Estimating jobs...

I like the idea of breaking it up; just make sure it is in logically separate steps so the customers can see and agree with the logic.

At some point, you have to assess the overall market and what it will support. In San Jose, I bet there are lots of guys wanting to make it doing what you do. If so, then it is just going to be competitive, and margins will be thin unless you are one of the top shops with the best reputations. Making it to that level is a years long process....

At some point, you have to decide what you will accept as the return for your time, and charge accordingly, and it if does not work, move on to something else. That is the key to being happy with the 'simple' approach like charging hourly rates..... deciding that it HAS to work a certain way for you or it is not worth it.