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I’m a smaller remodeling company with a client who wants me to renovate their basement into an “industrial” feel with open floor joists, halogen lighting, galvanized currogated metal shower with no walls (floor drain only), stained concrete floors, etc. They provided me pictures of a local coffee house with the exact look they want (I actually remodeled this same client’s bathroom completely on the basis of a picture they provided me!) So I had my fellow architect meet with the clients and develop some plans. However, these clients are not necessarily picky and don’t know the materials options out there (and they aren’t necessarily going to follow the plans to specs)
My question is how some of you other remodelers go about bidding jobs that don’t necessarily have specifications listed and where the job seems a little ambiguous. I understand some people just want your ideas, but I don’t want to type up a spec sheet of all the plumbing fixtures, halogen track lighting, etc, with line item estimates when people will be changing their minds constantly. (think about all those messy change orders make for a headache job). I’d rather do this job on a cost-plus basis, but don’t know how to present this option to the client while still protecting my markup. (I realize I will get my hourly wage, but I expect to also make money on subs and materials) So if I’ve been using markups of 1.38 to 1.51 times my time and materials estimates as the sales price for my bids, how can I still get this kind of markup without souring relations with the client? I can see the client thinking they’re getting robbed by a 40 or 50% markup!
How do I write this in a proposal?
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RTFA.. but basically , u'v got to get them to pay for all the design and specs.. and then if u want cost-plus u'v got to convert ur overhead and profit into a labor rate.. and keep some of the MU in your matls and subs... say 15+10...
RTFA....it's ALL here in the threads below........
*Yeah, Mike's right. You have to think in terms of "labor cost" not "hourly wage". Then you have to develop what your overhead really is (which means you have to recognize what constitutes overhead) and come up with a true cost of putting yourself on the job with tools in your hands. It's pretty astonishing, how much it costs to be a legitmate business.
*The problem you're going to run into is that there is a break even point where the value of the project is exceeded. No one wants to buy a $600 hammer, even if it's their own fault for changing the design 500 times. Trying to bid the job clearly means you're going to kill yourself, but going for T&M may result in war at some point down the road.Seems that you better make clear to the customer that at some point, they either have to make a firm decision or get ready to pay for $600 hammers.SHG
*I'm admittedly bad at this. Lately, I've gotten some bad reaction to a T&M job that went over my estimate, because partly I'm a bad estimator, and partly the client added stuff and forgot that it costs more. So obviously it's my fault.My next thought was to just submit high bids with enough play to account for little stuff without racking up many hours of time lost to estimating and detailing every item, another thing I hate, but mostly because the people generally don't know all the details, they want a bid. They don't always know what they want, hardly ever in detail.But, I lost at least one job I should have gotten recently by bidding too high. And I lost one job where I wasted 20 hours, many phone calls, even had an engineer come and take a look, and then found out the people didn't even own the house.So, how DO we solve this problem? In your case, there are so many variables open to design and the fact that nothing is really nailed down, I don't know where to start. Maybe you need to just romance these people, get it going, and keep billing them as you go, and see how they react. But I don't think any explanation of your costs is appropriate, even though there is a lot of discussion on this and a lot of customers seem to feel entitled to that information.I don't ask, wouldn't want to know, and don't care how much money they make, why do they get to know the profit picture on what you do for them? Irritating.Does this help?MD
*I used to think that cost plus was the way to ensure that you couldn't loose money on a job. However, what you do loose is the ability to make really good profits on a job. Now, when I do a cost plus job, I have established labor rates i charge for my employees, which is about 1.5 times their hourly wage. I then charge mark-up on top of this figure and all subs and materials. I bill my time the same as I would an employee. This way your costs are covered. Another option is to charge two seperate mark-up's, one for overhead and one for profit. Any reasonable person understands that it costs to run a business.
*Two comments: First, we will all make mistakes both in our estimates and in communicating to our clients what the effect of changes are. We need to improve our skills with each job but there will always be room for that improvement. As it pertains to any particular job, I have found that it is pointless to second guess yourself. Suck it up and do your best with a smile. Don't compound your mistake by blaming anyone else.Second, don't be afraid to lose jobs. Establish yourself as a high priced contractor and one who will deliver on his promises. This will eliminate a lot of bargain hunters but who will miss them? Never be afraid to give a potential customer the bad news. If they can swallow the worst case scenario and still choose you, they will be very satisfied (and happy to tell their friends about it) when you come in under budget.
*Why are you breaking out the details of your price? Read the other business posts over the last several months. One constant theme is that your price is your price. How you got there is no ones' business but yours.So, in this case you are going to do the job, if you want the job that is, a Cost Plus basis. Your costs are going to include everything it takes to get the job done. To that you are going to add your fixed percentage. How you got that percentage isn't the customer's business. The customer is free to negotiate a different number; just as you are free to negotiate a number. But, its' parts are yours and no one else's. Be creative in how you calculate the Plus. There are probably as many ways as there are businesses. Just be sure it is big enough for your paycheck to be what you want it to be.Can't get the paycheck you need? Then you are in the wrong business and it is time to do something else.As for change orders. To be blunt, if you allow a customer to authorize a change without going through a formal authorization, pricing and written change order process you are a very poor businessman. Remember you are first of all running a business. Then you are a carpenter/plumber/framer/ or whatever.
*If a customer dosn't know exactly what they want, then I can't tell them exactly what it cost. Decide on a budget for the items that are in the gray area, and make them keenly aware of the budget (they can upgrade if they want) but keep everything on the table. For example, just say "we are putting this much in for light fixtures because I can buy this many of this kind for this amount", then go from there. Make them aware that there is a 20% upcharge for any material you supply. If they want to supply there own stuff......great.......unless it screws with the schedule. Hey, I'm there for my customers, but I can't go home and sit for two weeks while they make up their minds. We will have to pull off and come back when we can. (That is a great motivator)Your hourly rate is not negotiable (sp?). Everything else is.Ed. Williams
*Sometimes it's best to decide for them. You've seen the pics, know what will and won't work, and have worked for them before and somewhat know their tastes for everything from fixtures to prices and quality. Design a project you know they will like, based on the pics and wants/needs, and price it out. Let them know any changes will cost double if made later. Alot of guys don't like customers like these, but if you can design and layout well and are creative, just lay it out, draw it up and impress the hell out of them. Jeff
*I gotta go along with Jeff on this one. The original specs cant' be that elaborate, and if they are, you better have a very good understanding of what is going in. Remember, if you are writing change orders, you should be charging for each one. I know you don't want to write orders for a living but if thats what it takes, then take it.Gimme $50 for each order, and I'll write a thousand of them next week!blue
*I'm tellin' ya Blue, once ya get use to "Boogerin' it", ya can't go back! Some you spoon feed, and some force you to eat their sh*t! With remodeling, a good design(fully explained and drawn) and a detailed contract always(usually) prevail. Jeff
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I'm a smaller remodeling company with a client who wants me to renovate their basement into an "industrial" feel with open floor joists, halogen lighting, galvanized currogated metal shower with no walls (floor drain only), stained concrete floors, etc. They provided me pictures of a local coffee house with the exact look they want (I actually remodeled this same client's bathroom completely on the basis of a picture they provided me!) So I had my fellow architect meet with the clients and develop some plans. However, these clients are not necessarily picky and don't know the materials options out there (and they aren't necessarily going to follow the plans to specs)
My question is how some of you other remodelers go about bidding jobs that don't necessarily have specifications listed and where the job seems a little ambiguous. I understand some people just want your ideas, but I don't want to type up a spec sheet of all the plumbing fixtures, halogen track lighting, etc, with line item estimates when people will be changing their minds constantly. (think about all those messy change orders make for a headache job). I'd rather do this job on a cost-plus basis, but don't know how to present this option to the client while still protecting my markup. (I realize I will get my hourly wage, but I expect to also make money on subs and materials) So if I've been using markups of 1.38 to 1.51 times my time and materials estimates as the sales price for my bids, how can I still get this kind of markup without souring relations with the client? I can see the client thinking they're getting robbed by a 40 or 50% markup!
How do I write this in a proposal?