So far, we've discussed the three major areas of expenses - materials, labour and overheads.

But if your quotation price only covered these costs, your company would do all this work for the client and only just cut even.

So we need to add a profit mark-up to make the whole job worthwhile.

The profit mark-up is what makes a business viable. It is used to improve and grow the company, and to give the owners a return on their investment and hard work.

The mark-up is generally expressed as a percentage of the total price, and will vary from one business to another, depending on the type of work being done and the amount of competition there is in the marketplace.

In wholesale supply-only companies, it could be as small as 10%.

In installation businesses that specialise in complex or difficult projects, it could be as high as 100%.

Goods and services tax (GST)

Once all the costs are accounted for, there is one more amount that has to be built into the final price. This is the GST that the company must collect from the client and pay to the Tax Office.

The government has set this tax rate at 10% of the value of the goods or services provided.

GST can be a complicated matter if you're working with different prices and some of them already have GST added. A simple way to avoid adding it twice to an item is to make sure all the prices that go into your calculations are GST exclusive. This lets you add a general 10% to the total figure at the end.

Suppliers are required to make it clear whether a particular price shown against an item is GST inclusive or exclusive. So you will often see the following abbreviations in brackets after a price:

      (inc. GST) - includes GST

      (exc. GST) - excludes GST.

Adding up a final quotation price

Below is a summary of all the cost categories that go into the final calculation of a quotation price. The figures used are carried over from the materials and labour calculations in the earlier lessons of this section.