Based on the info you have provided, if it were me?

I'd seriously consider it.

Also depends on how booked through the year and into the next year, you are.

...or just have him charge estimates for job leads outside of a smaller radius.

No right answer here besides:

"when your busy, price yourself out of work. When you start to slow down, price yourself right back into work."

Over time you will find a happy medium where you aren't " giving away the store", or "working for food."

Hope this helps.

 

That's a tough call.
We get calls to quote jobs as a sub to a larger contractor that is using our quote to get the job. So if they don't get the job I don't get the job regardless if my portion was priced right.
Lol it's very disheartening when they send you a set of drawings electronically. Now you go and print them at a print shop so yo can bid off the engineers report. Visit the site.
Build a quote. And then get told sorry we didn't get that one.

But it happens
If you don't bid the work then you don't get work
You don't get work you have no work
You have no work you make no money
You make no money you pay no bills

Have to bid jobs to pay bills.
Sometimes I have to keep telling my self this while I'm pricing jobs I think will never become.
Also in the last year I would say a couple of our best jobs have been long shots that I didn't want to even price or think they would happen.

 

I do charge for bids. I don't know why you say "obviously if they book the charge would be waved". Even if they book, you should still charge for the bid. Doesn't that 2 -3 hours of driving cost money and take time? This is work and deserves to be paid for. You can't tell the gas station clerk that it's free bid day so it's free gas day too obviously. Charge for the drive time, the time to fill up with gas, charge for the time you sit waiting to get your oil changed, charge for doing your laundry, charge for the bid and charge for the job too! Telling a customer that you will refund the money if they book puts pressure on the customer and devalues your time giving the bid and really doesn't make any sense. I charged for about 75 bids this summer and only 1 or 2 people had the gaul to ask me if I would refund the bid charge of $450 if they booked the job with me. I told these people 'no, there are no refunds or bouncing around of charges, it's simple, I charge for everything, a charge is a charge'. I know of too many old guys where I live who forgot to charge and now they have nothing to show for 50 years of hard work. My plan is to retire happy and it's simple I'm going to achieve this goal by charging for every mile and every minute.

 

You might be my new role model.

 

Some charge a fee and credit it toward the build if they get the contract.
Others concentrate on qualifying their leads so they don't waste time.

 

So if I order an appetizer at a nice restaurant the charge for the appetizer is refunded if my date and I each order a steak too? That's the same mentality. If I get my oil changed I get my money refunded if next week I buy a new set of tires too? Doesn't really make sense does it. And besides it's just smoke screen because one way or another someone is paying for it and hopefully the contractor isn't giving it away.

I started a thread on charging for bids just yesterday.
http://www.contractortalk.com/f16/charging-bids-2014-a-154518/

 

So if I order an appetizer at a nice restaurant the charge for the appetizer is refunded if my date and I each order a steak too?

No, it's part of the quote as well, so you'd get paid for it twice if you didn't credit the initial quote.

 

For large jobs I email customers a questionnaire about there project. I wan't to know if they have blueprints, a budget, a finish date that must be met, and many other things depending on the type of job.

If they are serious they will fill this out and get it back to me. At this point they have already taken action and are very likely to purchase. It also gives me a chance to see if I will even work for them. If they need it done too soon or are trying to get a lot done for too little. If so I have lots of ways to politely decline. The customers who are not seriouse will not take action. You will simply not here back.

I do this for many things. Hiring employees, screening customers, finding renters and so on. Make people do a little work before they have access to you. It really works. Obvious if you can charge for bids that is great. If it is only to screen I would not do it. There are more effective ways.

 

You might be my new role model.

No kidding. That's over $30k of non-refundable estimate charges. Well played sir.

 

Correct, I paid off $40,000.00 of credit card debt this year which I had been carrying for the past 5 years all by realizing that I need to charge for bids.

 

450 seems steep. I guess if its working for you..

 

I would love to charge for bids!

Let's not confuse getting paid for a bid with getting paid consulting or designing a project. You should charge for these services.

If some contractors are getting paid for their bids then they must be in areas with little to no competition, or your customers must love you so much that they are fairly sure that you are the man (or woman with 8 kids) for the job before you even arrive to give the bid. Incidentally, if a woman put pictures of her 8 rug rats on her advertising I would probably give her bid special considerations. Any woman who can handle 8 rug rats and work at the same time has my vote of confidence.

You will never convince me that it is practical to charge for bids.

a) Too many of your competitors are doing the bids for free. Why would I pay you for a bid when I don't know you and your competitors will give me bids all day long for free.

b) If I call you for a bid and you have to drive for 30 minutes then that is your problem and I can call a business that is closer unless you are the only game for 30 miles. No thank you for the opportunity to pay for a bid!

c) You can complain about your time and cost to give bids, or you can complain about the prospects and sales you don't get because you charge for bids.

There are so many screwball contractors that I would never pay one penny for a bid unless I already know you and I am positive I want you to do my job.

I called about 25 roofers to install a composition shingle roof that was only 5 x 40 feet. I took the roof off and had it prepared. Only one roofer showed up. He looked at the roof for one second and quoted $2400. This was about 20 years ago. I purchased the roofing material for about $150 and did the job in two hours with one helper.

QUESTION: Had I made a commitment to pay for this estimate would I have been smart to pay. Are customers willing to make a commitment and take the chance?

It will be a cold day in the center of the earth before I commit to paying someone I don't know for a bid.

Our cost for giving bids costs us dearly, but it has to be built into the cost for the job. You can often tell how good a contractor (sales person) is by what he is willing to do for free.

Examples:

If I was to look for a new job I would offer to work for a company for free for one entire week because I am 100% confident that at the end of that week the boss would be very impressed and I would be in the driver's seat as I demand the terms I want. I am so good, so confident and can close so many sales that driving for 30 minutes is only a great opportunity to relax and get a break during the day. Why would I care if I get or lose one more job when my batting average is so high.

Here comes Mr. Air Head! He is not good at what he does and he has to fight for a salary, or he can't work for the company. This is the applicant who tells you that he has to get paid to drive 30 minutes to give a bid because he knows deep inside that his chances of closing the sale is slim. He gets these feelings from experience. Otherwise, if he knew he could close more sales then he would not care about the drive nor time.

Take new construction bids. We have to do the bids for free. No general is going to pay us for bids. Our smallest jobs take 5 to 10 hours to bid and we have to drive very far to jobs and do walk-throughs that cost us entire days. Most of the jobs we bid take 40 hours and our cost to bid an average is about $1,00 to as much as $3,000. Including the cost for the jobs we don't get the average job we get costs us more than $25,000.

Lots of luck getting paid for giving bids and if you do get paid then the amount is insignificant compared to your losses!

Don't get mad! Just my streetcorner philosophy!

 

I would love to charge for bids!

Let's not confuse getting paid for a bid with getting paid consulting or designing a project. You should charge for these services.

If some contractors are getting paid for their bids then they must be in areas with little to no competition, or your customers must love you so much that they are fairly sure that you are the man (or woman with 8 kids) for the job before you even arrive to give the bid.

You will never convince me that it is practical to charge for bids.

a) Too many of your competitors are doing the bids for free. Why would I pay you for a bid when I don't know you and your competitors will give me bids all day long for free.

b) If I call you for a bid and you have to drive for 30 minutes then that is your problem and I can call a business that is closer unless you are the only game for 30 miles. No thank you for the opportunity to pay for a bid!

c) You can complain about your time and cost to give bids, or you can complain about the prospects and sales you don't get because you charge for bids.

There are so many screwball contractors that I would never pay one penny for a bid unless I already know you and I am positive I want you to do my job.

I called about 25 roofers to install a composition shingle roof that was only 5 x 40 feet. I took the roof off and had it prepared. Only one roofer showed up. He looked at the roof for one second and quoted $2400. This was about 20 years ago. I purchased the roofing material for about $150 and did the job in two hours with one helper.

QUESTION: Had I made a commitment to pay for this estimate would I have been smart to pay. Are customers willing to make a commitment and take the chance?

It will be a cold day in the center of the earth before I commit to paying someone I don't know for a bid.

Our cost for giving bids costs us dearly, but it has to be built into the cost for the job. You can often tell how good a contractor (sales person) is by what he is willing to do for free.

Examples:

If I was to look for a new job I would offer to work for a company for free for one entire week because I am 100% confident that at the end of that week the boss would be very impressed and I would be in the driver's seat as I demand the terms I want. I am so good, so confident and can close so many sales that driving for 30 minutes is only a great opportunity to relax and get a break during the day. Why would I care if I get or lose one more job when my batting average is so high.

Here comes Mr. Air Head! He is not good at what he does and he has to fight for a salary, or he can't work for the company. This is the applicant who tells you that he has to get paid to drive 30 minutes to give a bid because he knows deep inside that his chances of closing the sale is slim. He gets these feelings from experience. Otherwise, if he knew he could close more sales then he would not care about the drive nor time.

Take new construction bids. We have to do the bids for free. No general is going to pay us for bids. Our smallest jobs take 5 to 10 hours to bid and we have to drive very far to jobs and do walk-throughs that cost us entire days. Most of the jobs we bid take 40 hours and our cost to bid an average is about $1,00 to as much as $3,000. Including the cost for the jobs we don't get the average job we get costs us more than $25,000.

Charging for a bid is petty. My view is charging for bids either shows weakness, or it shows that you are so great that your customers are willing to pay you money just for the sake of talking to you before or after they get their free bids.

Lots of luck getting paid for giving bids and if you do get paid then the amount is insignificant compared to your losses!

 

We will look at any job, discuss options, scenarios and even do some foot work ( engineering feasibility, municipal concerns, set backs, restrictions, flood plane, ect...) free of charge. We will give a good idea what a typical project in that range would cost for us to build.

To generate a solid scope of work and a spec book or table of allowances, we charge for that. One of the additions (fairly simple room addition and car port enclosed and converted to living space) we just finished, the scope was 16 pages, and there was a seperate Table of Allowances, as well. They signed a simple PSA and paid the fee, as we have been doing for several years. Design was charged for as well, all a package deal.

If we were slow and it was a deal killer, or the market was tough again, we'd probably pause in the practice.

We do lose some opportunities to bid jobs this way, but we close most of the ones who pay for it.

We show them a template scope and an example of a Table of Allowances or spec chart, and some plans during the interview process. Works pretty well.

These are for major projects ( at least relative to our company), an exterior renovation, or simple project we generally dont charge for it.

After the last hail storm I charged $100 for a bid on a roof replacement, siding, windows, paint.... credited back if we got the job.

On a PSA situation, the fee is not credited back, or at least not as of the last year. If we need to book something and its a deal killer I imagine we'd look at that option.

 

If you are offering to work for free then it's not work, it's volunteering. You would be volunteering for a week for free not working at your new company. No real company would have you work for free because you could come at them in the future through that State's Dept. of Labor and Employment and sue for unpaid hours of work. The biggest mistake that new companies make is not paying employees for work and getting sued in the future. If you offered to work for me for free I would think you're crazy and a danger to my business and I'd tell you to beat it. Read the thread I started yesterday here:
http://www.contractortalk.com/f16/charging-bids-2014-a-154518/

 

In the beginning you claim that before you charged for estimates you gave about 200 bids and closed 10%.

For an example, lets suppose you earn a net profit of $3000 on each job. 10% of 200 = 20 x $3000 = $60,00 profit for one entire year when you do not charge for estimates

You claim that when charging you gave 75 estimates, charged a few hundred to $500. I'll take a wild guess and say you charged an average of $250 for estimates. 75 estimates x $250 estimate charge = $18,750. You said you still sold 10% of the jobs you bid and this means you closed 7.5 jobs. 7.5 * $3,000 = $22,500 + the $18,750 for estimate charges = $41,250 net profit for one year when you charged for estimates.

You earned $19,000 less than when you did not charge for estimates.

Your post states that you went from 200 bids in one year to 75. That means you lost the opportunity to close 125 potential sales and earn thousands of dollars instead of a measly few hundred.

Now, as I stated in my last lost, a good salesman (like myself) would never ever blow up 125 leads for a measly $18,750 estimate fee. I often net more than $18,750 on one job. Just one of those lost leads for a good salesman could net a profit of $10,000, $20,000, or more and multiply that times 5 a year for a good salesman.

If an applicant came to my office and told me that he would would for one week for free to show what he could do I would understand that this applicant must be very confident and I would tell him that I would be willing to give him a trial period and pay him.

On the flip side, you are telling me that you would rather hire a robotic loser who is desperate for cash. Obviously, the applicant willing to work for free is not desperate for YOUR CASK and may have more money that you. The confident person is willing to give, spend his money to get to work, pay for his own lunch and give before he gets. The confident person is willing to take a chance while the loser won't and you will be taking the chance of losing money on the loser while you take no chance with the confident person.

Don't confuse an employee doing estimates for free and a company doing estimates for free. Companies do estimates for free. Employees get paid for giving estimates by being paid either by the hour or from commissions. Either way, both the company and employees are paid because the cost of bidding is built into the sales. In essence, the customers still pay for the bids. But...the difference is; companies make more money by including the cost for bidding in the sale rather than charging up front for the bid and this is well-known and accepted by customers. Personally, I will use the method that reaps the highest net profit and this these profits are distributed to my employees. I do what is best for my employees and don't think only about myself.

 

The cost of bidding projects is one of many Costs of Doing Business, and should be factored into your overall pricing; it is one aspect of overhead expense.

Still, it may have usefulness as a method of qualifying prospective clients, to weed out tire kickers and wishful thinkers.

 

I appreciate all the feedback it defiantly gives us some thought in both directions.. My husband is a liscensed handyman so he can't do any jobs over 10 k with out getting a general contractors liscense with the state which is going to take him some time and school while working to pay bills. So when I say a big job that is about 3-6 k his average job is about 500 or so. I like the idea of a questionnaire before bidding any job and maybe giving a ballpark "unofficial bid" before driving to look at a job and a customer thinking that they are going to get a bathroom remodel for $400. And we were considering charging like 20-25 a bid not hundreds. So if he spends half his day driving to 3 bids he would at least cover his gas for the day. We are new to this he just got out of the army and worked with another guy for a yr before branching out on his own back in January so any ideas and guidance that you did not figure out right away would be great

 

Even a small charge will weed out almost all of the tire kickers and time wasters. The ones who accept it will be far more likely to commit to the project and to you.

 

In the beginning you claim that before you charged for estimates you gave about 200 bids and closed 10%. For an example, lets suppose you earn a net profit of $3000 on each job. 10% of 200 = 20 x $3000 = $60,00 profit for one entire year when you do not charge for estimates You claim that when charging you gave 75 estimates, charged a few hundred to $500. I'll take a wild guess and say you charged an average of $250 for estimates. 75 estimates x $250 estimate charge = $18,750. You said you still sold 10% of the jobs you bid and this means you closed 7.5 jobs. 7.5 * $3,000 = $22,500 + the $18,750 for estimate charges = $41,250 net profit for one year when you charged for estimates. You earned $19,000 less than when you did not charge for estimates. Your post states that you went from 200 bids in one year to 75. That means you lost the opportunity to close 125 potential sales and earn thousands of dollars instead of a measly few hundred. Now, as I stated in my last lost, a good salesman (like myself) would never ever blow up 125 leads for a measly $18,750 estimate fee. I often net more than $18,750 on one job. Just one of those lost leads for a good salesman could net a profit of $10,000, $20,000, or more and multiply that times 5 a year for a good salesman. If an applicant came to my office and told me that he would would for one week for free to show what he could do I would understand that this applicant must be very confident and I would tell him that I would be willing to give him a trial period and pay him. On the flip side, you are telling me that you would rather hire a robotic loser who is desperate for cash. Obviously, the applicant willing to work for free is not desperate for YOUR CASK and may have more money that you. The confident person is willing to give, spend his money to get to work, pay for his own lunch and give before he gets. The confident person is willing to take a chance while the loser won't and you will be taking the chance of losing money on the loser while you take no chance with the confident person. Don't confuse an employee doing estimates for free and a company doing estimates for free. Companies do estimates for free. Employees get paid for giving estimates by being paid either by the hour or from commissions. Either way, both the company and employees are paid because the cost of bidding is built into the sales. In essence, the customers still pay for the bids. But...the difference is; companies make more money by including the cost for bidding in the sale rather than charging up front for the bid and this is well-known and accepted by customers. Personally, I will use the method that reaps the highest net profit and this these profits are distributed to my employees. I do what is best for my employees and don't think only about myself.

Hahaha, I didn't want to point this out. He might be smoking when doing the math.

 

Log home maybe in a different category with his speciality.. It seems a bid on his end is very time intensive and since he does very specialized restoration he probably has some leeway that someone pricing a two room paint job for less than 1k doesn't have. His sounds more like an inspection fee. My husband is working on getting into a home inspection course now so he can add that to his business and a home inspection would be about 500 or more then he would also be able to offer services for repairs if needed but that would not be counted as a bid.

 

Where in the world do you charge 500$ for a home inspection?

 

I really like the idea.

 

Psychologically, there may actually be another advantage to charging a fee for estimates. In theory, once your customer pays for your estimate, that expense becomes a sunk cost and should no lover factor into their decision making process. In reality, that's not quite how people work.

By paying for an estimate, your customer becomes invested in you. In their mind, if they don't buy from you, that fee they paid for the estimate is wasted. But if they do buy from you, they can justify it to themselves as just part of the sale. This could lead to your customers favouring your bid over those of other contractors.

I'm not sure how often this is used in the construction industry, but in other businesses, these principles (loss aversion, escalation of commitment, sunk cost fallacy) are common marketing techniques that have generated billions of dollars.

And if what you're selling truly great work for a price that isn't outrageous, I don't think it's unethical at all.

 

For those that are charging residential clients, how would you propose charging for a commercial bid or government work? Let's test the logic.

 

I dont charge to bid commercial TIs. I do and have charged to write a scope of work for them so I can bid it.

My two main commercial/industrial clients have an inhouse person ( like an owners rep) who writes a scope and gives us plans to bid. No charge there.

I wouldnt charge a residential client either, if they had those things. Never had one with a solid scope of work though.

 

I charge for any estimate that is more than 45 minutes to an hour away from my shop. I charge $65 and people usually don't have a problem with it. Also after any major storm I charge for all estimates because most people want the highest estimate to get more money from the insurance company. Than they will hire the cheapest contractor and pocket the rest of the money.

 

Do you do commercial?

 

I get a lot of calls from people that are buying a house and want me to give them numbers on small to large remodels. We don't charge for estimates, but if you don't own the house its $450. Got burned to many times by people just wanting estimated to drive down the sale price on the house

 

I'm with you on that one!

I don't do a lot of qualifying on the phone because I have a lot of problems with customers complaining that I am probing them. Then, I spend a few hours diagnosing problems, writing estimates and find that they are only prospective home buyers.

I try to get enough to cover a little gas and an hour of labor.

 

How not to get burned on large insurance jobs

Sorry, this was supposed to be a new thread!

 

not commercial

We've never had the opportunity to do a commercial project. There aren't very many commercial log homes.

 

We've never had the opportunity to do a commercial project. There aren't very many commercial log homes.

Lodges, cabins, resorts, plenty of commercial log structures.

 

We have been generally charging for quotes (not estimates) since 2006. Our territory is much smaller (45 minute max.) and our average invoice is about the same as yours. The charge is $49-$89 and varies by distance. Sometimes discounted, sometimes not.

In my opinion charging anything, even $25 will eliminate the least profitable group of potential clients.

Not that you asked, but cash flow is another major item. In some cases we require a credit card advance for the service charge, such as an out-of-town landlord or home buyer. Generally for everyone we require COD or substantial advances.

These requirements are only relaxed for clients with a long successful history, such as a client who always approves projects and pays COD.

 

In my opinion charging anything, even $25 will eliminate the least profitable group of potential clients.

That is not true. There are many clients that make a ton of money, would pay for an estimate but end up being the least profitable.

While you will eliminate some tire kickers, tire kickers can turn into great paying and very profitable clients.