Doing some follow up on our previous estimates versus jobs secured and was wondering if anyone would care to share their numbers. Seems like lately we have only been winning less than half of the jobs we estimate yet I feel our numbers are good. Anything less and we run into the low area where the $$$ doesn’t even meet our overhead let alone profit.
It has been competitve around here lately with the industry slow down but I still want to win more than we are.
Is there anything like an industry standard although I’m thinking probably not based on variety of jobs and other changing variables.
Replies
Typcally, the "industry standard" ratio that folks look for is around 1 in 3. Any more than that and you're probably priced too low.
If you're getting 1 out of 2, it sounds like your prices are slightly lower than they should be- that explains why you said that if you lower them even a bit you're into the "unprofitable" range.
I'd look at raising your prices slightly to eliminate being so close to the edge, and then increase your marketing efforts so that you're running more leads and getting a slightly lower percentage, but making better $$ on those that you do get.
Bob
What industry?Remodeling?
Building new house?
Commercial?
Historic Renovation?
Specialty subcontractor?
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
Had a discussion abput this with my boss today. He says he gets about 1 in 6, now that is not a good average.
He has been in business for 55 years, and last year we turned 20 million through the office.
He must be doing something right.
Work to make money, don't work for free just to be working. I hear this all the time, especially when things are getting slow. Then all of the sudden we are swamped. The bad news is you've done exactly the right things to be exactly where you are today. "IdahoDon 1/31/07"
Work to make money, don't work for free just to be working
Most have probably heard:
I'm losing money on every job, but making it up with volume.
A friend of mine puts out bids like ol' loose Kelly from high school gave away crabs on valentines day. He will spend entire days putting out bids for what would appear to be decent clients, but they really act like tire kickers. Kickers, but not. Sort of like a pretty girl from across the room that's a touch ugly up close.
These middle of the road clients are a niche that's driving my buddy nuts. They have above average incomes, lots of smarts, live in decent parts of town, network with others so they are good refferences, but they're wheeler dealers who watch too much TV and think that all they have to do is nickle and dime poor young contractors to keep from being cheated. (They also know how to remodel a room for under $500 using tea leaves, brown paint, 1/4" MDF and old newspaper.)
I just don't miss bidding jobs one bit. Since going all T&M life is less stressful, although maybe it would pay better to bid some jobs.
Happy bidding.
Beer was created so carpenters wouldn't rule the world.
what kind of jobs do you do? do you ever compete to get jobs with others that are bidding, and how do you handle it, what is your pitch? do you ball park, so they at least have an idea if they have a budget for the work?
I have been doing a mix of T&M as well as some quotes. but I have only been on my own since the summer. So far I have only not got 1 job , which was a job I wasn't trying to get as I was supper busy, I didn't paticularily want to work for the guy, so I priced it high.
I have been doing renos and small additions, as well as some other funky projects, and have found that while some the jobs I dont' know how I could have done the job at a set price with all the varibles, I really don't like doing the actual work while being on the clock, as I always feel pressure to try to watch the time as the hours add up.
Guys,
I like the input but hopw do you do some of the things you say?
Like for example, we just were called for a job another guy walked off of. The folks knew of us and our reputation. We went out and had alook at the site (for free) and put together a cost to finish the project. All went well, the meeting was good and we thought, "Hey its not a gold mine but a nice job and one we could easily handle (approx a $70k project). They commented on our reputation and my previous and current involvement with the local building dept.
Well, we don't hear from them for a week so we follow up. NOW, we find out they are calling other folks! They only called others after they got our price. Long story short, they found some other guy to do it for about $10k less so are going with him.
I'd LOVE to be able to qualify all our prospects before doing any estimating or site visits but I don't see how we could have on ones like this. And sadly, this happens on quite a few of our prospects.
Maybe we are just too expensive but once again, I don;t know how to go any lower aside from cutting corners and using illegal labor.
Mike
oak... what an opportunity for you to have tried the new "pay as you go" Proposal...
look .. you guys were already pre-sold... you go out , take a walk around and say... "yes, we'd be willing to take over this job..
in order for us to spend the time to prepare our Proposal we charge $300
if you like our Proposal, we'll do the work.. if you don't , we keep the money we soent preparing the Proposal "
guess what.. bet they would have paid.. and..
once they pay.. they've already decided that you are the one.. they won't get another Proposal
if they say, "no, we'd rather not invest the $300.". that's fine... thank them for their time and move on...
would you be better off now .... or not ?Mike Smith Rhode Island : Design / Build / Repair / Restore
Mike,
I think you are right as even if we would have "lost" the job, we would have $300. to cover our time. My question is do you tell the client up front at the first phone call about the cost or just when you are on site?
Thanks
Mike
mike... first i evaluate the homeowner on the phone... find out about the scope,, if we both know someone in common.. how they heard of us.....
sometimes .. i tell them right off the bat that we charge for our Proposals... if they mention an "estimate" i tell them we don't do estimates .. what good are estimates ?
if they sound promising.. i make an appointment to look at their work at do a presentation..
at the presentation .. i'll have our job photo book and we'll look thru it..
i will show them or tell them of jobs similar to theirs and how much it cost for the other work..
then i tell them i'll be glad to prepare a Proposal with a fixed price for their work..
if it's a small job , with no design work.... $100.... $300...
new construction , whole house .. their plans... $1000.... $3000
we do the design ( including Proposal after design ) .. $3000... $5000.... $10,000..
but nothing is free.. at least not for new customers.. old customers.. some of the time we'll do a Proposal at no charge... but we've already established ourselves with them
at if it's involved.. we'll still charge
the thing about getting paid up front.... they called YOU for a reason.. you're pre-qualified... you've already done the free stuff.. you established yourself in their consciousness....that's worth something in their mind.... so prove it to both of you.. put it on a professional basis... " we get paid for preparing our Proposls "
none of the service companies will come out without a flat fee.. why should you ?Mike Smith Rhode Island : Design / Build / Repair / Restore
Thanks, Mike. Excellent information. I like it and definitely plan on trying it on our next call.
Mike
Interesting discussion all around. I'm a bit taken aback at some of the talk about "working for free." As som eo fyou know, I'm a lawyer. I do civil litigation, with a strong emphasis on labor law, but will occasionally get into something else. I can evaluate almost any case in a half hour and "ballpark" chance of success, and a rough idea of time and costs. By "rough idea" I mean that I can tell someone something along the lines of "you're gonna spend between $25k and $50k to get the case ready for trial and in its best position to reach a settlement, and another $15k if it actually goes to trial." Those are pretty rough numbers, and a pretty large spread, so I tell folks if they want I can do 10 hours of research and give them a much better evaluation if they want to buy my time.
I do 4 or 5 of those "free" half-hour telephone consultations a month, most of them are folks looking for a lawyer who will work on a contingent basis. I sign up a case every other month or so. I don't mind handling these phone calls, I get to educate people about the law, sometimes I can help them solve their problems without hiring a lawyer at all, and every once in a very great while a really good case comes along. From my perspective I have a hard time understanding why folks won't take a half hour or an hour to look at a job and ballpark it, then offer to work up a complete estimate with a reliable budget for a price.
Refusing to "work for free" as some of you guys put it, makes you sound more like you work for wages than that you run a business.
"If the trout are lost, smash the state."
James,
Good point...
I like your example on how you do your proposals, we just have trouble getting people to pay for that more exact calculated amount as the first response from the client is "forget it, I can find someone to give me an estimate for free".
Mike
My last post wasn't really directed at you Mike, I forgot to modify the "TO" line. It was directed more generally at folks who complain of "wasting" their time on estimates. I don't consider that time "wasted." I consider it marketing.
"If the trout are lost, smash the state."
James Pio,
you made some excellent points---but you have overlooked something.
You mention that you do 4-5 of those "free" half hour consultations over the phone---per month.---that's fair enough
however--------as a roofing contractor---starting mid march----- I can quite feasibly be wasting time on MORE than 4-5 of those free consultations PER DAY------and If I am not carefull----they will have to be done in person, not over the phone
so----as essentially a one-man-band------some sort of screening process is absolutely needed.----to evaluate accureately--- I really need to be on site-----and that takes about one hour minimum
so---4-5 hours per day --GONE---for free---- If I am not carefull.
so--I screen, and rank,and evaluate each call based on historical probabilities
for the record------------sales ratio is about what DanT posted----roughly 3 out of 10 to 4 out of 10 overall
BUT----prospects that are personally referred---friends, neighbors, co-workers etc.----closing ratio is approx. double that
which means--over-all--folks just calling blind---responding to phone book adv. etc.------are actually closing at a MUCH lower ratio than 3/10
someone--I think Schelling--mentioned he is pretty good at making judgement calls over the phone????-- well we have to be
during initial phone call I find out some important info-------" how did you hear about our company?"--- If you were referred by your highly satisfied co-worker-----well then I am certainly willing to invest a visit to your project and maybe 2 or 3 hours at an appointed time of the prospects convenience.-----------just dialing numbers out of the phonebook?----well you are MUCH more likely to get screened out entirely---and If I do visit your site----it's going to be at a pretty brisk pace.
do some potentially great customers get screened out?----I am sure they do------but they HAVE to be------or I won't be able to concentrate on the folks who ACTUALLY pay the bills.
Keep in mind----all this is needed even for something like my relatively simple roofing projects.
I have great sympathy for folks doing total remodeling projects---where the time invested in even the simplest project proposals will eclipse my most elaborate proposal.----In that situation my screening would be even MORE rigorous------and almost certainley a finacial component would enter into it--like Mike Smith's.
Best wishes, Stephen
Stephen,
I thought of the same thing when I read James' post. I like his approach I would love to be able to be in a position to handle the "pre qualification" aspect over the phone. Maybe thats the beneift he gets for having gone to law school while the rest of us went to the school of hard knocks.
But seriously, you are right he has some very good point but alas many of us are kind of stuck in having to visit the site.
After reading Mike Smith's informative posts, I think we are going to develop a base set of numbers for various projects we have previously done and use those as a guidline. My goal would be to spend less than 30 minutes on any prospect visit and be able to toss out some ballpark figures. THEN, offer them an exact quote for a fee.
Granted, this does require a small amount of "free" time spent on a project but I suppose thats the trade off for being self-employed. I mean, when I worked as a salary person for the local building department, I had to attend town meetings and other after hours events that I really didn't get paid for yet were expected of me as part of my salary even though it was very low being a "guvment" job.
Maybe after some time using this new approach, I will get better at it and more efficient.
Perosnally, I've got nothing to lose as now we spend an average on 6-8 hours on each proposal and if we don't get the job ALL of those hours are lost time. I'd rather just invest 30 minutes of risk than a full day of time.
And you are right, doing a complete home or remodeling project can be time consuming as most folks have no idea of what they really want...they just know they want something!
Mike
Thats good, im gonna print that out and put it by my phone, I do the same just never heard it said before, i gotta be carefull or im just spinning my wheels, Got burned again last month on realtors wanting a free bid to use to lower there offers, my free bid is used as a free inspection service, Never again
James,
I don't think anybody here is advocating charging for the first visit, and most people here who do charge for a proposal are not at all adverse to giving a free ballpark estimate.
What we are saying is charge for spending 10 to 40 hours developing a set price proposal.
Wait a minute! That's exactly what you said you do.
How to Compute a Free EstimateA free estimate, or Ballpark, shouldn't take more than 45 seconds to prepare after getting a rough idea of what your prospective clients has in mind; Make your best off-top-of-the-head guess, cut that figure in half for the low end and double it for the high end, then tell the prospect that's the range.SamT
Anyone who doesn't take truth seriously in small matters cannot be trusted in large ones either. [Einstein] Tks, BossHogg.
what kind of jobs do you do? do you ever compete to get jobs with others that are bidding, and how do you handle it, what is your pitch? do you ball park, so they at least have an idea if they have a budget for the work?
Going into a job I'm focused on the end product and how to build in everything the client thinks they want and some that they haven't even thought of. It's easy to be excited about the end product.
When the client asks how much it's going to cost I simply say it mostly depends on the materials they want to use, which it does, and come up with a ballpark there on the spot that's very broad and usually on the high side. Without hesitation I'll state that we're $32 an hour per person for all hours put toward their project, paid at the end of each week, and cost plus 10% for materials and construction related expenses.
If the client says that's too much I'd simply wish them luck with someone else. If they want a fixed price I'll offer to write up an estimate of what we think it will really take and add 50% (or more depending) to cover uncertaintees. So now the client is thinking of the others yoyos that have bid the job wondering if they are paying 50% more for them as well. Clients have always passed on my fixed price bids choosing to go T&M instead.
We're doing remodels/additions and other new construction built to blend in with folk victorians, craftsmen, contemporary and currently a carriage house, which probably fits some category familar with those of you on the right coast, but is not seen real often out west.
My background is as a carp on large vacation homes for out of state clients. Even these $1m projects are often done T&M, or at least with a T&M component, because of the unknowns. Clients often change their minds and enjoy helping the building evolve as it's built. It was nothing to frame the interior walls (10' 2x6 construction) and have the clients want to move 'em.
Today, since we do everything from the ground up and have a full range of finish related skills, those jobs that are risky for someone to bid because of the unknowns, those that are likely to change a great deal, and a long build time best fit our business model.
For instance, one job was preceded with various contractors bidding the job and there was a large amount of demo, remodel of part of the house and some new sqare footage. Without a crystal ball, it's easy to expect the worst from a 100 year old house and the bids were quite high.
Another part of the reason the bids were so high was the unrealistic set of plans. We weren't going into it thinking the end result would perfectly match what's on paper, but worked through each area with the clients to better meet their needs and with the architect to find common ground so it could be built above basic code, but overly so. Bidding up front doesn't allow the freedom required to do this.
Clients that have a set of plans but know they will have many changes are very put off by high change order fees often found in bids. It is sometimes frustrating, but also quite rewarding to end up with a building much better than it would have been if strictly following the plans on paper.
The more complicated the plans, the better we are at competing with bids. When clients know things are complicated and look for someone comfortable with the job are often put off by the chicken littles. It takes us as long as it takes so we have little stress up front where as the guys bidding the job go on and on telling the clients how hard the job with be and try to justify the high bid price, but also have a tendancy to sound rather incompetent.
Who is the girl going to Vegas with, the guy who simply says, "Baby lets go to Vegas and get jiggy," or the guy who says, "I want to take you to Vegas, but it's a long way there so it's going to be expensive, and once we leave the house it's too late to chance you mind or it will be an additional $500 if we agree to the change. I'll only go to the places agreed to in advance, or it's another $500 change order. There's no way to know how good our luck is going to be at the casino, so I have to charge you extra just in case I have bad luck, blaw, blaw, blaw."
If you are just starting out try to get into a profitably niche so compitition isn't as great and profits are better. In our niche we can keep our schedule full for over 6 months in advance so there is no reason for down time and lost profitability, which helps us charge as little as we do and still make a living, which helps us keep good jobs lined up.
If we changed to smaller 1-week jobs the amount of unbillable downtime would jump way up, requiring a much higher base rate, and greatly increasing the stress level.
Good building.
Beer was created so carpenters wouldn't rule the world.
Don,
I like your input. Can you survive on $32. per hour? Not trying to be too financially nosy or pry but here in Florida with all the taxes, fees, licensure, etc. I have to make at least triple that just to stay in business let alone make any decent money. Maybe I should move to Idaho? Been there once and loved it!
Mike
Can you survive on $32. per hour?
We really should be at $40, but for now that's ok since we're newcomers to the state. Idaho construction is very low priced compared to the northern CO/southern WY area back home. It's driven a lot of better Idaho carpenters into other fields so the quality level is surprising bad almost across the board.
Back home being a wage earning carpenter can be a legitimate career choice for many bright kids, many who either have or will get college degrees. The out of state money for vacation homes flows freely and makes that market quite attractive. Contractors in that niche have profits after tax of around 20% so there are many stories of building half a dozen big homes and retiring.
The niche we're in is enjoyable work for the most part so it's easy to work 50-60 hours a week. Anything done for the project is billed, so getting up in the middle of the night to draw up a cabinet isn't lost overhead.
Idaho is inexpensive to live in (slightly below the national average) and there's very little unpaid overhead in our jobs.
There aren't employees as we're both independant although hired at the same time for each project, sort of like a joint venture. Solo contractors with a few long drawn out projects have relatively low insurance rates. There's also very little accounting to be done so that's also a minor cost.
Commute times are quite short (10 min/day) and my work truck is a 1985 with less than 100k miles so it's good for a few more years. The time saved driving is simply put into working more hours.
Taking a short lunch keeps us on the clock and each year something as simple as that amounts to nearly $5k gross each.
When I first moved here I worked for a guy who is always remodeler of the year, has 2,000 sqft of new office and storage, two company trucks, skidsteer and everything on down. He was a full time office sitter and hired one carp--me. I was the only hands on person and worked with the subs so there's very little he needed to do other than run down materials and that's something the lowest paid guy on the crew usually does.
For a company with one carpenter he had a huge amount of overhead. On the other hand we build with better quality at a lower price, our clients are happier with the end product and we're on track to develop a top reputation for this niche--without over-hyped national awards.
If we were simply in it for the money we'd get into building commercial shops and hire a dozen $10 workers and all the headaches that entails. No thanks.
Good building.
Beer was created so carpenters wouldn't rule the world.
Don,
Your scenario you described sounds like what I view as the eptimoe of what I always wanted (and still want) my career in construction to be like. Good for you!
Mike
Thanks Mike. Our business model seems to have hope, at least here, right now.
Beer was created so carpenters wouldn't rule the world.
Another option when meeting with clients is to simply not throw out ballpark figures if that's not a strong suit of yours. If we don't want to spend time on the grand tour and listen to every detail of what they want, we'll simply cut the visit short and say we'd love to help them out if they'd like. That's it.
Some house calls have litterally been less than 5 minutes (15 minutes total with travel) for months of good work. It helps to have a good size backlog so we're never desparate for a job.
It's easy to forget how people will waste your time and a call can turn into half a day lost to overhead. I made that mistake last week and it cost nearly $100 in lost revenues that can't be made up.
Beer was created so carpenters wouldn't rule the world.
Thanks for the the input, very enjoyable and thought provoking read.
couple questions. you mentioned short lunches. how do you exactly handle them. If I take a lunch it is not more than 1/2 hour if that ( often I skip). I will always give my help a half hour lunch. but I don't bill the customer for lunch break. what do you do?
how do you handle any screw ups that need to be fixed. If I have to redo something due to my fault or the fault of a helper, I subtract that time from what I bill. not much different from when you're working on a bid job and you simply eat the time for mistakes anyway. ( not that our work is filled with mistakes - but it can happen)
also you mentioned, about when want a fixed price . you'd estimate for time and then add 50%. would change orders still be in the mix, also when you say uncertainties, would that cover any and all or would you still have a provision for "big" surprises?
Edited 2/17/2007 6:41 pm ET by alrightythen
couple questions. you mentioned short lunches. how do you exactly handle them. If I take a lunch it is not more than 1/2 hour if that ( often I skip). I will always give my help a half hour lunch. but I don't bill the customer for lunch break. what do you do?
As for breaks, I normally take a few 15 min. breaks each day which are billed. If lunch is 15 minutes it's no different from a break so it's also billed, but if 30 minutes or longer is taken then that's time off the clock. Few clients will complain about a paid 15 minute break every 3-4 hours, but 30 minutes away from the job is hard for most to swallow.
If I'm actually working on a job related problem while eating, that time is billed.
It's tempting to pack lunches and snacks so the time can just run continuously, although it's nice being so close to home and I take the full 30 minutes to check the mail and whatnot.
If a client calls when I'm off the clock it's billed because that's time out of my day for the sake of the project.
how do you handle any screw ups that need to be fixed. If I have to redo something due to my fault or the fault of a helper, I subtract that time from what I bill. not much different from when you're working on a bid job and you simply eat the time for mistakes anyway. ( not that our work is filled with mistakes - but it can happen)
I explain to clients that construction isn't an exact science and not every board is cut correctly and sometimes our best judgement creates a situation that needs to be reworked, which is simply a normal part of all construction. We make as few mistakes as possible, but to be 100% mistake free would take twice as long.
The bottom line is the clients are hiring us for our professional judgment and skill in building as quickly and effiecently as possible with above average quality. If you don't bill the client for a normal part of the job, then it seems you're giving away time for free.
Same goes for material waste, restocking fees, time to return unused or damaged materials, extra trips required because something was forgotten, etc. Unless it's a gross error on our part, those are simply part of normal construction.
However, if you want to take a hit on those items and make them part of your overhead you'll have to charge more per hour to cover it. If you take the hit on small items you'll be asked to take it on large ones as well. You'll also have a nit picker client who wants to watch you work and demand a time refund and replacement cost for any miscut board.
If clients ever push the issue and question what incentive we could possibly have to not take advantage of this, I'll remind them that they have hired us based on our reputation as professional carpenters to work in their best interest and that we litterally make more than 100 value judgments a day to build as efficently as possible. If they aren't comfortable with our level of professionalism, they are welcome to hire other carpenters because we have clients waiting that do have confidence in our work.
Most clients are clueless as to the amount of fine tuning our processes go through to be effiecent and they think something simple is somehow going to be handled like we're highschool kids. Reminding clients of how much we stress productivity is really important.
also you mentioned, about when want a fixed price . you'd estimate for time and then add 50%. would change orders still be in the mix, also when you say uncertainties, would that cover any and all or would you still have a provision for "big" surprises?
I won't give away time for a complicated bid. Clients are told that my work is T&M and that if they want a bid it will have to happen at the normal rate. Adding the 50% is somewhat of a broad oversimplification of producing a good bid, but representative of most of our projects. I tell clients 50% is added as a standard answer, but if the project has a large number of unknowns and high risks then that number may jump considerably.
If the job has some big unknowns, such as how usable a foundation is going to be, soil conditions, areas based on the performance of others, or anything that can't be uncovered up front, I'll simply state in the contract that the bid is based on those unknown items being usable as is and that any and all work to correct those areas will be billed at $xx/hr. As more of these exclusions are added the job becomes more and more a T&M job.
If the client balks at anything less than one price for the work I would have no problem whatsoever assuming those items are going to be replaced and price accordingly. If it prices me out of the deal so be it we have other clients waiting.
The more a client sounds like trouble the higher % of fudge factor is used. For instance if a client lives in a house devoid of all dust of any kind, indicating a cleaning obsession at best, and we're replacing walls and floors I'd add a 10% "nutty client fee" in addition to whatever the best dust prevention for the situation costs.
Those who bid on a regular basis are much better at handling the client interactions than I am. Personally, preparing bids seem like a good way to spend time off the clock.
Good building.
Beer was created so carpenters wouldn't rule the world.
have you thought of writing a book? I really like the way you explain how you do things and your different approaches.
"If a client calls when I'm off the clock it's billed because that's time out of my day for the sake of the project."
when you bill, how detailed do you get in your itemizing. use the above for example, do you simply blend it in with your other hours, or does it get itemized?
on one current job I decided not to itemize all the man hours. I charge by a scale rate per position. as I am still new being on my own I have part time help but do a fair amount on my own. so my rate is higher. But when I billed I decided to simply bill total labour hours. but I am wondering about the other stuff. I guess if one is bidding you have to account for that in the bid.
when you bill, how detailed do you get in your itemizing. use the above for example, do you simply blend it in with your other hours, or does it get itemized?
When calls come in off the clock and standard rounding is used to decide how much time is billed you'll have 5 calls that won't break 7m29s and so are rounded to nothing. Better is keeping track of them and when a few short calls add up to 15 minutes it's billed.
How things are itemized depends on what you are trying to draw attention to and what's better to minimize. Some clients want details and others don't. Sometimes I want them to see specific details, like change orders or phonecalls, and sometimes not (honest mistakes).
I list off the clock phone calls individually because I'd rather not have them and when a dollar amount is shown in black and white with the date and time it's obvious what it was for.
If I'm on another job and a client talks for 5 minutes, I have to make a 2 minute call to a sub, then go back to the job where I'm standing there is more than 5 minutes out of my day. In that case the client would be billed for the two phone conversations and how much lost productivity there was where I'm standing. Definitely at least 15 minutes. The other client will appreciate the credit.
Likewise, one day a week is spent on small jobs, usually a few minutes away from the main job. When something comes up that requires a quick trip between sites, the clock is running from the time I leave until I'm back in work mode and my concentration is back to where it was interupted. A 3 minute call may turn out to be 30 minutes of lost time.
When these situations occur I'll point out the reason behind the charges or credits when presenting that week's invoice. Even though it's a minor 15 minute credit, clients like to know that you keep track of both the productive and nonproductive time.
If a detail oriented client wants details broken down I let them know that the extra time required for that is billed. Even if it's just 15 minutes a week, that's $8 either in my pocket or theirs.
It works well for me to work no more than 50 hrs so the schedule is usually 10 hr. days m-f. During that 50 hrs. everything job related, including paperwork, is completed and all hours are getting billed to someone, unless it's a call for a new job or something personal comes up.
When a client balks at a charge for something like paperwork I simply remind them that to prepare the paperwork was time out of my work week for something directly related for this project and that's what we agreed to up front.
Cheers.
Beer was created so carpenters wouldn't rule the world.
Yes, I agree with the T/M work. It's best for both the contractor AND client. If a firm bid is demanded, we have no choice but to jack it high. Untill X-Ray can be used on a building, who knows what lurks behind the walls and under the floors. Even then, that wouldn't tell the whole story.
There are just too many things that can go wrong. That's the first thing I think when looking at a new job. What could go wrong here? And that is including the client. One clue is if the client is more concerned with the cost or the final product.
I personally work much better by the hour and this way I am thinking about how to do the job right, not about making the bid pay off. If the client knows you are working for his/her best interest, everyone wins and the job is done right. I have not advertised in more than 2 years. Good work brings in plenty of future work in the Seattle area.
I agree the T & M is very nice to work under but we never have any potential clients that would agree to it. Even now we are doing an estimate on a tricky renovation at a school and they need to know a bottom line no matter what!
I agree the T & M is very nice to work under but we never have any potential clients that would agree to it.
You aren't alone. I was surprised shortly after moving to Boise that very few jobs of any size are T&M. It's simply not the way things are normally done around here. Some subs have never had a T&M job and didn't know how to bill for it.
Back home many if not most jobs, including multi million dollar homes, are T&M, at least with the higher quality builders and remodelers.
Beer was created so carpenters wouldn't rule the world.
pacific... with all due respect ......BS !
fixed price contracts are so much better for profit AND customer satisfaction
i use both... but prefer FIXED PRICEMike Smith Rhode Island : Design / Build / Repair / Restore
Mike, the people that I've known that used fixed price effectively had large companies. They had nearly 100 employees and also used a wide array of sub contractors. Their volume alone translated into a nice company profit.
blue"...
keep looking for customers who want to hire YOU.. all the rest are looking for commodities.. are you a commodity ?... if you get sucked into "free estimates" and "soliciting bids"... then you are a commodity... if your operation is set up to compete as a commodity, then have at it..... but be prepared to keep your margins low and your overhead high...."
From the best of TauntonU.
jim... the problem i have with T&M is two-fold
one ... you have to suppress your rate or the customer will balk
i can charge a much higher rate on Fixed Price than i can on T& M
two...... it is very hard to deliver satisfaction with T&M..... if you Guesstimate that the job will vome in at $100K and it comes in at $120K.... you have probably got a lot of ill will
if you are right on with your estimate , then why are you working T& M ?
one o f the things i hate about T&M is invariably.. a number gets floated out there and that becomes the measuring stickMike Smith Rhode Island : Design / Build / Repair / Restore
Agreed, Mike- hearing the hourly rate can make people queasy, even when a lump sum of that rate x the required hours won't.
I had a meeting with a friend of mine who wanted me to do some preconstruction work for him, and I told him I wanted to bill him hourly because some of the tasks would be difficult to put timeframes on. He asked what the rate would be, and I told him $160/hour, which he balked at. I then explained that one of the tasks he had asked about (an estimate on probably a $10 million project) would likely take around 20 hours, so I'd charge him $3,200. His reply to that was "that's better- I can live with that". Hello!!!! It's the same number!!!
I guess it's all in the presentation......lol.
Bob"Brilliance!! That's all I can say- Sheer, unadulterated brilliance!!" Wile E. Coyote- Super Genius
I run into that same sentiment a lot, Bob. Not with the numbers you mentioned, but the principal. A lot of people are just uneasy about turning you loose t+m, even if itellectually they can understand you upcharge them when you assume the risk of a bid.
Many, many people are simply more comfortable with a fixed price, with knowing what something will cost them before they agree to hire the work done.
I have long been a proponent of working t+m. I like to work WITH people, allowing the job to unfold as it progresses. But lately I have been leaning towrds bidding for the reasons Mike stated - there's a lot more money to be made that way, and you don't have the customer standing there with a stop watch every time you take a break, or stop to straighten up your back for a second. Remodeling contractor who once visited the Glass City.
Bob, those two offerings aren't the same number at all!
The first was an openended 160 per hour bill which didn't have a cap. That number could balloon to the six digit number
The second offering was a fixed bid of 3200.
It wasn't the presentation that made the deal, it was the cap.
blue"...
keep looking for customers who want to hire YOU.. all the rest are looking for commodities.. are you a commodity ?... if you get sucked into "free estimates" and "soliciting bids"... then you are a commodity... if your operation is set up to compete as a commodity, then have at it..... but be prepared to keep your margins low and your overhead high...."
From the best of TauntonU.
Mike, I've done some t&m's for homeowners and I don't like them either. I used to do them all the time for a commercial contractor and they worked fine because he was also t&ming the building owner. He worked almost exclusively on t&m and he certainly had a handle on his numbers and managed quite well.
I do a lot of small t&m contracts with builders...usually on addons to a rough. Generally, it goes without a hitch until we start working for one of those bloodsuckers that want you to do everything, then pay you for half. That's a different subject though
You are right.....the t&m gig is a niche method of billing that I'm not that interested in for the same reasons you are.
blue"...
keep looking for customers who want to hire YOU.. all the rest are looking for commodities.. are you a commodity ?... if you get sucked into "free estimates" and "soliciting bids"... then you are a commodity... if your operation is set up to compete as a commodity, then have at it..... but be prepared to keep your margins low and your overhead high...."
From the best of TauntonU.
I agree that T&M jobs are best for the client and almost so for the contractor. The client pays for what's required, not more or less.
The major downside to T&M jobs seems to be lower profit on jobs that are relatively easy, but look complicated to clients.
Remodels are a perfect example. If the house is blessed with usable plumbing, electrical, HVAC, and floor framing, the costs per square foot are relatively cheap to strip down to studs and rebuild. Clients are more willing to overpay in these situations since they don't know any better. These are the jobs we should be bidding.
On the other hand a very similar looking house that was less well built or poorly maintained may have all sorts of problems that drive up costs $50/sqft or more. These jobs seem to be the ones we're most competitive with since clients have a hard time swallowing the high bid prices. Our costs often less than what others have bid, although we fix more problems than were in the original bid specs and have better finish results than those same contractors. In these cases we're a much better deal for the client and it's not stressful for us since it costs what it costs.
However, T&M does require a large degree of trust from the client and more careful hand holding for everyone to end up on good terms. Micromanager clients or those who think all GC's are out to rip people off do much better with bids.
Beer was created so carpenters wouldn't rule the world.
I'm a residential remodeler/carpenter.
Bidding sucks. There's so much time spent getting someone a price and then you don't hear back from them?? Phone calls, travel time, consulting, estimates. I deal with a lot of people who could easily afford the jobs I bid on, I give them a fair price, then don't even hear back. Drives ya nuts.
The worst is when all the jobs roll in at the same time and I have to give the bad news, "sorry, I'm booked for the next month", then they're shocked. I'm like, you should've hired me when I gave you the estimate a month ago, that's when I needed the work.
It's a tough game to play. If you can't afford to sit home then you have to work for much less just to keep something coming in.
Lately, I've probably been getting 1 out of 6 jobs that I bid on but it's hard to tell because some of those people who didn't call back could call back in a year, that's just how it goes.
The problem is these home shows that show "Joe homeowner" how to remodel something. So now he thinks that since he knows how to swing a hammer that he also knows how much I should charge, but of course they forget about all the things we have to include in our price like tax, insurance, help, materials, bits, etc....that all adds up buddy.
"Bidding sucks. There's so much time spent getting someone a price and then you don't hear back from them?? Phone calls, travel time, consulting, estimates. I deal with a lot of people who could easily afford the jobs I bid on, I give them a fair price, then don't even hear back. Drives ya nuts."
Potential clients don't call you back? Funny, I have been a potential client and the contractors don't call me back. I guess they have more work than they can handle.
Well, rude is rude on which ever side of the deal you are on.
"Potential clients don't call you back? Funny, I have been a potential client and the contractors don't call me back. I guess they have more work than they can handle.
Well, rude is rude on which ever side of the deal you are on."
Nothing could be more true.15 years ago I did mostly remodeling time and material only. After getting hurt and could not work for 3 months I went into a auto body parts and supply business.Well in 2001 my wife and I finally decided we wanted to buy some property and build a house.The house that we decided to build was a Cape Cod style with some extra features.I went to a local young contractor for an estimate and letting him know that much of the interior was to be done by me and my wife.He said that he would get back to me with a price soon. He never did give an estimate.I went through this same process with three local contractors. All with the same results..nothing.Then after 3 years I called back the first contractor and asked him if he would consider giving an estimate for the house again. He response was " Are you going to build this time?"I returned the answer with CLICK.We are now in the process of building that house in the neighborhood that that contractor lives and has to drive by it and look at another contractors sign out front.
We have been asked by many why one of our neighborhood contractors aren't building our house. Our answer is because they don't like to give an estimate and are rude to deal with. As a result the contractor building our house has gained alot of exposure in our area and the other contractors are doing roofing jobs.
Lesson here: If someone keeps kicking the tires chances are they will someday driveaway in that car.http://www.superwoodworks.com
Then after 3 years I called back the first contractor and asked him if he would consider giving an estimate for the house again. He response was " Are you going to build this time?"
Unbelievable. If he is still in business in another three years it will be a miracle. He certainly doesn't deserve to be in business now. Politeness is free.
On estimating jobs, I've learned that only the rarest of people can separate the tire kickers from the serious leads on the basis of one short conversation.
When we get a call from a potential client, they always get three things; a prompt return call, a scheduled initial appointment and a written initial proposal. ALWAYS. How people stay in business any other way is beyond me. The tire kickers bother me, but we have found that our approach turns many tire kickers into buyers. If you take them seriously, pretty soon they are thinking seriously. There is no magic-pill substitute for enthsusiasm and persistance. ( works on wimmin too BTW {G})
"On estimating jobs, I've learned that only the rarest of people can separate the tire kickers from the serious leads on the basis of one short conversation. "
I don't know how I do it, but I can tell a tire kicker from a serious buyer in the first two minutes. That doesn't mean that I am not polite to the person but I will pay attention to that impression. I don't want to turn a tire kicker into a buyer. I would rather have a customer who comes to me because he wants me to do the work. These customers only concern about price is whether they want to pay it. If they can, they want us to do it.
If I have doubts about anyone, I will give a price that I know will drive them away or I will not have time in our schedule to do the job. Both of these excuses will simply enhance our reputation while at the same time discourage tire kickers.
"I don't know how I do it, but I can tell a tire kicker from a serious buyer in the first two minutes. "
Just curious how you know for sure that you guessed right? Do you go back later and see if they did it with another builder? I believe that I've had a few decide I was kicking tires, but I have gone through with every job I've talked to a contractor about.
I usually do know of the outcome because most of our work is done in five towns with a year round population of less than 7000 people.
Perhaps tire kickers is the wrong term for the folks that I can screen out shortly after interacting with them on the phone or in person. Lets just say that I decide that we are not a good fit and that they would be better served by another contractor.
One of our competitors is jealous of every job that he doesn't get. I have never understood this attitude. We couldn't do and wouldn't want to do all the work that we could possibly get. We will have to say no some of the time. Why not say no to jobs that you don't want to do, either because the work is not interesting or suited to your particular talents or because you don't mesh with the customer? It has been a long time since I was desparate enough to take almost anything that people wanted to pay for. Maybe that time will come again but until then I will use my opportunity to choose the best jobs for our company.
Edited 3/14/2007 6:15 pm ET by Schelling
Many people may appear to be tire kickers but remember that this is going to be their home and for most it is an emotional time when it comes to building a home of their dreams. It is a process that needs to be worked through for most couples.In our case we wanted opinions and to listen to ideas from the contractors and learn about their building practices. This is not a small purchase and can be costly when things go array.Although we may have appeared to be just trying waste someones time, we were serious and needed to know the cost so we could get our ducks in a row because at the time our house was not to be sold before we had a new home to move to and finances could be limited. We knew how much we could afford to payout for construction loan payments without the cash from our home sale which would be directly related to the cost of building the new home.http://www.superwoodworks.com
I agree they should have called you back, another point is your key words, im going to do work myself, That scares a lot of contractors off, Another point is i almost went broke and ruined my relationship with my subs calling and asking them to price out jobs, Then i never got a call back after days of work,just a that guys to high,, after my schooling i never gave any bids unless the people had plans and were serious, You have to remember theres a lot of talkers and dreamers out there, I do roofing to and im not ashamed of it, that does not make me a failure
We did have plans. And the only sub he had to worry about was the Mason.
Only the shell was to be estimated and the escavation part of the estimate was to be an allowance.
I never said that roofing was to a sign of failure. Where I live it is hard to make anything but barely wages doing residential roofing and small jobs. Too many part timers willing to do the jobs at a cut rate. I know, I've been there.Anytime another contractor come into a small area such as ours, people ask questions. If the comments are good for the contractor from the next town, it is good advertisement for him and not so good for the guy that lives down the street.http://www.superwoodworks.com
Try the expiration date on the bids as been discussed here before. No way you can honor a bid you gave ten months out. Give them a window to decide and give them your proposal in person.
When contractors are busy, getting a bid from them is sometimes impossible. I called a local design/build firm quite a while back. Wanted to talk about a 600sf add-a-level, with a new stairway, and one, possibly two baths. I think the guy decided I was a tire kicker: first he told me they would NOT build a shell and allow me to do the finishes (I'd do the whole job myself if I had a couple helpers and felt more confident about framing the roof, and then roofing a 12/12 pitch fast enough to beat the weather). Then after talking for about ten minutes he told me my budget of $85,000 was unrealistic, and that we'd need to be talking about well in excess of $100k. I got the distinct impression he was trying to get rid of me, and it worked. At least that outfit called me back. Two others did not. At that point I exhausted my list of recommended local builders (which I had gotten from an excavation specialist who is a friend), and before I could ask around any further, spent my money instead on a business opportunity and a new car. We'll never know if I was really just kicking the tires. I did have the resources available at the time and I think a good builder would probably have gotten my business."If the trout are lost, smash the state."
you were kickin tires or you would not of spent your money on a car!
"I did have the resources available at the time and I think a good builder would probably have gotten my business."
James - could you give an example of what you mean when you say "...a good builder..."?Romania wasn't built in a day.
"James - could you give an example of what you mean when you say '...a good builder...'?"
Sure, Jim. I guess I mean a lot of things in this context. I was looking for both design and build, so it would have taken a designer with at least moderate skills to deal with the existing floor plan and add-on in a sensible way. I would have wanted someone who was polite and patient in dealing with us since, as somebody else has pointed out, a major change to your home and a major financial investment is an emotional process for the owners. I would have needed a builder who could show me some good past projects and had some solid references from past customers involving both flraming and trim work. I would have needed someone whoc ould explain how they could do this work on our second floor without totally ruining our loves down on the first floor. And it would need to be someone who could show the ability to help develop a budget then finish the work within it."If the trout are lost, smash the state."
What you are looking for in a builder is very commendable and there are many builders who could meet your qualifications. But in order to convince you that they are your man, they will need to expend time and effort. They will need a better closing ratio than 4:1. Unless they are charging for this effort, as Mike Smith does, they must make judgements about the likelihood of getting the job. This is what we do. Considering that some of the preliminaries can last for years without a dime being earned, this is a pretty important job.
Of course politeness is a given but sometimes a little plain speaking is in order for everyone's benefit.
Something interesting to all of the replies is the fact that only one or two have mentioned the fact of paying for an estimate.
I wouldn't feel as frustrated in all of ours if we could at least make some money for our time invested. We have tried to propose a design agreement whereby the folks would get a set of working plans they could keep at the end of the estimate as sealed plans are required in our area but not many folks will take you up on it as they don't want to spend the money, just want to know the cost of the project.
Charging for estimates is tough in our area however as there are so many guys willing to do the estimates for free most folks aren't sold on quality or integrity, they want low cost.
I am a bathroom and Kitchen remodeler have one full time employee (just a little insight) and I have given this subject a lot of thought.
I think that you really need to qualify your potential clients before biding. I get 90% of my work and I am not cheap. I have been told that "you are expensive".
I work strickly by referal and do a little research about a potential client. If I am gointg out to bid a job it is one I want. I don't have time to bid several jobs and only get 1 out of 6 If I find out that they are getting a couple of other bids I politely excuse myself from the biding process.
We give a level of service that is unheard of in the construction industry and go out of our way to leave the job with a very satisfied client which refer the heck out of us.
In short I think it depends also on the size of you company as to the ratio of bids to bookd jobs.
franklin, i'm with you...
if they are soliciting bids, i will decline to bid.. no one is going to include the things we are, so it's a waste of our time
sometimes i would get lulled into bidding.. they made it sound like i was not bidding against others... only to be told our price was higher than so-and-so's
now, when we get paid for our Proposals, we know they are genuinely interested in us doing the work.. so we close almost 100%Mike Smith Rhode Island : Design / Build / Repair / Restore
I have often said I would happily pay for an estimate. If I am looking at $30,000 remodel, what is a couple $100 dollars to make sure that we have the right fit with the contractor? You get what you pay for and a free estimate is worth what you paid for it.
The "no call back" is related to "free estimate" expectation. How often do you want to work for FREE? 300 Hours per year? 400? If you did a search on the phrase 'free estimate' you'd see this is a long standing discussion here.
If I'm not interested in doing an estimate I send a polite form letter saying so.Best to you and yours, Chris.
Some say I know too much? Can you ever?
We close between 20 to 25% of the jobs we quote. The more you advertise to the public the lower your close rate will go. Unless you are bidding really cheap which we don't do. Our close rate with referals and repeat customers is around 65%. Shows you where the money is. DanT
We close 4 out of 10 jobs that we bid, on average. We do residential building and remodeling(decks,basement finishes, siding, additions, roofing, windows,new homes once in a while.) It varies in the short term, we might go 10 bids and not get one, then get 6 in a row. I would say we are priced in the middle of our market. Not the cheapest but not the priciest either.
I put the mental in judgemental
Mike,
I work for a local "full service" remodeling firm, last year I tracked our leads we closed approximatly 25% of the number of jobs we put a proposal out on and around 28% of the dollar volumne.
Those numbers are lower then I would like to see them but not horribly so. On the other hand we had a horrible year last year.
I'm the poorest excuse for a good bidder because I get more jobs than I should. Meaning I price myself too low. I understand that 1 in 5 is a good average. I just have a hard time developing leads. done the paper, the phone book, referals, etc. they just don't come in that often so I'm always wanting that job. kind of like an addiction, I can't help but shave the number down after I know what it will take, then get the job and find out I would have made a profit I like on the origional number I had. Don't sell yourself short is all I'm saying. It's easy to do.
"it aint the work I mind,
It's the feeling of falling further behind."
Bozini Latini