[Jason]

I wanted to know how people felt about charging less than their estimate. In the past we've kept to our estimates if they were high or low. In the beginning our estimates were usually low, but since our crew has been getting more efficent we are now breaking even off our estimates.

I'm giving out an estimate today that could be around $600-$800 higher than what we would usually provide due to situations that may arise. Our estimate already includes a total breakdown of hours, materials, and overhead.

If the estimate is high, would you "give back" the extra money? How do your customers respond?

*This customer really wanted a solid estimate with fixed numbers, but he is not shopping around at this point. A person came before us, looked at the job for a couple of minutes, and walked. Several people have done the same thing before us due to high peeks on the house.

 

[Mike Finley]

Aren't you mixing up a time & materials quote and a fixed price quote here?

Everything I do is fixed price with change orders for additional work outside the original scope of work or for hidden defects. If I do something quicker I reap the profit, if I do something and it takes longer, I eat it.

 

[plumguy]

I agree, never penalize (give money back) yourself for being effecient. When you consider what it takes to become effecient (experience,dependability,team work,etc.) that whole ball of wax comes with a price that does'nt need to be altered it needs to be appreciated!!

 

[Grumpy]

Look at it this way, if you underbid the job will the customer compensate you for your mistake? Probably not, infact 99% no. Why would you punish yourself if you finish quick.

Now I could see a situation where you tell the customer "I think it will take X hours at $N to do but I might be wrong. Let's do this at time and material and if I finish faster then I'll credit you, if I finish later then I'll have to ask for more."

I can sometimes close small jobs over the phone, having never seen the site with that line.

 

[ProWallGuy]

Everything I do is fixed price with change orders for additional work outside the original scope of work or for hidden defects. If I do something quicker I reap the profit, if I do something and it takes longer, I eat it.

Ditto.

 

[ConcreteGuy]

Sounds like you want to give a good client a break. You can do that with a "not to exceed" number, but perform the work at time and material.

For example you estimate the job at $50,000, but charge time and material along the way. Therefore, you are guaranteed to stay in the black, as long as your estimate is close, and the client is gauranteed he won't pay more than your number.

If your T&M costs are under budget, the client wins and you have lost nothing. And since you furnished at risk a "not to exceed" number, you are motivated to perform.

Nobody gets rich, and nobody goes broke. Low risk, low reward, except presuming you are doing this for client relations, the reward is future opportunities.

If this is not a suck up job, then give away nothing! The key to bidding work is not what it takes to do the job, but what they are willing to pay. If you can get more from them than your cost, get it. It's an artform. Learn it.

 

[Jason]

Thanks for the insight. These customers are wonderful resources. Very respected in the community, provide a lot of work to a lot of people, and are just nice people.

They are having us stain a very large gazebo that is primarly trim work with three different color tones. We are basically getting are time/materials straightend out by this project.

I believe we will be able to get the project done just short of my estimate and all should be fine and great.

But, I'm also taking your guys advice and measuring out all the parts of the project and starting to track time/materials per spindal, deck plank, etc. so in the future it wont be such a pain.

Thanks for the help and advice.

 

[donb1959]

Our estimate already includes a total breakdown of hours, materials, and overhead.

Hours and ok are fine on a qoute, but frankly as a painting contractor overhead is really none of their business. And no, under no circumstances would I give money back, keep your bids the same and reap the rewards for better efficency.

 

[Teetorbilt]

Ooooh, oooh, oooh, take the money and run!
It will help on the underbids.

 

[PipeGuy]

...frankly, overhead is really none of their business. And no, under no circumstances would I give money back

Beautifully put. I couldn't agree more.

 

[Grumpy]

Beautifully put. I couldn't agree more.

I never give a price break down. If they want a price break down they get labor and material, and both are marked up drastically to cover overhead and profit but that's only happeened to me twice in my life.

Usually I detail my invoice by the proposal. I give a base price and optional upgrades so my invoice reflects the base price and what ever upgrades they choose, nothing more or less.

One time I had a customer tell me he wouldn't pay until I gave him a break down of each piece of material used and the cost of that material and the manhours and the cost of those hours... etc... he asked for this after I submitted my usual invoice.

Instead of giving him what he wanted, he instead got a copy of my original invoice marked "copy" and a letter of intent to Lien the property. I got paid, and some dirty looks

 

[Teetorbilt]

If I get into a deal that has the potential to be a real headache, the customer is notified and the proposal is initiated that way. Should those circumstances never arise, the charges are backed down.
A customer is never disappointed when it costs them less but always when it costs them more. Always quote on a 'worst case scenario'.

 

[Floorwizard]

I never give a price break down.

No doubt.
I will do ________ with these materials __________ for this amount of money $______
ect...ect...

If arguing occurs, it usually is a way to detect a future problem customer.

 

[Teetorbilt]

Flor, I deal with remodeling in FL. This often equates with termite damage, wet rot, dry rot, mold and a plethora of other problems. Firm quotes are out, for the most part. Flooring can be the same.

 

[Mike Finley]

Instead of giving him what he wanted, he instead got a copy of my original invoice marked "copy" and a letter of intent to Lien the property. I got paid, and some dirty looks

LOL!

 

[DecksEtc]

One time I had a customer tell me he wouldn't pay until I gave him a break down of each piece of material used and the cost of that material and the manhours and the cost of those hours... etc... he asked for this after I submitted my usual invoice.

The above reminds me of a quote request I got via email the other day - attached was a 15 page detailed list broken down into 5 catagories (with photos). He requested each item be quoted on by including time and materials for each. To top it off, he gave me a deadline date for finishing - a date which just so happened to be the first upcoming day I have available to start a job.

I couldn't run away from that quote fast enough!!!

 

[ConcreteGuy]

Unless the contract requires it, no client deserves to know your cost breakdown, and if required, lie to them. If someone wants to know your costs, they should try taking on your risks and find out for themselves.

And stay away from furnishing unit costs, unless you heavily qualify it.

The risks you take are not for sale!

:evil:

 

[Mike Finley]

Unless the contract requires it, no client deserves to know your cost breakdown, and if required, lie to them. If someone wants to know your costs, they should try taking on your risks and find out for themselves.
:evil:

I couldn't agree more. Everybody should realize that being in business is a risk on investment just like buying a stock or a bond. You have your money invested in your business, look around and add up what you have in tools, inventory, computers, vehicles, business accounts due from your suppliers...

Just like you deserve a return on investment based upon the risk of a financial investment - bonds - low risk, low return, a growth stock - high risk, higher return...

... you deserve a return on your business investment proportional to the risks involved. If not you could just be an employee like everybody else and go to work half asleep every day with no consequences.

 

[PipeGuy]

I couldn't agree more. Everybody should realize that being in business is a risk on investment just like buying a stock or a bond..... you deserve a return on your business investment proportional to the risks involved. If not you could just be an employee like everybody else and go to work half asleep every day with no consequences.

From my business plan, point #2 of 5 point mission statement: "To earn a profit consistent with the risks assumed."
The more risk a customer is willing to assume (like accepting a time and material contract in lieu of a fixed cost contract) the narrower one might expect the profit margin to be - and vice versa. The assumption of risk however does afford the customer access to proprietary cost infornation.