a construction company. This information will help you estimate jobs and budget more accurately.
This article will explore what labor costs are typically for construction companies and what material costs are typically associated with them. We will also discuss the ideal labor-to-material cost ratio.
What Are Typical Labor Costs for Construction Companies?
Labor costs can vary significantly from company to company, but they typically make up a large percentage of the overall budget. On average, labor costs can range from 30-50% of the total budget. So for a $100,000 job, labor costs could range from $30,000 to $50,000.
But this is primarily dependent on how much you pay your workers. For example, if you have a high labor force, you will have higher labor costs. On the other hand, if you use a lot of machinery to do the work, your labor costs will be lower.
The typical wages for common construction jobs are:
- Laborer: $13-$25 per hour
- Carpenter: $20-$35 per hour
- Electrician: $25-$50 per hour
- Plumber: $25-$50 per hour
- Welder: $20-$35 per hour
However, it is also essential to remember that these costs can fluctuate based on the type of project, the size of the company, and the location.
What are the Typical Material Costs for Construction Companies?
Material costs also vary significantly from company to company, but they typically make up a smaller percentage of the overall budget. Material costs can range from 10-20% of the total budget. So for a $100,000 job, labor costs could range from $10,000 to $20,000.
The cost of materials will also fluctuate based on the project type, the company size, and the location. For example, if you’re building a house, the material costs will be different than if you’re creating a commercial office space. Likewise, the cost of materials will differ if you’re in a rural area versus an urban area.
Some of the common materials used in construction are:
- Concrete: $100-$200 per cubic yard
- Brick: $250-$750 per thousand bricks
- Wood: $2-$6 per board foot
- Drywall: $0.50-$1.50 per square foot
- Paint: $20-$50 per gallon
What is the Ideal Ratio of Labor and Material Costs?
The ideal labor-to-material cost ratio will vary from company to company and project to project. However, a good rule of thumb is that labor costs should make up 40-60% of the total budget, and material costs should make up 20-40% of the total budget.
This also means that the labor to material cost ratio should be 2:1 to 1:1. So for every dollar you spend on labor, you should spend two dollars on materials or vice versa.
In conclusion, it is essential to understand the labor-to-material cost ratio for a construction company. This information will help you estimate jobs and budget more accurately. Keep these rules of thumb in mind when estimating your construction projects.