My business partner/wife convinced me to use line items when presenting a bid to a client. To me that just opens up alot of opportunity for the HO to whittle down the price on each line item. Ya know. ” I have a friend who does drywall” what do you do?
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Replies
My business partner/wife convinced me to use line items when presenting a bid to a client....... what do you do?
Not listening to your wife would be a good start ;)
You're right- with certain customers, you're opening yourself up for the nickel and dime treatment- especially those who "think" they know what they're talking about. With others, it allows the customers to understand where their money is going, and feel better about spending the money, rather than not knowing where the money is going.
In a way, having the customer start nit-picking the line items can be a good thing- it helps you to realize, prior to the job starting, that this is a customer you may not want to work with in the first place.
Bob
I ditto Bob, and further.........
The only time I may itemize cost is when we take on a remodel / addition and I know it is a fair price but seems high to me....I am thinking it will probably seem high in the clients observation. So, I itemize for to show them where the money is going.
Clients for a Kitchen remodel can forget about the demo and disposal, or the cost for things they asked for like concealed hinges, full extension drawer slides, lazy susan, spice rack, trash can cabinet, lower sliding shelves, crown or light molding, etc. You point these things out and itemize cost in writing and they most often say "Oh yea, OK.....lets close"
Edited 3/15/2006 2:38 pm ET by txlandlord
In my experience, the best option is to stick with a lump estimate. but expand further on this by coming up with 2 or 3 lump options.
Offer them the premium installation, best materials, elaborate design, etc, etc - this is the highest price and most impressive. Then continue by saying that if they don't want to spend that much money, you can...
...do the installation for less money by subbing out some high-price (and high quality materials) for economical choices. Perhaps scale down the design, or the detail of the project. Whatever you do to lower the price though, make sure the customer knows what they are losing when they move down to a lower price point. Sometimes that means that you explain to the customer that materials may be cheaper to buy, but they will take you longer to install, so you as the laborer get the same money, but they are often stuck with a mid-grade finish.
This method makes the premium job seem a whole lot nicer.
You can continue moving to a lower price as far as you want with this technique of pitching the job, but it's important that for each level of quality/materials, your updated price reflects the time and money required. This way you are always making the money that you want, and the customer feels like they have haggled and negotiated for what they want.
I should probably give a better example, but I hope you get the idea. Don't tell them how much things cost, because they will only want to sub in crappy alternatives to save a dime. Pitch the project as a whole and explain why the price is what it is.
Justin Fink - FHB Editorial
I use a bulleted, detailed line item list but don't include a price for the line item level, example:
You can dress it up or pare it down but it gives the HO a better idea of what's involved as opposed to just listing "drywall: cost $x" yet it doesn't give them enough info to have someone else quote off of your proposal. If they want to nickel & dime pricing you can start pointing to details within each bullet and see what they want to eliminate in order to achieve cost savings vs. you taking the hit on your bottom line.
-Norm
That approach makes sense (cents) to me VTNorm.
blue
I used to Line Item pricing. What an idiot I was! I kept getting questioned on each line. When the husband got tired, the wife took over. I had to justify each cost. Didn't always give up the $$, but eventually, as I got tired, something would slip out of my mouth which I did not mean to say. That's when I lost $$.
Then there were the times they used it as an opportunity to become better educated regarding the scope of work - process and cost. They got info for free and I got a waste of time for nothing.
Now, the only Line Item I have is for Allowances, like appliances, hardware or tile. My contract headings have a lump sum - Site Protection & Carting $xxx, Flooring $xxx, Painting $xxx, Plumbing $xxx...
BTW, Tradespeople not hired by me are NOT allowed on MY jobsite during the duration of my contract. I don't care if they are the Client's cousin or best friend. These are MY prices and I am the GC. If they want to bring in their own Subs, great! - But then THEY are GC'ing the project.
Frankie
There he goes—one of God's own prototypes—a high powered mutant of some kind never even considered for mass production. Too weird to live and too rare to die.
—Hunter S. Thompson
from Fear And Loathing In Las Vegas
I've never had a "good" customer ask me for a breakdown.
It was either Yes We Can or No We Can't.
I have had several "bad" customers ask for a detailed breakdown.
maybe when I get smart ... I'll just close the briefcase and walk silently out the door the first time someone starts asking for a breakdown! Hell with prequalifing .... that's all the info I need right there. And based on previous experiences ... I'm thinking that'd not be a bad way to operate ...
Jeff
Buck Construction
Artistry In Carpentry
Pittsburgh Pa
Thanks for all the input. Allow me to digress a minute. Unfortunately I am not in the position to pick and choose jobs. Young company ,competitive market. I just found out today i lost a job because some one (an established company)under bid me by 10K on 70K project. Third time in 6 mos. this has happened and these are the only quality projects I have had a chance to bid on. The standard advice I reading in this forum is charge how much you want to make. Apparently either some guy is willing to make 10k less or I am way off base. I am losing(have lost) my shirt trying to get an accurate estimate. I don't yet have data to use to estimate the time it takes my crew (another story) to do things. Also how do you deal with things that got overlooked or are unforseen.
Thanks
Dave
Dave... I've always been told you make your money buy'n, the market will only stand up to a certain price, on a 70k job i can see where a wise buyer (should be you) could save 5k to 10k just shop'n subs and material and end up with the exact same finished product... since you are somewhat new It'll be hard to "name your own price" which many can in fact do... now those that can can because they 1. will be in the ballpark to start with and 2. people will pay more for the comfort of a well known&respected person doing their work. Now you always have the exception those that can charge alot more for the same basic job... these are the ones who know how to add the touches people love that really don't cost them a ton... plus sometimes people will just pay more to be able to say "STAN THE MAN" did the work on our house... and everyone already knows stan is the highest priced guy in town...
there is a level of salesmanship involved and a good salesman can convey value & trust...
p
Ganjo,
Will let you in on a secret. The majority of large--successful construction companies involved in commercial or high end renovations or construction will underbid if they know that it will be a job which will have plenty of changes and additionals. They make their money on changes and extras--and on a typical site those changes and extras often double or triple the price of the project. It's a big gamble to agree to do a job for cost or less--banking on making it back in spades--but some companies thrive on it.
When they have to go with the low bid--(and that's not right)-to play the game you have to be it.
It's why I left the renovation business in the first place. I Don't like games.
LGardenStructure.com~Build for the Art of it!
Jeff, Your comment about the price breakdown made me realize that my experience is the same. Could it be that these people are wanting to be their own GC? Or maybe they cannot trust the tradesman. It will be a redder flag in future.Bill
My customers that ask for a breakdown are in the minority, but what I hear when talking to most of my customers is that they really have no idea what work goes into the project - and they're genuinely curious. I use my breakdown (without line item) pricing to educate them a bit, the most common comment I get back; "wow, I didn't realize there was that much work involved".
I do all of my proposals on the PC, at this point I have templates for most types of projects I do; one for decks, another for basement renovations, etc. After doing the $$ math I can plug the specifics into the template for a new proposal in the time it takes me to have the first cup of coffee in the morning; 10 minutes. And it looks like a custom crafted proposal just for them.
-Norm
Most of my project are small. I use the same method though and include the make, model, brand etc. of the planned item or material if it is releveant. I also include simple cut sheets from manufactures web sites to illustrate the product to be used again if I think it is needed. I agree it allows the customer to see what goes into the project and what will be done. I still use lump sum pricing but line item description. If they ask how much a certain line is I tell them my notes are at home but I can check. Few have ever asked again. DanT
I do both. I do a fair amount of work where the customer is involved in the process in some way or another (demo, paint, stain, cleanup, etc...) and If they are waffling on a few of these items, I usually offer to do a 'breakdown' of different phases of the project so they can see what they are saving or what they are breaking their back to do...it all depends on the vibe I get from the customer on how much I break it down.
Also, if there are aspects of the job I don't like to do (PAINTING!!!!) I usually jack up the price a bit to make them feel inclined to do it themselves...or at least I'll be paid well for all the cussing I'll be doin'...:)
most smaller jobs are one price...period.
knowledge without experience is just information.... Mark Twain
http://www.cobrajem.com
I don't blame you for wanting to avoid all the nitpicking. I am in the manufacturing business and several of our customers, Fortune 500 companies, have cost analyzers who require us to provide detailed cost breakdowns for every item, along with our sources so that they can be verified. G&A expense and profit are compared to those of your competitors. Basically you pull your pants down if you want to bid.
If the business runs at 100% capacity with 100% efficiency this approach may work, but when you whittle all the fat out of a price this leave you very vulnerable. While no one wants to subsidize obscene profits, everyone must recognize the importance of having a financially strong vendor ( or contractor ). I am not a contractor but I would assume that in many cases your bids include some educated guess work about labor costs. If the HO really wants to nickle and dime let them pay you on a time and materials basis and let them bear the cost of any overruns.
Doug
Hi All, I bid a deck last week budget was discussed as ho asked what I thought it would cost Guessed 15 k came in at 14k and some change. Got a call was asked what I was making on the job, material discount , sq ft price, why it was so much. I have done line item bids and gotten nit picked also. Mike
If you take that job make sure they pay you as you go, cash up front for at the very least materials & the time you have already spent. Remeber, it's cheaper to sit at home & not make money than it is to go to work & lose it.
"Got a call was asked...why it was so much"
That's the exact situation I'm talking about, most customers (mine anyway) just don't know the amount of work involved. I walk them thru my line item detail (again, no line item pricing, just the steps involved). Depending on how much detail you want to get into you could easily create 10-15 detailed bullets of the deck design, permiting, material selection & purchase, site prep, sono tube excavation & concrete pour, framing build-out, decking install, railing and stair detail, site clean-up & debris disposal, finish landscaping...etc. Walk them thru the steps involved and unless there's grunt work or clean-up they want to do themselves it's nearly impossible to just 'remove' a step to save a few bucks.
I've had a couple of customers ask what my hourly rate is or what I'm looking to make & my standard answer is that I'm not out to make a killing but I do have to make a living. And then I remind them I'm licensed, insured, have thousands invested in tools, etc but I never tell them my hourly rate, my costs or my profits.
-Norm
I have found the best way for ME to land jobs is to be as open and honest as possible.
If it's a t&m job I am more than willing to open my books and let the customer see where their money is going. I am willing to explain "overhead", "profit", "wages", explain why they should pay me a mark up on subs and services I use to make their job come out better than they hoped, and on time.
It's their money and I don't have any qualms about what I charge, or why.
A bid job is different. Once we agree to a price, that's the price. I take the risk of delivering a similar result - a job better than they hoped within the stated time frame - but because I assume that risk, I am entitled to any resulting profits. I am happy to explain this to them, but not willing to show them where their money went or why.
Before I got a handle on exactly what my overhead was, and understood why I need to make a profit to stay in business I was uneasy about revealing my numbers to coustomers. Not any more. Now I see it as an opertunity to gain their trust, for them to better understand why they should think twice about hiring people who work cheaper than I will.
But again, I'm just saying what works for me. Other people will get better results going about it differently. The main thing I've found is to be true to what I believe. To not say or do anything I am not comfortable saying or doing. And if I find myself feeling uncomfortable discussing my business practices with people I am doing business with, I stop and ask myself why, then set out to resolve that inner conflict. I believe "honesty is the best policy".Tipi, Tipi, Tipi!
http://www.asmallwoodworkingcompany.com
Get paid in advance for your proposals. And the payout isn't part of their price, if they go with you. It is for professional services.
We know. We know. It doesn't seem just hard, it seems impossible. But others do, and you should, too.
"Free estimates" are for silly little one-scope jobs like roofing replacement, driveway surfacing, painting, and so forth.
Remodeling or new construction that involves design and planning, rough carpentry, structure work, mechanical trades, waterproofing, room finishes, flooring, yadda, yadda, yadda, is something that takes professional time to price correctly.
Your proposals should spell out scope in general terms, but not in enough specificity for the client to take your work and shop it out as a scopesheet. Explain that if they wish to move forward, that your contract will spell out all the specifics you are giving them verbally, at the time you make your in-person proposal.
I agree I normally get into trouble when I say ,write or give to much information.
George
when i give customers a price for a home i give them a 35 pt. cost breakdown of every aspect of the construction process.because they should know what i'm doing with their hundreds of thousands of dollars. it doesn't affect my final price, that's firm and very reasonable as it has to becompared to the breakdown.
but thats for custom homes.i don't know what realm of construction you are in.
RTC