Business Models for Brand New Businesses
What’s the best plan for a business model of a brand new construction company? <!—-><!—-> <!—->
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This is what I’m thinking of right now:<!—-><!—->
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I’ll begin with free estimates. When the customer calls, and then I go and survey the job and write up a proposal for free. I plan to stay at this stage for no more than six months.<!—-> <!—->
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Once I get my name out there, I’ll quickly move up to charging for estimates. When a customer calls, I’ll charge a small fee to go and survey the job, and then I write up the proposal for free.<!—-><!—->
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Then, when I get a hold on the designer market, I’ll switch to cost planning. When a customer calls, I’ll once again go and survey the job for free, but I’ll now charge for my proposal instead by getting involved with the designer from the start and helping my client plan the cost of the design to fit within his budget.<!—-><!—->
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Finally, when my company develops a widely known reputation, and I acquire the resources to become a design/build company, I’ll begin charging for proposals. When a customer calls, I’ll still go and survey the job for free, but now instead of charging for cost planning services, I’ll start charging for the very proposal.<!—-><!—->
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Any thoughts?<!—-> <!—->
–T
Replies
IMO it would be easier to budget estimating and proposal expenses as part of your overhead. As the owner, you're only going to earn 25 cents an hour for the first couple of years anyway, so why put your business at a disadvantage by trying to charge for services the competition gives away free?
As the owner, you're only going to earn 25 cents an hour for the first couple of years anyway,
I'd say more like $1.25/hr for the first 40hrs/wk, then $.00/hr for the next 40.
No, your're right. He'll have at least $30/wk for gas so he'll net out at $.25/hr.
Hey, I still buy my rice and beans in the 25lb bags at the discount food store. Some of those old lessons are worth remembering.
It all sounds so tidy but reality will be so much more complicated.
Right now, we are establishing ourselves in a new market so our name isn't "out there" yet. We can't make the mistake of acting like it's not out there though....
Saturday, as we pondered several estimates that are being proposed today, we wrestled with this very issue. How do we make a propsal to a client that has plans, but no engineering and no specifications and needs a little more detail on their plans to convert them to construction drawings. It's a fine line to walk. We want the job, but we don't want to promise a price we can't meet. We want the job but don't want to appear too "cold" by demanding that they pay us to develop the engineering drawings and construction drawings.
The conversation reminded me of the many SCA (Sonny's "Specification and Cost Analysis") discussions that have glossed these pages. In the end, we opted to let the designer do whatever she felt would close the deal and write in the appropriate disclaimer to cover ourselves regarding the engineering report. Basically, we are estimating about 5k worth of engineering and construction doc detailing and leaving an out that would allow us to increase the budget if something unusual comes out of the engineering study.
Like I said, it's complicated and it boils down to salesmanship. The design consultant has to merge our fears with the fears of the owner buying into a contract that seems to be fixed, yet isn't. It takes two people working in a good faith effort to reach a common goal. That's our approach and we think we'll be able to work it out.
We spent about 30 minutes discussing a 300k job. If we land the job, we will spend a lot more time specifying the job and get paid for it. There will be plenty enough money in the budget to accommodate this engineering and specifying period and we simply figured a high level of goods and services. We are selling on quality and can always get down to the nitty gritty of price slashing if the original proposal seems out of line. We'll toss out the superior quality specs and move in the intermediate level of good and services.
Bob's next test date: 12/10/07
Just my two cents JCT but I never tell folks I do stuff for free or they will abuse it. Let them call you for an estimate, hear what they want and then decide if you want to do it for free.
I will estimate a room addition or some project that I can figure out in an hour or two for free but I am not going to bid a decent commercial job or whole house for free as you are talking a few days to do so.
Just me saying that of course. After almost 20 years in and out of the business I am finally comfortable telling people they need to pay for my time. Don't let it take you 20 years to reach that level.