Question About Estimates

DXNJ

Ok, I recently went into business with a friend of mine and I am by no means a grade A business man. I'm used to just going to the job getting my list of things for the day and goin home. When I hand someone a proposal/estimate is it common to break the list down or is just a list of whats being done and total price for labor?? Any other business tips would be great

Grumpy

Hey you are a step ahead of many. Yes give them a list of what youa re going to do, and the major materials you are going to use. This detailed "scope of work" accomplishes a few things. It informs the customer what they are buying. It covers your ass, because you are only doing what is on the scope of work, and it covers the customers ass because you have to do what is on the scope of work. Finally you give them a lump sum price for the above scope of work and materials.

I like to give them optional upgrades. As a roofer I may give my base as a 25 year 3 tab shingle then an optional upgrade to 30 year architectural. Siding, I may give my base as a .042 and an upgrade to .044. This is called upselling, and is the same principal as McDonalds asking "would you like fries with that?"


I admit it, I am a hypocrite. When I first got into construction sales, I was in your same shoes. I wanted to know how others did it and what others were charging. So I did it, I called competitors to my parents house to give me quotes. What I learned was astonishing. I don't recommend you do this, but you may want to ask your customers for copies of your competitors quotes. This gives you a real good idea of what you are up against.... but when I did this I got one quote for their roof that simply said "Install new shingles $5,000.00" That's it. That was the whole quote, printed on office max generic contract, I might add. I still see that kind of stuff because I still ask my customers for competitor quotes.

red_cedar

The way I interpeted that is explaining how the price breaks down to the consumer.

Initialy I would say no. Unless there is another price being considered, then you are prepared to explain the price difference.
For example,...You say I dont see how- my competitor can offer what I am offering when the material alone cost this amount and it will take this much time.

hope it make sense to you.

Cole

Do not, and I stress do not, break the price down into the scope of work.

If a customer wants to know that, it is a good time to walk.

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DXNJ

thanks guys! really helped

RobertWilber

and don't make it so thorough that the "prospect" can hand it out as a specification for proposals from other contractors.
Don't do consulting and design work for free!
Sell yourself, not your price

mdshunk

One nice thing about being a small town contractor is that your fellow contractors will tell you when one of your estimates is being "shopped around".

Grumpy

This is exactly what I have done. I want to be the standard by which all others are compared. I want the customer to know exactly what they are buying but at the same time I want no grey area so my ass is completely covered and there is no "..but you said you would do this..."

I think having a detailed estimate builds the customer's confidence and if they want to hire the cheapest contractor, well it's not going to be me regardless of my proposal form so that doesn't scare me. I'd rather have a professional looking document, since it becomes a legal binding contract once signed.

Brickie

I agree. The price is the price, take it or leave it.

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DaveH

I used to never break out the price, buuuuut!!!
Now I take all components and mark each one up more.
Then they add up all of it and tell me it doesn't match my lump sum I tell them "you want the spaghetti dinner" It's a lump sum. "If you want the Spaghetti, bread, and salad seperate" It's ala carte, and it cost more to do only parts than the whole shabang.

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karma_carpentry

I don't break down costs in bids.

I do specify what materials & techniques I plan to use, especially those that show some thought or special care regarding the job. That let's the prospective client know that even if I'm not the cheapest bid, there's a good reason: the job I do won't be the cheapest job.

Customers have told me many times, "We really appreciated your very detailed proposal." For a porch rebuild or something of that scope, it generally takes me about 2 hours to write it up, but that 2 hours seems to have a big impact on the clients trusting me and choosing me. I've been told so many times, I have to believe it.

But the detailed proposal is NOT a breakdown of costs, not even into labor & materials categories.

Like Grumpy said, "Scope of work" (and my "Specific materials and technques" section) really are protection for both you and the client. A proposal becomes a contract, so it should be detailed and clear. It also should spell out what will be extra, especially if you can foresee that there may be rot or other problems beneath the surface. Or if there is any other thing that *could* be construed as included, but that you're not including. I have a section in most of my proposals called "What is not included". It may sound negative, but I think it's also a good selling point, just the fact of being that clear. It also CYA when you're ready to ask for the final payment.

On T&M jobs, I do break out all costs, down to the last lag bolt, and every day down to the 1/4 hour. I don't mind doing that. Some jobs just have to be done T&M.

Greg Di

I recently started showing a subtotal for the job and then adding two more line items underneath (depending on the job).

The two line items I show are "Complete Debris Removal" and "Dust Protection/Protective Coverings"

It's kind of an experiment at this stage, but if I figure out that a job will entail a lot of protection and tarping that will have to be setup everyday, I'm including it in my costs. If it takes a 1/2 hour everyday on a two week job, that's five billable hours. Those five hours could make my proposal seem expensive compared to someone else's. I break it out to show people primarily that I'm actually going to protect their home from dust AND to show that if they don't want dust in all their cabinets for the next 5 years, it's going to cost money.

Same thing with debris removal. I have a sub who will pick up all my debris for me since most towns will not take construction debris even if its only two bags worth. The HOs generally have no clue that they can't put debris at the curb and also have no clue who to call to get rid of it. I'm more than happy to arrange it, but they should see the cost AND that it's included. A lot of guys will just leave the pile. Trust me, most HO's don't even consider removing debris a part of the project until they see it in writing.

STUMPFOOT

So when you say you dont break down the cost, your saying that If xyz says I need this building painted my lot striped and a sign made you would give them a total on that work rather then breaking it down like; the building this much, the sign this much and the stripes this much?

Double-A

No, I think they are referring to breaking out the time and materials that go into the bid.

Sign - $300.00
Materials - Wood, fasteners, paint $125.00
Labor 3hrs@58.33/hr = $175.00

Stripe lot - $4000.00
Materials - Paint $400.00
Labor - 1hr@$3800.00/hr (using Astoria Turbo 6000 Striping machine)

Building - $16,000.00
Materials - finger paints, artists brushes $400.00
Labor - My Attorney and Accountant owe me 62.4hrs@$250.00/hr

You can see that every single line there is a battle waiting to be fought.
However;

Sign $400.00
Stripe Lot - $4000.00
Paint Building - $16,000

Leaves much less to be discussed. Oh, always include a scope of work.

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New York Times, July 20, 2006

joasis

The primary reason to never stage labor on a bid is that customers can hold a stop watch, or clock...suppose you say 3 hours to job A, and 2 hours to do job B.....suppose they know it only took 2 hours to do A and they know this, but it ook you 4 hours to do job B...I would nearly promise you that will think you are ripping them off unless you discount job A, and their position will be tough luck on the job B, you should have bid more.

I have said this before, never break out a bid, and never discount.

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MattCoops

Some people frown upon this, but...

A good way to learn how to do an estimate and close a sale is to watch a good salesman.
Call a few companies and have them do an estimate. Note the way they sell their company and see what tools they use.
You'll also get a better understanding of your competition.

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