Critique My Estimate...

 
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Old 02-05-2018, 07:41 AM   #1
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Critique My Estimate...


So you live and learn. I am considering a few options as I have had issues with clients seeing all my line items and creating problems out of thin air.Either the bottom line price works, or it doesnt. And I am realizing the client likely does not know how much things cost, especially drywall or concrete.


Also have recently gotten, I guess the overhead and profit is fair, but seems high.


In the spirit of continually growing and fine tuning, I am looking for advice on residential estimate breakdowns....



The way I usually break down proposals for clients is as follows. Mind you- this is generally for larger scale remodels, $40k and up.


General conditions-$***X/week, estimate 6 months

Structural- $***X
Framing/ Drywall-$***XX
Electrical-$***XX

Overhead-10%(example only)
Profit- 10%(example only)
Insurance Burden-1%(example only)
Warranty- 2%(example only)

I know there are a million ways to skin a cat. And a million ways to break down an estimate. Lets just make the assumption that Id like to stick to a remotely similar structure, unless there is a compelling reason not to. Again, I am a younger guy and will take all the advice I can get my hands on

-Should I be just incorporating the markup into line items?
-Should I be combining line items into groups, and still show OH&P?
-Should I be giving a lump sum, and only show prices for things like cabinets, finishes, allowances, etc?(leaning this way)
Thanks as always,
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Old 02-05-2018, 08:25 AM   #2
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Re: Critique My Estimate...


There is no good reason to go beyond line item allowances and total cost.

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Old 02-05-2018, 08:53 AM   #3
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Re: Critique My Estimate...


Since it's resi and not commercial, there's no reason to break it down the way you are above as it more represents your accounting of it, not necessarily what the customer needs to see... the info they are looking for is who is doing the work (company, subs) what is being installed (products), when, when will it be finished, how is it protected (service), and what it will cost (price)...

IOW... your agreement should represent your Company, Product(s), Service and Price... the things you actually discuss with them... the other minutiae will not necessarily benefit them to the degree that it makes sense for you to waste time/effort/money breaking it down for them creating more questions... like, "what does General conditions mean?"...

In most cases, they simply want to know what it's going to cost to bring what they want done to fruition... they don't necessarily need to know the inner workings...
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Old 02-05-2018, 10:22 AM   #4
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Re: Critique My Estimate...


I'd like to know what are General Conditions ?

I do the line items net cost per whatever category you make up.

Pulling these figures forward towards the recap sheet, add margin / mark up to each work category. Could be Rough Materials 12%, Subs 15%, Vanity - accessories 40%

Then bring everything forward to the recap sheet. Add Profit and Overhead.

FWIW, this is called the Two Column Recap Method of Estimating

Another little bone. The customer decides to drop a $400 vanity...you deduct that vanity net cost only....you keep in mark up, profit and overhead on the item as much as you can.
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Old 02-05-2018, 10:50 AM   #5
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Re: Critique My Estimate...


General Conditions in my world is :

Site Maintinance (parking plan, silt fence, barriers, dumpster, porta potty, clean up and staging and moving materials around and material delivery

Supervision
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Old 02-05-2018, 10:52 AM   #6
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Re: Critique My Estimate...


OP - is this Cost Plus or a fixed price proposal? If it is fixed price I would not show them any numbers other than allowances or fixtures and appliances flooring maybe stuff like that they can control. Nothing to do with stuff they can't control. That is not for everyone, but it works well for me. If it is Cost Plus I do a breakdown that is a couple pages long and they can see every number and they get a copy of every receipt and invoice. At this point I dont do a lot of Cost Plus.
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Old 02-05-2018, 10:54 AM   #7
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Re: Critique My Estimate...


Quote:
Originally Posted by hdavis View Post
There is no good reason to go beyond line item allowances and total cost.
Depends on what the job is. We have gutted and remodeled a 100 year old farm house and many other old busted up projects that were full of "surprises" and gave fixed-price proposals without change orders for unforeseen conditions several times. But those are few and far between, because many people who do not stick to their original budget when they have a large bank account, they make changes and additions and stop the job and redesign excetera excetera excetera


Also I do not get bids for Cost Plus. It is Cost Plus, it is an estimate based on my experience and historical data, it is in no way shape or form a bid and the line items or for reference only. For many people this is a great system because they do not know what they want and love to make changes. It is nice for us on those kind of jobs becasuse I don't have to write a hundred change orders. LOL.
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Old 02-05-2018, 11:10 AM   #8
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Re: Critique My Estimate...


I don't like to break down pricing like that unless they insist on it. It just gives them something to nitpick. Give them a lump sum, all inclusive price instead.
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Old 02-05-2018, 11:22 AM   #9
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Re: Critique My Estimate...


Something I have done on two houses that we built where the people were adamant to go beyond just the pricing on the Table of Allowances is to break it down into a few categories like Super Structure, MEPs, Exterior Finish and Interior Finish. These will be one whole number for each category and not broken down. All materials and labor and GC and O&P

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Old 02-05-2018, 06:29 PM   #10
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Re: Critique My Estimate...


Yeah, way too many line items there...I simply do something like:

Option 1 - blah blah blah __$15,000__
Option 2 - Blah blah Blah ___$10,000___

Payment to be as follows:
Completion of ***xx $5,000
Completion of yyyyy $5,000
Balance due upon completion
Extra work and change orders done at $5,000 per hour (I wish!) plus materials
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Old 02-05-2018, 07:36 PM   #11
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Re: Critique My Estimate...


I am 100% against breaking down anything on a job you do not absolutely have to break down.

My job is not to bid the job so I make a minimal profit or try to get above any type of 'beyond minimal profit'. My job as a sales person is to make as much profit as possible for doing as little as possible. That does not mean that I am cheating the customers. It means that I don't throw in the whole 'kit and kaboodle' when I can get the job and get the price I want without throwing in the 'kit and kaboodle'. Only a fool quotes a price and throws in items worth hundreds or thousands of dollars when he does not have to.

There is no way I am going to break down the job for an estimate nor for a contract. When the customer asks me how much certain items cost I tell the customer that I priced everything based on the volume. That means I took prices for each separate item, reduced the price for each item and I came up with a price for the entire job.

Then, the customer asks what everyone on CT seems to worry about. The customer asks me how much credit I will give if they purchase their own vanity. If the customer wants to buy their own vanity I tell the customer he can reduce my contract by $*** and that $*** is less than my actual cost because the customer knows a company like mine can get a vanity for much less than what the customer will pay and no law forces me to disclose my actual cost. The $*** discount does not include discounting the profit I would have made had I purchased the vanity.

The end result is; when the customer wants to change horses in the middle of the stream the customer can accept the price I quote, or stick with the original contract agreement.

When bidding you have to decide if you want to work for time, plus material, plus profit and overhead, or if you want to work for a flat contract price. If you decide you want to bid with time and materials, profit and overhead then accept the b.s. and haggling.

I've been doing kitchen and bathroom remodels for more than 50 years and I never got into an argument or problem about the cost for items. I think most contractors try to break down items up front and they cause their own problems.

You quote a flat price for the job and when the customer wants changes you quote your price for the discounts and changes. It is when you break items down up front you will have problems as the job progresses.

The only time I break down portions of jobs is when the customer does not want me to do things like drywall, paint, install finish, etc., but I
never break down the prices for the portions of the work I do.

When it comes to bidding bathroom and kitchen remodels I do very little calculating. I don't use spread sheets, price lists, or hardly anything to come up with a price. I listen to what the customer wants and by being street smart I throw out a price. If a customer wants a basic kitchen I evaluate the customer more than I evaluate what they want. When I think a certain customer wants to spend about $40,000 then that is the price I quote. If I think the customer wants to spend $100,000 then that is price I quote. Then, after the customer accepts the price is when I get into the details. But, I still never break down the job.

For my company, selling and writing contracts is more about reading the customers in the very early stages, figuring out how much we think we can get from the customers and then we quote a price before we get into details. Then, as we progress with closing the job we lower and raise the price, but we never give the customer a breakdown for items. We only quote a new and different price when the customers want changes.

Keep it simple. You are either bidding a flat price, or you are working for time plus materials. The customer can't be like Miley Cyrus and have 'The Best Of Both Worlds'. The customer either pays you for our expertise and services, or you can allow your customers to chisel you out of your maximum profit. I am not in business to work for wages and get chiseled out of my money.

Quote only flat prices. When the customer wants to reduce the scope of the work discount less than your actual cost and do not reduce your profit or overhead.
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Old 02-06-2018, 06:19 AM   #12
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Re: Critique My Estimate...


Wow a lot of replies.

This is work which although on paper looks like cost plus, is a fixed price contract. Verbiage has modifications at 18%.

I had a feeling I was showing too much. Definitely going to revise it.

The company I used to work for, which looking back, is why I do these breakdowns... was fairly large and a pretty big player locally. Figured I’d stick with what worked.

Everyone has their own way... at IBS Orlando there was a class on pre con agreements, one of the guys charged T&M on large jobs. Billed at $___ an hour for each guy. I couldn’t believe it, seemed insane that a client would be ok seeing the hourly rate, and then not argue “hey I saw your guy on phone for 30 minutes.etc”. But he said it was working great for him.
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Old 02-06-2018, 06:20 AM   #13
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Re: Critique My Estimate...


thanks for the constructive discussion
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Old 03-28-2018, 04:32 PM   #14
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Re: Critique My Estimate...


I do not break out my estimate either.
I just give a list of material allowances (the ones that the client can go pick out him/herself) and one number for labor, building material, transportation & landfill fee. Then add up all of it and that's the bottom price.

Whatever optional I will list separate.

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Old 03-28-2018, 04:36 PM   #15
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Re: Critique My Estimate...


Forgot to add...
My proposals include a VERY detailed job scope and 3d renderings. I explain how everything is going to be finished and estimate time for exactly what I said. Anything beyond of what was initially described in the job scope will result in change order.
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Old 03-28-2018, 04:39 PM   #16
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Re: Critique My Estimate...


There can be times that breaking out prices by segment is good - for example if you can only bill for what is finished (As I recall Cali does this) so rough electric is X, plumbing is Y
As for showing OH&P on a fixed price - nope and can be deceiving depending on how you do your numbers
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Old 03-28-2018, 06:10 PM   #17
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Re: Critique My Estimate...


Quote:
Originally Posted by SLSTech View Post
There can be times that breaking out prices by segment is good - for example if you can only bill for what is finished (As I recall Cali does this) so rough electric is X, plumbing is Y
As for showing OH&P on a fixed price - nope and can be deceiving depending on how you do your numbers
You never break down a job for the sole purpose to get paid for portions of work completed. You put requests for payments when you complete 'MILESTONE' in your contract. When the concrete is finished you want 10% of the contract and 15% when the drywall is completed, etc., but there is no need to break down the line items.

The only time a job should be broken down is when you are charging time + materials. Your are either a contractor writing contract agreements, or you are a contractor charging by the hour + materials + overheat, etc.

I only charge hourly + for insurance companies and large commercial jobs that exceed $10,000.

This is a subject that probably has 10,000 posts.

As for charging 10% for overhead and 10% for profit, I always list the profit and overhead as 1 line item. I would never put separate line items for insurance or the warranty because that should be included in the profit and overhead. You don't want too many line items so it looks like you are padding the bill. I hate it when I look at the way auto mechanics have 20 to 30 line items for something simple like changing an alternator. Some plumbers charge for equipment, truck surcharge, and 5% to 10% for miscellaneous parts even when no parts were used. Those types of surcharges only make me furious.

Virtually, no homeowners are educated enough about the costs to run a business. I never do t & M for homeowners. The only time T & M works great for my company is when we are working for large corporations where the people you deal with understand what what it costs to run a business and large corporations understand that they get the quality service they are willing to pay for.

For T & M we may charge up to $140 per hour for a skilled worker. Then, we add 15% to 20% to the bill on top of the $120 to $140 by adding 15% to 20% on top of the entire bill.

No homeowner I ever met will pay $140 per hour plus 15% to 20% on top of that. Ironically, we quote a flat price for jobs for homeowners and we base our price on $280 to $320 per hour for each skilled worker. Then, we don't need to clock any hours and we don't add the 15, or 20% markup. The homeowners pay far more than the commercial accounts and the homeowners think they are getting low prices.

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Old 03-28-2018, 09:29 PM   #18
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Re: Critique My Estimate...


Even better than being paid on completion is being paid on inception.

A part or a complaint can hokd up completion of a phase. But when you get paid to start the next phase no problemo.

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