Pricing, Estimating, And Success

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Old 11-19-2007, 12:22 AM   #61
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Re: Pricing, Estimating, And Success

I agree with the OP 100%...But I think where a lot of new contractors mainly GC's have a problem coming up with the right numbers is knowing
what to allow for subs.It is one thing to know how much it is going to cost to do something you yourself are going to do.But it is be quite another thing
to know how much to budget for plumbing,electrical,paint and what not when you have been a framer forever.It is a catch 22 in that before you get your GC license you should not have been doing any contracting.But now that you have it where do you go to find out how to price your jobs?
I know asking a message board "How much should I charge" is not the way to do it but it is a tricky thing none the less.....
in texas with framing and cornish people will do it for 3.00 a foot. What do yall think about that? Just laber
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Old 11-19-2007, 04:05 AM   #62
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Re: Pricing, Estimating, And Success

that is a very nice post Brian. Wish that my small town in Alaska new this. And all over the world for that case. thks
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Old 11-19-2007, 09:41 AM   #63
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Re: Pricing, Estimating, And Success

Originally Posted by Brian View Post
I'm not very concerned with what others charge. Most of them don't know what they are doing, won't be around in a few years, and certainly don't offer what I do.
WOW, I agree with that 100%, that simple philosophy is my driving force both in buisness and in life
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Old 11-19-2007, 01:00 PM   #64
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Re: Pricing, Estimating, And Success

I will re-answer this questions because it has been pointed out many times how important it is and want to simplify it for the new contractors

Using the (what other guys charge) or (sqft method ) does not work. It can provide a basis of price comparison for what you rate is but that is it.

You have to know all the information that Brian told you about in the orginal post. Your rate, cost, sqft price is based on your individual numbers. It can't be given to you by anyone here only by you solving the equation yourself by filling in the number blanks as they relate to your business/company.

Now the hard thing i think for new contractors to understand is, if your numbers are higher than the going rate, then you justify your cost by doing good work, have something that makes your company stand out for the better doing good work and getting good referals etc so your increased price is not an issue because your reputation is solid and proceeds you.

Now if your new and do not have the solid reputation. Until you get to that point you will have to either increase productivity. or lower overhead cost if you have no other choice but to match the going rate especially if you are a new contractor until your reputation is solid enough to command the pricing you need without the intial hassle you have as a new contractor.

But in your early years and until you hang up your tool belt you have to go above and beyond in the quality of work, attitude and knowledge to be seen as the best of the best and qualify for that higher asking price you need and deserve.

I went to a sales seminar many years ago and the guy ask me if I knew how to get a 100K kitchen remodeling price on a job and I spouted of specs on custom cabinet pricing, appliances, custom features needed etc. When I was done he said it was easier to just ask for it. again I am simplifing the answer but I hope you get the drift.

One of the greatest compliments a customer gave me was while refering me to a friend he told his buddy upfront that I was expensive but worth every penney he paid me and would hire us again in a heart beat.

This was a compliment because I felt he valued my services enough to recommend me to one of his buddy and also felt his money was well spent. If you get hundreds of customers like this in your career, it makes the pricing alot easier.

Last edited by rbsremodeling; 11-19-2007 at 01:07 PM.
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Old 11-19-2007, 02:01 PM   #65
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Re: Pricing, Estimating, And Success

BobE, if you want the secret, here it is in a nutshell. The secret to a successful small business is as simple as the Golden Rule.

Do unto others as you would have them do unto you.

Be fair, reasonable, flexible, reliable, trustworthy, respectful and kind in all you do and you will be successful.

Say what you will do, and do what you said you would, on schedule, on budget and with a smile. Treat your client's home as your own. Pay your help as well as you would like to be paid. Pay your creditors with the respect they are due... They are the folks that believe in you and floated you the loan in the first place.

Forget the 'going rate'. Its the first and last defense of the fool in this business. It is a fantasy, it doesn't exists except for moment in time to serve a particular need. Then it disappears like the tooth fairy, to await the next time someone needs to be calmed because things do what they do best. They change.
"My clients’ wishes are the center of my attention." -- David Guido, a contractor in Woodstock, N.Y.
New York Times, July 20, 2006
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Old 11-19-2007, 04:44 PM   #66
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Re: Pricing, Estimating, And Success

BobE you will have a hard time trying to rant people on here into giving you a free education. The vast majority paid a very dear price for their knowledge at the school of hard knocks and for you to wade in bellowing like a spoiled two year old is insulting to both you and those here who willingly share what they do.

You will have about the same success as walking into a Harvard professor's office and yelling until he gives you a MBA. There's an old saying that goes: "You can't learn anything with your lips flapping" and that applies to typing in bold as well.
What's the REAL cost of doing it on the cheap?

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Old 11-19-2007, 05:17 PM   #67
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Re: Pricing, Estimating, And Success

I like Double-A's view. Sometimes being too nice is painful as well. I needed to learn to charge more and be comfortable doing it.
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Old 11-23-2007, 09:46 PM   #68
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Re: Pricing, Estimating, And Success

I can understand you guys not wanting to get too specific with numbers pertaining to your businesses, however, isn't there some sort of general industry standard for net profit %?

For example, my cousin does maintenance and project management for a decent sized non-profit housing company and he mentioned that most government contracts usually cap at a 10% margin, and i believe he meant gross profit.

I know from my experience that when I run a remodel job for a GC, and I'm acting as a subcontractor but running the job I can mark up my subs invoices 10%, as well as marking up materials 10%.

When i was in the restaurant business there were industry standards on net profit...if u were making 3% u were doing ok, 5% was considered good, and at 10% you should be writing a how-to manual. Is there some generality you can make about this in the remodel trade?

Thanx for any input
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Old 11-23-2007, 10:00 PM   #69
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Re: Pricing, Estimating, And Success

Yes there is.

The lower your net profit margin, the more likely you will be out of business soon.

Over 90 % of all contractors are out of business within 5 years.

Should I base my numbers on using them as my reference point?

I think not. I would rather use the remaining 10 %, or better yet, the remainming 2 % to 4 % who have survived 10 years, as my guage for enlightenment.

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Old 11-23-2007, 10:08 PM   #70
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Re: Pricing, Estimating, And Success

not to beat a dead horse Ed, but that's still pretty mysterious....should I read that as "No, unlike most other industries in the world there is no general standard of profit margin for remodeling"....?
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Old 11-23-2007, 10:16 PM   #71
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Re: Pricing, Estimating, And Success

You may be correct in that assumption.

How much profit does each individual operating a business desire?

If they do $ 100,000 gross volume can that be achieved?

If they need to do $ 500,000 gross volume, is it now attainable at a lower margin?

Do they desire for their company to offer health and pension benefits, firtly for themselves, but in some scenarios, for their key or at large employees?

How much net profit are they willing to give up to do so?

As with all percentage questions, their will inevitably be a range of numbers that many contractors could lay claim to achieving, but their also are those that produce extremely higher net results.

If 10 % is your desired goal, should it make a diference to you, what mine or anyone elses would be?

Run the business per your mold and not anyone elses.

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Old 11-24-2007, 02:22 AM   #72
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Re: Pricing, Estimating, And Success

Interesting thread, very interesting.
Ask one shop what their rate is for a 50 gal powervented water heater and they could be as much as $200 different from the next.
Usually larger companies charge more, mainly for the advertizing and overhead.
On my estimates/rates I just know what each task takes as far as time and stock, tack on downtime, advertizing, overhead & stock markup to cover handling and ordering.

Whats ironic is I came up with my own prices before I even went into self employment, a year later a friend gave me a copy of the flat rate book for the current year and it turns out my rates were pretty much the same as the "going rates".
Then there are the lowballers, guys who either cut their price in eagerness to get the work, or fold in fear of a slow market.
To those of you who do that, here's an interesting observation of mine...
There are slow spurts when the calls stop coming and followups on estimates don't yet pan out.
Then the calls start coming again, on that first call your nails are bitten to nothing, you're ready to work like a dog to make a profit for the month.
You take the quick loss just to pay the bills.
Then the other calls start coming once you're committed to the job for short money, your competition is grateful to you.
Then theres the word of mouth thing.
Are your referrals coming from customers saying "Bob, I had a painter who works real cheap, here's his number."? ...or, "Jim, I had a painter that did an incredible job, very neat and meticulous, here's his number."
In the long run, you reap what you sow.
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Old 12-18-2007, 01:51 PM   #73
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Re: Pricing, Estimating, And Success

Originally Posted by Susan Betz View Post
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.
I hear this frustration. What kind of specifications are you including in your bid aside from identifying materials?
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Old 12-21-2007, 08:50 AM   #74
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Re: Pricing, Estimating, And Success

Vinny, I agree that a financial education is a plus for anyone in business but to regard the men in the field with the attitude that they have "ditch digger heads" is wacked. Anyone can learn business skills through practical training, and lets not forget, for most of us, without them we wouldn't have a job.
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Old 12-25-2007, 07:52 PM   #75
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Re: Pricing, Estimating, And Success

Originally Posted by Brian View Post

There seems to be no shortage of hacks willing to work for dirt cheap prices. Nor does there seem to be a shortage of replacements when they inevitably fail. One of the most effective means for avoiding failure is to know your numbers. Asking what to charge for a job is simply an admission that you don’t know your numbers.

Hi Brian

Very informative information, the problem (here in Dallas) is people have been brainwashed by the media so much that labor is cheap due to the 15 plus million illegals in the US doing the jobs we Americans don't want to do that they think they "deserve" getting their home repairs/remodels ect.. for almost nothing.

So I just don't see how "knowing your numbers" will actually help when you have HO'ers thinking they "deserve" dirt low prices for services and illegals bidding the same job you are, 50% lower.


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Old 01-22-2008, 06:24 PM   #76
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Re: Pricing, Estimating, And Success

I have to disagree with Bob. Software is like any other tool it is up to the user to keep it up.
The Software I use allows me to change any cost I choose before I plug in my numbers.
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Old 01-28-2008, 09:55 PM   #77
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Re: Pricing, Estimating, And Success

Excellent Brian! Well said and to the point. My last 4 estimates to HO's
have been under cut by low ballers and the HO's went with them strickly on price. So reading your post is just a good reminder to keep moving forward, have a positive attitude and good customers and quality jobs will come.


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Old 01-29-2008, 10:31 AM   #78
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Re: Pricing, Estimating, And Success

I typically use 12-17% profit margins if GC'ing a given project.
It's pretty proportional to time spent. It doesn't matter to me if my belt is on, or I'm on my phone managing a project. It pays the same as far as I'm concerned. Otherwise I would just do one and not the other.

I make a living. Sometimes it's hard to discriminate what is actual profit. I don't really ever have "Profit." I mean I eat well, every now and then someone may accidentally put a little rum in my soda, but I also invest most of my extra money into tools, trucks, and equipment. I donate to my IRA but that's also considered a business expense. It's more of a way of life for me.
Get more tools to get more jobs to get more tools to get more jobs.

Somewhere in there I pay off everyone I can.

I tried to use a software estimator (without double checking) a few years ago and I lost my ass. So I learned no-one can tell you what you need to charge. Find some guys in your area who are doing well, and ask them how to charge. That's what I did.
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Old 01-29-2008, 09:02 PM   #79
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Re: Pricing, Estimating, And Success

There is a lot of advice out there but the guys on this thread keep going back to---What are your costs---What do you need to grow your business?
I use the cost x method. $10000 cost x1.50 or 1.60 or 1.70. Depending on clients or difficulty. All my jobs make money some more than others. I am a small contractor but I make a good living. I always sell my jobs for more than they cost to produce. Good estimating is the key. If you are not a good estimator always get your subs to bid and have your vender's price in hand before you start to think sales price. RBS made a good point about the $100,000 kitchen, I like to hear things like that more than once so they get through the thickness of my skull.
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Old 02-01-2008, 07:35 AM   #80
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Re: Pricing, Estimating, And Success

All of us should desire more money and greater profit margins. There should be a price point to where we all would not go beneath clearly its better for everyone in our business. Those guys saying 10% and even 15% should set that to 30 or 40% at minimum.
But you have some guys who dont need as much money and profit to survive and thats all there looking for. They keep there living expenses down and try to do as much as they can themselves. It all depends on what you are happy with taking home at the end of the year. The guys that are never satisfied most likely make the most money and have the best profits. Always wanting more and figuring out ways to support it when it comes.


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