Open Book Policy To Customers

SmithBuilt

Does anyone have an open book policy with customers? By that I mean show the customer the entire estimate including the details of markup's and labor. Also a page showing the details of why it costs so much per hour to operate.

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Tim

Winchester

nope

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Ryan

WarnerConstInc.

People that ask those kinds of questions and want things spelled out like that, are the one's you want to, run, Forrest run, away from.

If someone balks at the price, I tell them we could install junk materials and not provide a warranty but, I would have to sub that out then.

Dont dirty up my good name.

eastend

does your customer show you their bank statements, brokerage accounts, mortgage, household expenses, and salary/earnings?

kevjob

They won't show me their tax info or bank account info so why would you ever show operating costs, markups etc.. only thing they see is one price with breakout sheet for materials everything else is company info and unless they work for me or aremy accountant no one ever will see that info.

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Kevin
Basement Finishing Highlands Ranch Colorado
Littleton Colorado, Basement Remodeling
Kitchen Remodeling Denver

JonM

Only if they let me look at their bank statements, tax returns, and the wife's underwear dresser drawer......

SmithBuilt

I plan to show them my full profit margin and not budge. I'm not doing this as a bargaining chip. I plan to show a handsome profit right on the page and not back down. I want customers that will look at this and see that I'm paying my help and me enough to send our kids to college and still hire us above another contractor.

I have had some customers balk at the price. I would like to lay it out in front of them and say here's why we charge what we charge.

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Tim

BobsLandscaping

I think it'd be a real good way for a customer to beat you down on your price.

"$2,000 profit? That seems a bit excessive, let's take that down to $250 shall we?"

silvertree

It's none of their business, you give a price and they accept it or not.
This type of honesty only works against you.

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Vote for Pedro
Kitchen, bath, St Paul remodeling
Minneapolis Remodel Blog
203K Loan Consultant Minnesota

J F

While I agree with pretty much everything stated, I do know of some who do this. Don't know any personally, but would love to know how they make it work.

J F

I'm sure it comes down to being good at sales...

SmithBuilt

I don't really care about their bank account as long as they pay what I ask. I just want them to see why it costs so much to operate a business. I don't think most of them know what it takes.

If I go to a customer and take the unknown out of a proposal I think we will be on better terms from the start. Like I said I'm not doing this as a bargaining chip. They may look at it and say "you must be crazy charging that much profit". If that's the case I don't want them as a customer. I have found I can't (or more correctly will not) compete with the less expensive contractors.

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Tim

SmithBuilt

I'll admit I'm not that good at sales and I'm never the lowest. I would rather a customer not get three other estimates. I'm thinking that they may get a good look at mine and realize I'm being honest and flat out telling them I will make a profit. If they don't agree with my honesty and go with a lower price that's fine by me. If they take mine then I know I have a good customer.

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Tim

DDGconstruction

I don't think you gain much with an open book policy. If you are trying to earn their trust, I think you are better off earning it by showing a nice presentation of past projects with good references to back them up. And if you know you are bidding a job where you know you will be higher than your competitor, show your customers why you are worth the difference in price (sell your value).

finehomes

I'm completely open book with all of my clients. They see a complete line by line breakdown and copies of all bids from my subs when we sit down to go over the proposal. I do all of my homes on a cost plus basis so they see the cost of all the subs plus a line item for my supervision, overhead, and profit. I rarely get anyone that complains about the numbers and they are pleased that I am so open with them about my business.

I'm also completely open with them when it comes time to do monthly draws. They see an invoice from each sub. If the lumber, plumbing, concrete, etc bill comes in under budget....the client gets the savings and can use the money elsewhere....if they go over....they have to come up with more money!!!

This has worked well for me for over 10 years and has kept my clients very happy.


Sam
www.morganfinehomes.com

SmithBuilt

I can see if you are cost plus that will work. What happens when you bid one aspect of the project too low or a problem comes up? Do you just explain to the customer that you made a mistake in the estimate?

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Tim

bwalley

Yes, that is what happenes on a cost plus, they take the good with the bad, as long as the contractor is honest and can back up why he chose one sub over another one, even when he was more expensive.

When I run cost plus jobs I boost the projected numbers a bit just in case there is a problem, we also include a contingency cost to cover things we miss.

You also don't want to leave out clean up and hauling away trash, that always costs more than you think it will.

If it is a big cost plus job, I open up a seperate checking account and will give them a copy of the quickbooks register and copies of all checks and bills as well as all bids from subs.

finehomes

I do it just like bwalley said....there is a MINIMUM of a 3% added in a line item called contingency for items that go over budget or things that might have gotten missed. If we don't end up using the contingency amount the client can use it for upgrades or they don't use it at all and save that amount on the cost of the home.


Sam

AmeliaP

No. We usually come in mid range if they have multiple estimates so I don't feel a need to explain anything. If they have specific reasonable questions about something I can entertain them.
One guy tried to do the math based on what his "buddy" told him the timeframe should be. He called up all pissed off about paying X amount per hour (he was way high)!
"I won't pay you that! I'll pay my buddy!"....Bill (spouse/Mason) didn't say it this way but basically he said......ok dude, I don't give a sh*t, go ahead and have your buddy do it.
He's on a main road and soemtimes I drive out that way. 3 years later the thing still isn't done.

ModernStyle

I been telling people I know you, I have been beat up twice by disgruntled strippers and a small child kicked me in the nuts and said you were late with the child support this month.

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