Price setting and price architecture

Every job is quoted by hand

In timber, hardware, steel fabrication and building supply businesses, estimators often price each contractor and project job from scratch. Margins vary widely on similar work, and the quote that wins is often the one priced lowest.

Read on ↓

1
What is changing
Project and contractor customers run more competitive tenders, with shorter turnarounds and more variations after award.
Experienced estimators are retiring, and their judgement leaves with them.
2
Common signs
- Two estimators would price the same job differently.
- Quoted margins range widely on similar work.
- Freight, risk and variations are left out of the quote.
- Approvals depend on who is in the office.
3
Where it leads if left alone
The margin on won work comes in below what the quote suggested. Over time the business wins more of the work it prices worst.
4
The decision that is hard to reverse
A low tender price on a large project becomes the reference for the next one. The customer, and the market, reprice your work downwards.
5
What recovery costs
Recovering quote margin means rebuilding pricing logic job type by job type and retraining estimators, while live tenders continue.
6
What good looks like
- Base prices by job type, adjusted for urgency, specification and risk.
- A floor price that needs approval.
- Freight and variations built into every quote.
- Won and lost quotes reviewed each quarter.
7
What it is worth
Quoting rules keep judgement for the large and unusual jobs, and make the right price the easy one on routine work.
8
How it is treated
1. Analyse won and lost quotes. The price range that wins by job type, and where margin was given away in freight, risk and variations. Strategic EBIT Opportunity & Risk Diagnostic →
2. Set the quoting rules. Base prices by job type, adjustments for urgency, specification and risk, a floor that needs approval, and charges for variations. Value-Based Culture & Transformation →
3. Build the rules into the quoting tool. Estimators work inside the rules, and exceptions go to a named approver. EBITDA Improvement Program →
9
How Pricing Insight works
Relevant work: at Hyster-Yale Asia Pacific, EBIT moved from a A$100k loss to a A$3m gain within 12 months (realised).
Experience
Ron Wood has worked in pricing for 30 years: first as a pricing and commercial manager in FMCG, building materials and capital equipment, and since 2007 as adviser to more than 160 businesses.
Method
Each engagement follows the same sequence: diagnose, optimise, embed. Recommendations rest on the client's own transaction data, and every figure can be traced to it.
Measurement
Results are measured against a margin baseline agreed with the client's finance team, and reported as realised, modelled or identified.
Continuity
Ron Wood leads each engagement from the first meeting to handover.
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How far apart would two of your estimators be on the same job?
A first conversation establishes how this applies in your business and whether a diagnostic is warranted.
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