Pricing, Estimating, And Success

Milhaus

Great sticky gents. Perfect for my day.

I came in well over another couple guys in an estimate I put out last week. Customers were pretty concerned about price throughout the whole process. I talked with the customer today and he told me there was something wrong with my pricing. He is an architect and a past friend of sorts, so I'm intrigued by his statement, but I don't think I was overpriced. I went through this estimate three times, had someone else go through it, and knocked off some of my labor for the old friend clause. Customer really helped me out a while back.

I plan on reviewing my overhead just to be positive that my numbers are right, but I am pretty confident that I understand where all the money goes when it comes in. And I NEED that money to come in to avoid being part of the failure stats in small businesses. I was up against a contractor that I have known for a while who has been in the game for over ten years. And then another guy who runs an handyman crew, but I'm not confident in his work.

Both came in substantially below me on labor. I figure my overhead into my labor costs and I think I'm reasonable - not the cheapest but definitely not the most expensive. I think a lot of it has to do with what you guys have mentioned previously. I NEED to spend some more time finding out what the going rate is, not to base my estimates off of them but to know how my competitors are going to bid. Another is that it IS the win the war mentality that pays off in the long run. I'm trying to have some integrity with the business as I grow. I don't want to drop my price just to fill the schedule. (But I admit that it is becoming more and more appealing). I've held true to it so far, and I aim to continue. Another is that I have to look at the competition - what are their goals for their business? I don't know for certain, but I have a pretty good idea that they are not looking at this the same as I. I want to run a strong, solid business that can compete with the more well known construction companies in the biz, that is not what either of them is after to my knowledge, and I don't think they will get there charging the rates they bid on this job. There is no way that they could cover overhead or profit at the rates they bid.
It is baffling me a bit, but I know I'm heading in the right direction with this business, and my quality is good, so I'm going to try to brush this one aside.

Thanks for the ears. And the knowledge. When I talked to the homeowner tonight - you guys were the first ones I thought of. What would the guys on the web say? Awwwww, it's a bud light commercial. You guys should be on the 'here's to you....contractor guy' commercial.

Thanks again. Oh, and sorry if I'm hijacking the thread.

Mark

Milhaus

I just reread that post and I don't mean any harm to anyone who has made their biz go by dropping prices to get the word out or whatever the reason...to each his own. I'm just trying to find my little piece of the pie without having to do it.

dirt diggler

why do you think you should have too??

think about it in very simplistic terms

your expenses WILL remain constant. Will your lender give you a break on your mortgage just because "well, things are slow"

nope. and neither will vendors, the phone company, the grocery store, the gas stations, health insurance, etc.

I think it's human nature to just "drop prices" ... I think people get into this panic or something - they're afraid not to get work - and just start cutting prices. They figure that they can make it up in the good times.


Mistakes (intentional or not) in estimating WILL FOLLOW YOU down the road.






You know, I love what I do - I really do. But there's a lot that goes with that: scheduling, staying up to date with bills, meeting deadlines, making clients happy, etc. It's not uncommon for the novelty of it all to where off quickly.

It costs A LOT of money to make those things happen. It takes being realistic and awareness. You cannot just cut prices - because, most likely, your costs are staying constant. While, overall, construction is somewhat seasonal - bills are not!!!



I think the one thing that seperates successful contractors from unsuccessful ones comes down to one thing: the successful contractor has total control over his estimating & pricing. I think this even surpasses workmanship, craftsmanship, etc. You can be the best bathroom/kitchen remodelor in the country ... but without a solid grip on your pricing - nobody will ever know about it



i will say one more thing and then i have to work:

alot of people that got into business in the early 2000s got to experience a very friendly and booming construction environment. Maybe I'm wrong - but in a sense, I think this spoiled them. I hear guys on here AND in the real world say "man, i've been in business for 7 years and I've never been this slow" ... in essence, they grew in a "easy" economy and now that things are slower, they're finding that they never really had a solid "foundation" in their business and they're paying for it now. Talk about your indian summers ....

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Thanks in advance!!!

Susan Betz

We've seen it go both ways bidding. We always get good feedback for providing lots of specifications in our bids. But then, when we are underbid, they want our fence for the lower price. It becomes very easy to say, "the bid they gave you is not for the fence we priced." Apples to apples. If someone is bidding the same fence, and they are calculating their overhead, they will come in with approximately the same numbers. If they severely underbid us, they can have the job. We're not here to get distracted by bargain hunters and tirekickers; we tell customers when bids aren't realistic, and if that customer is all about price, we let it go. And there are companies that price higher than us - bigger fish in the sea, and it makes us look competitive. So far, there's enough work for everybody.

What gets me is when these companies lowball and you KNOW they aren't going to sell them the product the client wants for that price, they just want to get them in the door for the sales pitch. I've always found that kind of selling slimy. Think car dealers. But it works.

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Fences of Distinction, Ocala, FL
http://www.fencesofdistinction.com

POOLMANinCT

hence, nurture your service business.... my work is done here young grasshopper....

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......Less with the jaw & More with the paw.....

te12c02w

Good info. I suspect, however, that there will still be those same questions asked in the future.

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Jim R

Gordo

I have a bath remodel coming up. How should I charge...by the sq. foot or by the hour?

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Looks like some pros were here.

kevjob

we are charging sq ft by the hour!

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

XanadooLTD

Very well said Brian. I will print this post and look at often to keep myself on a straght line. Thanks for taking the time to inform us all.

rbsremodeling

One thing that is also important is to know each of your guys productivity. It may sound simple, but I know what each one of my guys does well and their average time to complete a task. If I bid a job and I know which one of my guy or guys will work on it I also know how to adjust the numbers for their average completion time on jobs. This helps if I need to be very competitive on a bid tha i really want

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mstjohn

We've been working on publishing a free version of the Frank R. Walker Remodeling Reference book on the web at buildingcostsonline.com that is an estimating reference for remodeling work. Is the information on this site helpful for you guys to develop remodeling estimates? Any feedback you might have would be appreciated.

Ed the Roofer

Unless the prices were regionally adjusted and had a % variable and took into consideration long term legitimate contractors overhead, instead of sole owner/sole employee pricing structures and were updated as the cost indices fluctuated, it would only offer a minor amount of advice and realistic pricing wisdom to the estimating process.

I checked out the roofing and gutters section and the costs of materials are greatly under-estimated.

Ed

rbsremodeling

Two things I thought about that can really affect your job price.
Gross volume dollar amout of work vs. overhead. I am truly blessed with my guys I am able to to a much higher dollar volume of work versus what my competitors do. So my markup is 10-20% less because my overhead is the same as theirs with more gross dollar volume of work completed.

Secondly how many jobs to you do at a time. If your a one job at a time guy all your overhead is fixed on that job versus having several jobs to spread it over. Which goes back to my first comment on a higher gross volume so lower mark up to cover overhead and profit. I am of course simplying my thoughts it is a little more complicated that.

Overhead is a bigger killer for many remodelers. Depending on the size of the job it may be better to sub some of it out and save time, money and lower overhead costs

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BACKWOODS

Labor prices seem many years outdated to me for many trades.
Plumber for under $30, most around my area ar $90-125 per hr.

gunther.arneson

Great posts from everyone. I think it's important to know what your 'break even' rate is which means you have to understand what all of your expenses are and then go from there based on other factors (demand for services, prevailing hourly rates, etc.)

rbsremodeling

Went to a construction seminar this week and they basically relayed the same message I spoke about. There theme was to up your guys prodution to lower your mark up for the lean market ahead. The seminars speaker said the average remodeler makes about 150k per employee when I check my numbers I was at 200k per employee, well ahead of the average, next year I am going to shoot for 225k which should make up for the lower dollar jobs. We use to have 300-550k jobs now they average 150-250k because of the market slow down. I have to do a few more jobs but I am going to up effeciency and try to sqeeze a bit more production out of the guys. The seminar introduced them to new methods of working by themselves to increase one person productivity. I will try some of the suggestions out now and fine tune it for next year.

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Pearce Services

Although the wages are low, the productivity rates appear to be reasonable. If you apply these rates to your hourly cost, and mark up accordingly, this may be a good reference.

BobEBobE

Quote:

Originally Posted by Vinny I would think perhaps you have a point.

Quote:

Originally Posted by j_sims Very Good post Brian...You are dead on with what you are saying.

I am new to this forum and have been reading many threads in order to acquaint myself with the information that I could obtain here. At first, I was impressed with the idea of having on-line mentors. But, I am becoming more and more disappointed as I continue to read these threads. It appears that there is an underlying "good ole boys club" mentality presented, and if one is new to the business, yall ain't too happy to see that he is successful. This keeps the competition out and ensures YOUR success, right? And, when he fails with the 99%, yall will catagorize him as lacking good business sense. Reading between the lines, I think you just don't want to give the secret ingredient to the winning recipe. The competition is stiff. If you really wanted to help the rookie, then why didn't you give him an EXAMPLE of YOUR pricing breakdown. The profit margin for "weddings" as suggested in the above formula, could easily be adjusted depending upon how many daughters the guy has, right? Don't be so smug about it. In our neck of the woods, EVERYONE in construction knows the "going rates", as do you! For EXAMPLE, a sub would bid in the market of $90.00-$100.00 per square for vinyl siding, give or take. Now, was that so difficult to do? Your disortation was informative, Brian, but you basically said that a guy who asks the "how much" question is ignorant to business. I think he is admitting that already, simply by asking the question. If you don't want to give constructive instruction with REAL numbers, why don't you just say so? You should just say, "here is a formula that you can use" (I assume you have an actual formula based upon your writings.). The free-flowing formula listed above is a good example of help that doesn't help. One cannot sell a hamburger for $200.00 just because of his financial goals. Remember, there is a MacDonald's and Burger King around the corner, both having Dollar Menus. I beg to differ; it is not a "gift" to be a good business person; it is exposure, information and education. This is where a good mentor would come in. I would like to see the flavor of these threads change by way of inspiring a new contractor to be the best he or she can be by giving information as to where he or she can find the good business education, of which you speak. If you don't want to share your personal bid numbers, just be clear and honest about it and tell the guy that the business is way too competitive to go down that path in this forum. Now, yall can respond with your rips, but when you are finished ripping, think about what I have said here, the next time you are asked these types of questions. Perhaps those of you who really would make a good mentor should start a Mentor's Forum. There, you could have easily accessible Work Order forms, Bid Grids, etc., as well as, the basics for beginning a SUCCESSFUL company. Remember the Golden Rule? What are your stories? How did you begin? Where did YOU obtain your training? Where did YOU obtain YOUR education? Really! This would be quite helpful!! Thanks!

George Z

Give a man a fish... never mind.
Why would you want Brian's or somebody else's stinky fish anyway?
That information is available for everyone to see, just search for it.
I got a lot of my information from these boards, it was useful.
There is no old boys' club.
I remember not long ago, I asked some of the people here questions,
I got some very useful information from people like Brian, ProwallGuy
No secrets, what you are reading is indeed as good as it gets.
Be open minded and learn how to fish yourself.

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Toronto Painters Commercial Painting Commercial Painting Toronto Toronto Office Painters
Painting Toronto Blog

dirt diggler

George ... for once ....








Bob - as great as it is to have a forum like this ... i think some might mistakingly be looking for the "simple answers" to huge questions.


Can you blame someone who has worked so hard to accomplish what they have to feel a little offended perhaps by some of those type of questions?


Personally, I think it's a bit assuming. Gotta be sharp in this biz ... and gotta learn fast. Mistakes can happen once ... after that - you're either lazy or stupid if they happen again.



I think this forum is great. But it it should not be The Internet Guide to Contracting. Someone who wants to look at it that way probably is not going to fair well in an already unstable, volatile type of life/career

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Thanks in advance!!!