Estimators - Contractor Talk - Professional Construction and Remodeling Forum

cbrew210 · 11-30-2007, 01:46 PM

I run a painting and decorative finish business in NYC. I do alot of my bidding off of plans. I was curious to know how many of you guys use estimators and how you pay them. DO you give commision on bids won or just a standard rate. I am getting really busy and don't have the time to stop by all the jobs and take the time to read the plans and selling. So i am wondering what a fair rate or percentage is. Any help would be greatly appreciated.

L. B. Condulet · 11-30-2007, 01:48 PM

Any commissions should be based on percentage of profit.

cbrew210 · 11-30-2007, 02:09 PM

so you would pay it upon completion of the job? Do you pay for the time prior to closing a job or anything like that? i am just trying to get a feel for how others do it. would 10% of profit be too much or too little? Obviously I have an idea of what I want to make per job, correction: what I need to make per job.

Bob Kovacs · 11-30-2007, 02:17 PM

As a estimator, why would I want to get paid only if you get the job? You send me a set of drawings, I do a takeoff, I give you the details so you can submit a proposal- whether you get the job or not isn't within my control, so why would I do that for free on projects you don't get?

Now, if you want me to be a "salesman" for your company, that's a different story. But then you and I need to talk to make sure that your pricing structure is correct for the market, otherwise I may be out selling jobs at prices that won't allow me to close jobs. Once we got on the same page regarding that issue, then I'd be willing to go and chase work for you- and it'd be in the range of 7-10% of the sales price- not the profit (since I don't run the jobs, and therefore can't control how much profit you make).

L. B. Condulet · 11-30-2007, 02:37 PM

Bob brings up something we don't know. Is the estimator a freelance hired gun or an in house employee?

Bob Kovacs · 11-30-2007, 02:40 PM

Quote:

Originally Posted by L. B. Condulet

Bob brings up something we don't know. Is the estimator a freelance hired gun or an in house employee?

And even if he's an in house employee, the same rules apply- if he's an "estimator" you pay him win or lose- if he's a "salesman" he may be commissioned. There's a big difference in the roles and responsibilities (and compensation) between those two positions.

cbrew210 · 11-30-2007, 02:43 PM

That was very helpful. So as a salesman you would do what you have to do to get the job. Say you close a 40k job I give you 4k upon receiving a purchase order. Do I have that right? That is about what I was thinking it would be.

Grumpy · 11-30-2007, 03:09 PM

There are very many pricing structures that can be utilized. You will find the standard for estimator salesmen to be a percentage of the sale. When I was an employee I was paid a percentage of the profit. I feel a percentage of the profit is the most fair and accurate method of payment. Most seasoned estimators won't want to move away from the standard percentage of sale model of compensation. I tried to steer my guys towards it for bigger job but they all said they have no control of profit if the crews F up.

large commercial contractors usually pay their estimators a base salary and then a small percentage of the sale. Since the sales are usually big numbers, it averages out at the end of the year and these guys end up making good money even at low percentages.

The structure you decide to utilize should be based upon the responsibilities of the employee as well as the size of the work. What ever structure you utilize, you first want to reverse engineer to determine how much that person has the potential of earning. Let's say for example you decide that this estimator should be earning $75,000 a year. Determine how much you expect this person to sell, let's say $1mil. You would then pay this person 7.5% of the net sale, and raise ALL your prices 7.5% to cover his commission so his salary isn't coming out of your pocket.

That's just one easy example. If you decide to pay based on profit it will require a little more math to figure out but the base formula is basically the same. You just have to first determine how much profit you need/want this person to generate and work it from there.

silvertree · 11-30-2007, 04:55 PM

Bob and Grumpy have it covered. I have been an estimator and got a paycheck that my employer and I agreed on. As a salesman, a job I liked much more, I estimated and sold jobs for a percentage of the gross sale with a cost plus markup my employer used to sell jobs. My commission was between 7 and 10% on a well priced job. I also worked for a percentage of the gross profit, this didn't work as well for me since I was at the mercy of the production crew. In the Twin Cities area most salespeople are earning between 5 and 8% of gross for remodeling. For specialty sales like windows, roofing and siding another system is used.

L. B. Condulet · 11-30-2007, 04:59 PM

Quote:

Originally Posted by Bob Kovacs

And even if he's an in house employee, the same rules apply- if he's an "estimator" you pay him win or lose- if he's a "salesman" he may be commissioned. There's a big difference in the roles and responsibilities (and compensation) between those two positions.

An (in house) estimator should have a salary base with bonuses or commissions based on the job coming out the way he said it would. An estimator will be less likely to forget things when his income is effected by such omissions. Estimators just don't do takeoffs and grind out estimates for an hourly wage, estimators must be very trade savvy and find creative ways to save money. They should be given incentives to do well.

Grumpy · 12-01-2007, 09:06 AM

Quote:

Originally Posted by L. B. Condulet

An (in house) estimator should have a salary base with bonuses or commissions based on the job coming out the way he said it would... estimators must be very trade savvy and find creative ways to save money. They should be given incentives to do well.

I disagree with the first part and whole heartedly agree withthe 2nd part. Think for a second if their entire income hinged on their accuracy just how creative and saavy they would become. I personally feel all people should be paid based upon performance. If you find you need to cushion this persons income to get them over the rough spots... may I suggest draws in lieu of salary? Draws are monies fronted to the employee which are later deducted from commissions they earn. In the end they make the same, it's just a little more spread out.

A salary based commission system can work and does work in many situations(as I said it is how most large commercial contractors compensate). It just doesn't work in mine!

Computer programmers are paid based on lines of code.
Data entry clerks paid based on number of files/pages entered.
Many tradesmen paid based on square/linear footages.

I tend to keep people a little longer than I should. I've fired many people in my life but in most of those cases it was well after I should have. So these people tend to cost me lots of money and lots of aggravation. When you pay based on performance I find it tends to weed out the slackers automatically since they can't earn squat because they slack. They leave on their own.