Hello All,
I know we’ve talked about it alot but just revisiting the estimating process…
For example, let me give you a few scenarios we just experienced several times in the past few weeks.
We receive a call from a potential client who wants to build a custom home. The have no plans (in Floirda plans have to be signed and sealed by an engineer or architect so they cost some $$$) yet they want to discuss their project. and talk price. How much time do you spend on that kind of prospect and how do you charge for it? Do you pay your subs to get estimates to you so they are not working for free?
Second scenario:
Current homeowner wants to add on to their house yet doesn’t know which direction to turn and not sure if they want to spend $$ on plans incase they don’t want to do the job. (an addition can still run $1k for engineered plans) I can “ballpark” a cost but we know what that might get us into.
Now, I know I could just say, “pass” to these kind of folks but these are 90% of our calls and after all “you gotta eat”.
Any thoughts? Thanks
Mike
Replies
I think conventional wisdom says there will be miscommunication without clear understanding. I think it is fair to give them a typical square footage cost to get them started, but then tell them that you need much more information in order to give them an honest answer.
Probably most people don't know that a decent work costs $150/ft minimum. Most people probably don't have the slightest clue.
KS,
I agree as we have just given a sq. ft. price in the past (say $100-125) and then we get the "Wow!" and something to the effect of so-and-so estimated it at $85.
I sure wish there was an easier and more direct way to do this... I've been doing it a while but it still seems to be such a arcane system compared to many other professions.
Mike
What's worked successfully for us on commercial projects is to put together a little "data sheet" for each typie of porject we do. The sheet shows 4-6 projects we've done similar to what's being discussed, with the costs for each broken down into categories- so much for excavation, so much for electrical, etc. You can then show the client where the range of numbers comes from- "this project had extensive interior finishes, so that numbers is very high. This one had a full basement, which raised the excavation and foundation numbers", and so on. If they come back with the old "so and so estimated it at $85, you can then counter with "well, if you and I can get one or more of these numbers reduced dramatically, maybe that's possible, but I haven't seen it on the projects we've completed to date". They likely didn't get this level of info from the other contractor.
At least with the data sheet, the client can get a better feel for how your $100-125/SF number breaks down, and can see more managable figures for each component.
Bob
Good idea Bob thanks.
Mike
And don't let them keep the detailed sheets. Treat it as confidential information. Have something else that they can keep that has less detail (like your business card <G>)
http://jhausch.blogspot.comAdventures in Home BuildingAn online journal covering the preparation and construction of our new home.
I just had a hair salon client find some one to build their project for $50,000.00 less than my price. That's a big chunk out of $140,000.00. When they tried to take that to the bank for the financing the bank told them they would not write the loan. My numbers were historically accutrate with what they had previously financed. The $90,000.00 bid was unrealistic. (they don't know I know this) Now they are calling me back to finalize the contract.
I only use square foot pricing for a ballpark idea. I explain to clients square foot pricing is very misleading. Too many variables can drive the prices up.
are you saying that the bank looked at a contractor's proposal and deemed it unrealistic ?
carpenter in transition
Yup. They are afraid of getting stuck with a property with a botched up remodel job that will cost a bundle to repair. Plus, if there isn't enough money to do the job right, how will they ever get the doors open to start making money to pay the loan back?
Does the loan officer know that much about remodeling costs, or did he or she ask to see ALL the written proposals?
It wasn't the loan officer but the underwriter. They took my estimate with the break downs and compared it to a book ( not means I forget what one they used, I just know it's one the loan industry uses) . I can't help but wonder if the impossibly low bidder just wrote a proposal and sent it in. Either way they are now back to me about finalizing the deal.
I never give breakdowns. Never. Lump-sum has become my game.
As detailed a description of the scope as you can imagine, and perhaps some allowances for products not yet chosen, but absolutely no breakdowns.
IMHO, all a breakdown does is to cause arguments, anguish, anxiety, nit-picking, and generally no good relations with a client.
There may be some clients and some lenders for whom a breakdown must be presented, but for me life is too short, and there are plenty more who like the one-price method.
Makes me wonder whether that bank would have qualified me and my proposal.
>>makes me wonder whether that bank would have qualified me and my proposal.
Probably not. To do a job funded by a construction loan, you (the contractor) have to turn in a detailed budget. The budget has to make sense and you probably have to have a track record. A guy I know is doing a spec. He's a specialty sub and could not get a loan approved based on his business type. He had to bring in a general to handle the qualifying.
I disagree.
I have been successful showing a lump sum and only a description of what elements of work must be completed for each partial draw payment, and it works with lenders.
Example, new house:
Lump sum contract $50.
Draw 1, $10, upon completion of deck-capped foundation, complete with all backfill and rough grading all around.
Draw 2, $15, upon completion of building enclosure, including roof underlayment but excepting finish roof shingling, and including installation of all exterior doors and windows.
Etc.
Of course, financing rules and regs are quite fast and loose here in NY, with Ms. Clinton and Mr. Schumer as our Senate reps, and Mr. Elliot Spitzer as our new Gov.
Edited 12/20/2006 10:27 pm ET by Gene_Davis
Gene,
I used to be able to do what you do. Not any more, banks now (at least in my area) require a pretty accurate listing of fixtures, itemization of everything included on the project . Each draw they send a person out to check on progress and ensure what is installed matches what was listed to start with. More then once I have had to explain why we didn't use what the originial loan sheets had listed.As for clients asking me about sq. ft. pricing without giving me info , I simply ask them how much does a car cost ( I can get you into a brand new car for about $12,000 or a Maserati for about $170,00 which is it you wish ?
They get the idea pretty quickly that it all depends on what car they are buying .
Another way I have approached the situation is to ask what kind of kitchen counter surface do they want, What kind of tub/shower in the M. Bath and what kind of flooring . (carpet, wood tile etc.). I can then use their choices to demonstrate how these few items can impact the $ sq. ft. price dramatically.
But then I hate bidding(nothing but a poker game as far as I can tell) so do as much of my work as possible on Cost + fixed fee
My work scope description in the contract provides a highly detailed itemization of specifications, materials, fixtures, and includes schedules for such as lighting, plumbingware, plumbing fixtures, and appliances.
A bank inspector has no trouble inspecting to see that what is installed is what is called for in the contract.
I simply don't spell out what is being charged for each and every item and quantity.
Got it, amounts to what is done here really. I misunderstood what you had said.
Bob,
jhausch brings up a good point in 83086.6, do you give your prospective clients this data to keep, or is it just a quick peek? I can see both sides, but I'm going to guess that you let them keep it.
Jon Blakemore RappahannockINC.com Fredericksburg, VA
Normally we let them keep it. There's no names on the projects, so no one's privacy is being violated, and it allows them to start looking at bits and pieces of their project to see where they fit in the range. For example, if they go to a cabinet showroom and find cabs that they like that cost $10k, they can go back to the data sheet and see what the cab costs were for various projects. If they've got a $40k budget and they see that a few jobs with $10k in cabs were in the $60-70k range, they know they're likely out of their range.
I don't see the harm in leaving them with this info.
Bob
I think that it is a great idea. For most of us it would be an invaluable exercise just compiling the data sheets. In our case and I expect this is true of many contractors, we are only competing with a small number of other contractors. Our biggest problem with pricing is coming up with numbers that make sense with our finances and with the customers wishes. This is what drives the inevitable back and forth at the beginning of any project until both parties are satisfied with the product and the price. Any information that can be easily produced and understood is going to be a big help.
I look at it this way. If the client is paying for the proposal, they are going to get a professionally done package of drawings, details, specs, schedules, and an itemized work scope litany, plus price proposal, proforma contract that includes a sample payment schedule, etc., etc.
If they are not paying, they will get a presentation of what we have prepared, but we will not leave any papers behind for them to keep, save a simple sheet with our contact information and the lump-sum price.
Period. We let them use their own notes or memory to remind themselves of what all is in the price.
We have found that anything left behind can be used against us. They'll take our plans and details to cabinet and millwork shops, our schedule detail to Lowe's and Depot, and they will copy the whole thing and give it to some uninsured jackleg to try to get a lower price.
As an architect meeting with a potential client to discuss their potential project, my first meeting is to get to know them, let them know a little about my process, and then ask them a good number of questions which will help to figure out the total scope of the project. The questions don't only linger on how big and how far, but what do they feel their existing space is deficient in, how do they use the space now, how do they entertain now, where do the kids do homework now, etc. Then how would you prefer to do all of those things.
Of course the discussion always gets to what would something like this typically cost. What is typical? I give them an idea of a cost/SF range, but the I explain to them that can be misleading. The best way is to at least go through a preliminary phase to come up with some preliminary plans and elevations. Fine tune these prelims once or twice and then do a cost estimate based on this. The more information you have, the more real the numbers are. You know how many windows and doors there are, you know how many plumbing fixtures, you can figure out area of finish flooring, drywall, roofing, soffites, and even put together a number of outlets, switches, lights. You can ballpark a cost for HVAC based on the area. However, for this amount of architectural service, they are informed that there is a fee. They then decide on how comfortable they are with you, your reputation, etc. Then can check out other architects. Many times I go into these meetings with a general contractor that I have worked with who can answer some questions that relate to his work. The general contractor I go in with is not guaranteed the job, but is told he can bid it.
I do not charge anything for this first meeting. Afterwards, I write up a proposal for architectural services summarizing everything discussed. Then we wait and see.
Edited 1/15/2007 7:53 am ET by JoeArchitect
And just as a follow up to all these ideas guys, do you charge for this time and estimating? I know JoeA said his first meeting was free but what about the rest of you?
Mike