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Could you break down your costs for m…

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I’m relatively new at being my own ‘boss’ but I like it so far. Get to work 60 hour weeks instead of 45 hour weeks, but its nice doing things right and seeing a client pleased with a job well done. Anyway heres my question. On two of my most recent proposals (a basement finish and a bathroom redo) after the client has recieved my proposal– which is a single number at the bottom of a list of all of the services and materials i will provide. I get a call from the client asking if I could break all of it down line by linefor them so they can see where I get my Number from. Sorry this is so long and drawn out but I have tried this approach – line by line- and I get beat up by it so whats a young contractor to do.? I’m not trying to hide anything– just streamline my proposal process because we all know how much time goes into getting a proposal to a client. Not to mention the hours spent writing up free proposals for work not closed. Any help from the more experienced contractors out there would be greatly appreciated.

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  1. jim_"crazy_legs"_blodg | | #1

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    I don't think it's a good idea to show the customer your numbers unless it is a t+m job. I think it's perfectly reasonable to say "that is information I don't give out". You don't expect your lumber yard to show you his costs, do you? And when a car dealer says "100.00 over invoice and we'll show you the invoice" you know they are lyin'. No, you can't blame the customer for askin', but I don't think it's a good idea.

    Don't forget your profit and overhead. - jb

    1. Rob_Rehm | | #2

      *Jim's right. T&M give it to them If it isn't, they are going to try & beat you down on the price. If you don't budge & you get the job, they will find enough things wrong to get the bargain they want. Your best bet is to not take the job. What they are doing is warning you they are cheap bastards & will trash you to every one they know.

      1. MEK_Construction | | #3

        *Jim- Rob thanks for the insight-- I really don't feel like it is in my interest to break costs down for a customer unless it's T&M. Been there and tried that and have the bruises to show. Thing is they are being persistent and maybe I should look at that fact as a lesson before I learn it the hard way. Thanks guys. Also I have learned from them that I'm the middle bid and they just need to see where they can cut back. I don't mean to dwell on this, but I know I have a TON to learn about the business side of what I'm doing and want to do the best I'm able. Thanks again

        1. SHGLaw | | #4

          *How about another point of view. When the customer wants a breakdown, sometimes it's to weed out items that are more expensive than he thought, some items that he may have wanted but could live without or make less expensive choices.Why not try breaking out prices by areas and particular high priced items. The prices must include your profit and overhead built in. These are the numbers you are charging for your work, not your cost. For example:Bathroom:Vanity with fixtures: $5,500 (Note: Dorn Bracht faucet $1,095)Tub with fixtures: $5,000Tile: $3,500Frameless Shower Door: $1,500Travertine: $9,500This gives the customer the option of reducing the cost by making alternate choices, without you having to justify every screw. And it really isn't much to do.SHG

          1. Rob_Rehm | | #5

            *SHG you are close to an approach I will take on occasion. If I'm in a haouse where I am sure the taste for the project are outlandish for the budget, I will offer suggestions such as " I know the grohe shower tower loooks great but we could save over $3000.00 with a Moen." I still don't feel a need to discuss my profits with a customer.

          2. SHGLaw | | #6

            *On a small job, there's no reason to tell profit, just what the general areas cost the customer. On a larger job, profit and overhead are generally broken out as a separate number anyway, though you may make some on items that aren't broken out. But discussing profits isn't the point. The customer wants to know what certain areas, or certain items cost, and there is often a sound reason for it having nothing to do with trying to cut into your profits. If he wants you to do a job for x, and you're not willing to, that's the end of it. If he's willing to lower his sights, so be it.SHG

          3. William_Swales | | #7

            *I generally agree with SHG that a smaller job can be broken down into general cost areas. I personally don't show profit in a smaller job spec sheet but lump it in with the job costs. As a builder specilizing in high end renovations in the Philadelphia suburbs I have found it is always best to provide a detailed spec sheet with any proposal, large or small, for informing and detailing all aspects of a job. This is as much to inform and compare apples to appples as it is to protect you in what the client expects to get for their money. Any client has a legit right to question any and all aspects of a proposal and you as a professinal have a legit right to price your work as business with expenses and a right to a profit.Don't be ashamed of charging a profit. Conduct yourself as a professional and you will be usually be treated as one. Another suggestion to your future succes is to learn sales technique, your future as a builder depends on it. I wish you success with your new business. Bill Swales

          4. MEK_Construction | | #8

            *To all so far -- thanks for the advice. Very enlightening on what I could really be doing here instead of a complete line item breakdown. Did that once and the guy says What in the Heck are you charging me overhead for??!?? Any way I'm thinking of kinda breaking things out simply and just adding my P&O to each line so it doesn't need its own line at the end. Thanks for the advice so far.....

          5. jim_"crazy_legs"_blodg | | #9

            *Whenever someone asks me that I tell them what it's for. Profit too. After highlighting the nuts and bolts of bonds, liability insurance, modern equipment and such, I tell them the main reason they want me to make a profit is so that I will be in business long enough to stand behind the products or services that I provided for them, and the rest of my customers. If they find that unreasonable, no problem, they hire someone else. They are better off and so am I that we didn't work together.

          6. mark_cadioli | | #10

            *Good advice Young Bob....(.ya can tell us old farts.....but ya can't tell us much.)

          7. Ryan_C | | #11

            *My first thought is to run away from this customer.My second thought is to sit down with them and ask them what their budget is and work with them to redesign the project for that budget. I really like pricing out of a price book. Using this book, you don't have to break anything down but you can tell them that by changing x, you can save $y.

          8. SHGLaw | | #12

            *Ryan, why does it scare you when a customer wants a breakdown. Rather than see this as a threat, why not as an opportunity. This is the way to promote the better building skills you bring to the job. Rather than trying to use "schtick" to sell a customer (not that I'm saying you are) like "you can't get a mercedes for yugo prices," you can explain why building it right cost more than building it cheap, but is worth the money. You can explain the difference in materials, etc. and make yourself the hero. Isn't this an intelligent customer asking you to tell him why you're worth it?SHG

          9. James_DuHamel | | #13

            *If a customer is asking for a cost breakdown, they are usually refering to THEIR costs, not yours. They are basically wanting to know how much you are charging them for lumber, fixtures, labor on each project, etc... Sometimes they are really wanting to know where to cut their costs, and sometimes they just want to know why you were higher than the other bidders. If you are simply giving them $xxx for the whole job, with no breakdown on the prices of of the items, then I personally feel you are cheating yourself. A lot of groups (such as AARP), professional contractors with t.v. shows and magazine articles (they have a large audience), and some state building officials are telling people more and more to avoid contractors who are not willing to tell you the prices they are charging for materials and labor. They are telling them that a contractor not willing to detail a bid is hiding something. This crap leads to public mindset. Whether or not this is a legitimate claim by them or not is not the issue. The fact that a very large number of people are listening to them is a good reason to be concerned. I list the prices that I am charging for each item, a description of each labor item, and the cost of each labor item. I usually get the job because I was the only one willing to tell them what I was charging them for, in detail. People really want to know what what they are spending on their project in a piece by piece basis. I get most of my jobs without having a competing bid at all. This is nice, but not always the case.Just a thought...James DuHamel

          10. jim_"crazy_legs"_blodg | | #14

            *That's fine if you like doin' paperwork. Where do you draw the line on specs? Do you list model number of toilet? Refrigerator? No. you set a budget, based on your impression of the overall job, then let the customer know how much you budgeted and tell them to go shopping, right? How you gonna do that when you plan to use TJIs instead of joists? Or if you plan to dense pack the insulation instead of using batts? You'd be spendin' more time writin' than you would buildin'. I haven't looked at a job with a print, much less specs, in several years. Design is part of what I do. Listing and pricing each item that I'd be using is handing the customer something to take to a competetor for him/her to pick through and undercut me on, without having invested the time and energy to put it together in the first place. This has happened to me, and every one of you who have much experience.This is why I don't "bid" jobs. The phrase "compare apples to apples" gets thrown around a lot. There is no such thing in our profession. We are craftsmen. The way I remodel a kitchen will vary tremendously from the way you do the same job. Even if the stove and sink end up in the same place. If the price is too high, or if they want to use me but can't afford what I've told them, they say something like "geez, why is your price 20% higher than______?" Then I sit down with them and try to make changes that will reduce their costs. By "bidding" and "itemizing costs" you reduce your craft to a commodity. Don't do it. - jb

          11. James_DuHamel | | #15

            *Let me back up a few steps...I am refering to the LITTLE guy here, not the larger remodeling/building outfits. I cannot imagine having to sit sown and itemize every item for building a house. I wouldn't even consider it. Nor would I do it for a large add on/kitchen remodel.I am refering to the bath remodel, repair work, basement remodel, etc... In my area (no basements) the customer knows what they want, and they ARE comparing apples to apples. If I show up with an orange, then I am not even considered.As for designing, I do a lot of that. I get paid for it too. Once the design is in place, the specs written up, and the budget established, THEN the bidding starts. The bids SHOULD be based on the specs and designs. The homeowner doesn't want every contractor bidding on the job to do a design. The design is already in place.As far as allowances for appliances, fixtures, and such, if a client of mine wants something different than what I recommend, I make them go purchase it. Then I don't have to worry about how much it cost. Again, I am refering to the little guy. Competition in my region has mandated that we get our act together, and start telling the customer what we are bidding on (specifically), what we are charging for the materials, and what we are charging for the labor. From what I have read on some of the postings here on Breaktime, we evidently use a whole different technique when bidding. Here also, bidding is totally different than estimating. A bid tells the customer what we will do the job for. We also have to convince the customer that we are the right outfit to do the job. When contractors are bidding apples to apples, then the only MAJOR issue seems to be who is BETTER suited to do the job. I spent years building references and portfolios, and learning how to sell my company without using the "salesman" approach. It has paid off well for me, but it may not work for everybody.Just my thought...James DuHamel

          12. jim_"crazy_legs"_blodg | | #16

            *James - When you say "...designing, I do a lot of that. I get paid for it..." how do you get paid for it? Do you agree to an hourly wage for your design time? Do you refund the cost of design if you get the job? This is one area I am very weak in. I am always giving this time away, and then resenting it when I don't get the job; but I realize that if I don't do a thourough job it reflects poorly on me. What a dilemma. So, do tell, please. How do you get paid for your design work? Thanks - jb

          13. James_DuHamel | | #17

            *Hello Jim, Whenever I get a call for a bath or small kitchen remodel, I ask the customer if they already have the specs and designs for the job. When they say something like "No, should I?" I tell them I'd like to come over and take a look see. While I am there, I look around at the job, offer a few PROFESSIONAL suggestions, explain why designs and specs are needed, and let them know that I offer this service, for a fee. I charge anywhere from $200.00 to $400.00 for designing and spec'ing the job. If I get the job, I apply the design fee to the total. If I don't get the job, I still get my money for my design time. I sign a design contract, just as if I were signing a repair or remodel contract. All the details of what I will provide are listed. Sometimes I get a customer that tells me they will design the bath themselves. I explain what all info, drawings, specs, etc... that they will need, and they nod. A couple of days later I get a call asking me if I would consider doing the design for them. This is really an area that most contractors are qualified in, but few pursue. It is really an open ended market with few people to fill the need. I see a lot of drawings and designs from Kitchen and Bath Designers, but heck, we contractors can do as good, if not better work than most of them. We are in the trenches actually doing the work, so we know more about all the fine details than they do. Kitchen and Bath designers in my region charge a lot for the design work. ($500.00 and up)Of course, there's always Homer Depot design staff. They'd be glad to print out a few computer generated images of bath fixtures, and tell you it's a design (at least around here).A lot of times, people just want a bathroom gutted, and new everything installed. They want the fixtures and such right back where they came from. I refer to these as "cheap Baths". The only real design is choosing brands and colors. For those customers who do not want design work, I simply prepare a bid package and present it to them. I (nor anyone else for that matter) ever hear from them again.James DuHamel

          14. jim_"crazy_legs"_blodg | | #18

            *That sounds good James, fair and straight forward. I'm gonna have to try that. Thanks - jb

          15. Dan_Dear | | #19

            *All excellent comments. Here's mine. At the onset I explain there are several ways I can do the work, T & M, cost plus, fixed price and a couple of variations. I only work on a fixed price contracts. The reason is the same reason why you go to the same favorite restaurant and usually buy the same types of cars. Peace of mine. You don't ask the wait staff how much of the $18 prime rib is for the prime rib, how much for the potatoes, the vegetables, their profit and how much of their overhead. Ditto for a car, an appliance or a sofa.When you hire a remodel project you are not hiring just "products". You are hiring the entire "process" including it's "delivery" which includes content protection, scheduling met, workmanship, guarantees, courteous workers and accommodating as well, even the caliber of the tradesmen, and finally the character of the contractor. You called me because I was recommended. If your main concern is none of those I mentioned, but only price, then we are not a good match. The reason is that I don't provide the service of McDonalds. I provide the services of an expensive restaurant. Both will fill your belly but "the process" and "delivery" is a world of difference. Both an Escort and a Town car will get you from "A" to "B". But which would you rather own. My prices are not double as is the Town car, only slightly more than the Escort. To me that represents true value but it may not be the value you seek. I simply do not provide McDonalds service and refuse to lower my standards to that service level.In my 30 years in the industry, I've found that 90% of those asking for line item pricing are looking for ways to chisel. Those are the one's who, in our current economic conditons, still think they are doing you a favor by throwing you a bone. I neither have the time (for free?) to do that ,nor the desire. There are too many others waiting to literally throw money at a contractor with an excellent reputation.

          16. James_DuHamel | | #20

            *Sonny, I like your restaurant analogy! Can I use it?Just a thought...James DuHamel

          17. Ryan_C | | #21

            *Sonny,I've been seeing you out of your regular neighborhood alot lately. Decided to "slum it" with us little guys for awhile?I'm curious why you've decided to focus on smaller projects now?Oh, and by the way...my post on "need help closing deals" about sales should include a thanks to you, rick, and some others. I think I've learned more about sales from you guys then I could have learned anywhere else.

          18. MEK_Construction | | #22

            *Thanks again for the info coming in... its been really helpful in getting my proposal package together quicker and more complete. Here is another question-- despite not closing the basement deal I am curious about some very rough square footage numbers for a basement finish with a full bath..no plumbing in slab and sewer exits through wall about 4 feet above floor. I am in the chicago area and this house is in a very upscale neighborhood. The reason I didn't win the bid was ultimately money-- I was again the middle bid of three contractors however the fourth was 32% lower than me and they got the job. Now I know that I'm building quality product and it doesn't work to use square foot prices to bid--but I think that by having some rough numbers to hip shoot a number to a potential client I can begin to weed out price shoppers. One note the basement client got my name and I was highly reccommended from a previous client. I know I'm not going to win all bids-- nor do I want to. Just venting about how 3 out of four bids can be close and the guy who is 30% lower win???!?> Sorry so long but my ultimate question is this-- Do any of you guys have rough square foot prices you use from past jobs on a basement remodel? that one was about 1200 square feet with drop ceiling bath wet bar nice stuff. I came out around $42 dollars a square foot. I don't think i was that far off But maybe I am??!!??thanks Mike

          19. William_Swales | | #23

            *Mike, I feel that if you are in the "Fine Homebuilding", quality market, forget about sqare foot pricing. There are to many variables. My prices if broken down to square footage range from $90.-300. To think in square feet invites unrealistic numbers. Low-ballers have been around as long as there have been carpenters, forget the loss, and continue to focus on selling. If you get most of your bids your prices are too low anyway. Good luck, Bill Swales

          20. J._Belanger | | #24

            *I sometimes break down costs for repeat clients to help them know where they can reduce costs, but this is when I have already been chosen for the job. For other clients I will price the job for them as spec'ed. but I will also add a blurb at the end of the contract(I don't do written estimates, just contracts for work)that tells them what areas where changes can be made to lower costs, or sometimes I mention that things can be done in phases to spread out the costs. Before I do any estimating or writing, while meeting with a prospective client, I ask them about whether they have any plans or other bids. I give them a very rough ballpark estimate at the high end. I.e. "Well that can cost as much as $$$$". If they think that the price is really high, I ask them what they were thinking it might cost.Well I just saved myself a lot of time. I may lose a few potential clients, but I keep from spending my time pricing peoples dreams. If they do have other bids, then I mention that my bids usually fall in the mid-range but I only use quality people with integrity. No day laborers, etc. Plus I have lots of references. If they are still interested, then I will prepare a bid. Remember that if you don't respect yourself, then they sure won't (i.e., if you don't value your time then neither will they). Never act hungry or desperate. Always take the time to find out what the client envisions, the closer you come to providing it the easier the whole job will be when under way. Square footage doesn't work for me either, other than for the rough verbal ballpark, too many variables.Good Luck.

          21. Peter_Koski | | #25

            *Mike, I would spend some time learning some sales basics. Attend the some of the shows out there that offer courses on Remodeling Sales or pick up some books on sales. Email me if you need some ideas. When your sales abilities improve a few percentage points then when prices are close you will stand to get a larger pct of jobs. Also, you need to worry less about your pricing and more about your profits. If you are slack on work, then it is time to consider marketing (advertising).Time in the business builds confidence and homeowners will sense that and look to you as the authority.Pete

          22. Heartwood | | #26

            *I'm mystified that you would hesitate to break your costs down for a customer. They have a right to know what they're paying for. Even if you break materials down into larger categories -- building materials, plumbing fixtures, lighting fixtures -- you at least lay the groundwork for a discussion about why the project costs what it does. That discussion is a rich opportunity to sell the customer on your business.If customers feel they are overpaying for work, the relationship is going to deteriorate and you will spend an enormous amount of time combating their mistrust. You have to make sure the customer is comfortable with the price. You do this by asking them, "are you comfortable with this price?" and by addressing their concerns.If a customer is making the decision strictly on the basis of price, and yours is not the lowest price, there's nothing you can do -- no amount of information you can withold -- that will prevent you from losing the job. On the other hand, big price differences between bidders unsettle customers: what did the low-bidder leave out? The more information you include, the more you reassure them that your proposal is thorough and complete. Everything you describe in your proposal should address their unasked questions and fears: am I overpaying? Did he remember that the flooring in the livingroom is oak? Will it be finished by Christmas? Does he have insurance?On a bathroom remodel, there's no reason you shouldn't specify your assumptions about plumbing fixtures, lighting fixtures, tile, flooring, paint, and so on. You've made assumptions about all of this in order to arrive at the price in the first place. Do you plan to do the job without discussing any of these things with the customer? If not at the proposal stage, when exactly do you plan to raise these issues with them?If you can compete on price, you have nothing to lose by breaking down your price. Realistically, how much extra time does it add to flesh out your proposal with some of this detail -- a couple of hours? Add it to your price and recover it when you get the job. On the other hand, if you know you can't compete on price, then your effort has to shift to determining whether this is the sole basis of the customer's decision. You do this by asking them, "are you planning to choose a builder solely on the basis of price?" and "why would you choose a builder whose price is more expensive than another?" These shouldn't be unasked questions. Just as they have a right to know what they're paying for, you have a right to know on what basis they're making their choice.I'm amazed by builders like Crazy Legs who tell me they don't participate in bid jobs. You are fortunate, indeed, to work in a market where projects are not bid out, or to have built your business to a point that your customers are not interested in talking with anyone else. I have to say, though, that price is always a major factor, even if the project is not put out to bid, and it's always better to bring all of the money issues out into the open where they can be talked about.

          23. Heartwood | | #27

            *Jim, I just read a posting of yours in an unrelated topic in which you reveal that you don't use contracts in your business either, even on work above $100K. I'm at something of a loss for words. If you're operating with this level of trust, and your customers are operating with this level of trust, then there's certainly no reason for you to break out your costs. I have to wonder, though: why do you hesitate to charge for your design services?

          24. jim_"crazy_legs"_blodg | | #28

            *Heartwood - You have asked many questions in just a couple posts. Let's start with "contracts". First, I don't know how binding a "contract" is. I have always heard the saying "contracts are written to be broken". I have, at times, given written proposals that outlined the budget I set for each phase of a large (for me) remodel so that customers could see where they were spending their money. Included in these documents are terms of payment and billing schedule. I ask the customer to sign and keep one and sign and return one for my records. I see this as a way for the customer and me to keep tabs on the job and it's progress. I don't think it is "binding". It still comes down to trust. They trust me to get the job done and I trust them to pay me in the allotted time for my work. If they are unhappy with the progress, price, or quality of work, they withhold payment. If they withhold payment, the job stops until problems are resolved (none of this has happened, but it could). They are protected, and so am I. I'll close by saying that I operate at what has to be the bare minimum a legitimate business could and stay afloat. I'm sure that 99% of the folks on this board run more through their books every year than I do. I mostly work alone and prefer to bill myself out hourly. I do mark up anything I'm responsible for including materials, labor and subs. I am much more interested in my craft than my business. I see business as necessary to control the type of jobs I take (I have some physical limitations), not as a way to make money. I don't have goals. I don't look for work. I just drift in the stream, picking and choosing from the opportunities that come my way. No one who knows me will say "that guy is driven". I know I'll never make a lot of money this way, but I sleep good at night and have fed my family for the past 9 years this way. It works for us. What about you? How does your business differ from what I've said? - jb

          25. Dan_Dear | | #29

            *I both agree and disagree with Heartwood post today. Anyone who does not list or at least state in their contract to "furnish" all materials and to perform stated operations is foolish. However, to list each item by unit cost in a fixed price contract is ridiculous. That's why it's called a fixed price contract. Now, if they want to hire me on a cost plus or T&M basis is fine. Then I'll just give them of a material list including amounts of each and they can sit on the phone, check prices, arrange for deliveries, etc. Comparing a large remodel project to an expensive car or even a house, I don't ask for the breakdown of the engine, drive train, frame, body, electronics, etc., nor when buying a house, the breakdown of the land, basement, walls, flooring, roof structure, etc. The reason for a complete, comprehensive all inclusive contract is to allay the owners anxieties about what is included and how the contract handles possible unforseen items.Finally, I sure as heck would not want to expend the laborious time to list each item on the "hope" that I might get the job. As a novice back in the early 70's I heard too many "potential" customers tell me "So and so has drywall on sale. Are you buying it from them?" I never bought because of price. I only bought and still only buy because of service. I do not intend to play the "price" game, for to do so is the quickest way to poverty. What's next? - having the customer also advise be about the "cheapest" place to get liability insurance and workers comp, uniforms, vehicles; maybe they can even talk me into lowering my weekly salary to cut my overhead charge to them."Here's the price and here's what is included. Do you have any questions at all?"

          26. Mike_Smith | | #30

            *Sometimes, I'll try to help a customer out by breaking out some areas. The bid program I use, creates 3 documents, a spread sheet: Estimate (work sheet)where I fill in all of the variables, and I build the job in my head or from past unit costs, I price all the materials, I price the subs and equipment, I price everything I think it is going to take to get the job done. Then the program adds in my labor burden, my contingency and overhead, my profit, and the sales tax. I can change any one of those things any time.the second document is the Proposal, bottom line, Specs, Boiler plate, time, exclusions, liens , etc.the third document is a Pro-Forma, this is the spread sheet with the percentages applied to each item, and with a little manipulation , this is a document you CAN share with the right customer, but in the hands of the wrong customer, it's just another thing they're going to use to try to beat you down.BTW...many customers ask for an Estimate, but as usual, most of them don't have a clue, and who can blame them, we, the builders, didn't go to a school to learn how to be Contractors, so most builders don't have a clue either.I used to try to give them estimates, that isn't what they want. They want a Proposal.Give 'em one and ask for the deposit. You get the check, and the signature, now you've got an AGREEMENT.

          27. Mike_Smith | | #31

            *hey J&M (Jim DuHamel) why do you apply the cost of the design to the job ?..........I assume that you give them a Credit, right ? well, lots of people ask me that too, and sometimes I say sure, and do it. And lately I say , why would I do that ? If you had an Architect or a CKD do the design , how would you get a credit off the cost of construction ? Is this one of those , Add it in at the top and deduct it from the bottom type credits ?And another thing.......the other night I bought a pkg. of 50 floppies, $10.........and there was a mail - in rebate for $10.......how does this work ?........what happened to Economics 101 ????????????b Jane, you ignorant slut

          28. Heartwood | | #32

            *Jim, more power to you. It sounds like you've got a good deal going out there. I'm not sure, though, that MEK wants to know the most relaxed conceivable approach he can take in his business. He lost a couple of jobs and is wondering if he should be doing something different.I am very much driven in my business. Back when I worked for contractors who took whatever work came their way, I noticed I was spending a lot of time insulating crawlspaces, re-roofing garages, and installing screen doors, then going home at night and salivating over the houses I saw in Fine Homebuilding. I'm in an extremely competitive market: where I work, everyone is a carpenter.A great deal of the work I do is fixed price contract work. The specifications of the job are arrived at after a long process of discussion and negotiation. Since the specifications form the scope of the work we're performing, it makes sense to me to spell them out in as much detail as I can. The customer and I both have expectations, and it's no use trying to conceal or finesse these expectations. There are too many opportunities for misunderstandings as it is. I agree with Sonny that the purpose of an all inclusive contract is to allay the owners anxieties about what is included and how the contract handles possible unforseen items. Sonny, I'm afraid I might not have been clear enough about what I include in the price break down. I don't break out every stick of lumber: I do break out every component in the price. Materials, for example, are grouped under the category Building Materials. I might break out windows, doors, or some particularly pricey item, like steel I-beams, separately within that category. All of my costs are expressed as actual costs, and I explicitly state that I am marking everything up 10%, and that this 10% represents my profit. One of the advantages of breaking the job down into its components is that each component is a launching point for a discussion with the customer about their expectations. If they want it done for less, we can take each component apart and revise the specifications toward a less expensive job. If they want a different finish, we can translate that change into a dollar amount.I used to agree with Sonny's idea that including this kind of detail was too "laborious" until I realized that, in the course of putting together the price in the first place, I was already generating all of this detail. The benefit of presenting it to the customer far outweighed the hour or two it took to put it into presentable form. The fact of the matter is, I win bids even when I'm not the lowest bidder, and when I ask customers why they tell me it's because the detail in my presentation assured them that I hadn't overlooked anything, and that I have a clear understanding of what they want. What message do you think a single number at the bottom of the page conveys to a customer?These metaphors that get tossed around to clarify these issues are dangerous. Having your bathroom remodelled is not like buying a car, or like buying a meal in a restaurant. Those products are offered to you as a package, with a very limited menu of options. A bathroom remodel is completely customizable. That's why we're called "custom builders". Anything you do that limits the customer's opportunity to get the finished product they want goes against the spirit of the endeavor. On the subject of T&M: I've had terrible experiences charging by the hour. To begin with, customers always ask for an estimate, and the estimate always seems to get translated in their heads to the upper limit of what you will charge them. This is one of those unstated expectations that detailed contracts are so good at making explicit. The process of changing the scope of work, which is documented in contract work, is glossed over in T&M work by it's very nature: you charge T&M so that customers can change their minds without all those aggravating change orders. I've switched to a simple, signed agreement for T&M work which states "the estimate does not represent the final cost of this project."Finally, I'm not comfortable with Mike's argument that if you give a customer too much information, or the wrong customer any information, that the customer will use it to beat you down. I'm not sure I have a problem with a customer trying to beat me down. I don't like this phrase, "beat you down" in the first place. Here in America, the customer is free to ask for a lower price, and you're free to say no. You're also free to ask them what price they're looking for, and to suggest ways to alter the specifications to achieve that lower price. Why are you wed to your price in the first place? There are parts of your price that can't change -- your wage, your profit, your overhead -- and parts of your price that can change. You can always say that to your customer and let them decide.The problem with the business we're in is that it's extremely difficult to comparison shop. Unlike buying a car or a restaurant meal or most any other retail product, when you ask for a price from a contractor, you're not exactly sure what you're getting until you get it. If the price is more than you want to spend, it's hard to figure out exactly what you're giving up by spending less. Most customers, who are intimidated by the process and by your expertise, aren't very good at asking the questions that will guide them toward the information they need to make an informed decision. That's the problem with the single price at the bottom of the page: it doesn't offer an opening to anything but itself, the price. You're directing the customer to make a decision based on the only information you've given them: the price. Mike, I'll bet you wouldn't identify yourself as a person who "beats" anyone down on price, but you make lots of spending decisions in which you evaluate an opportunity and choose the lower of several prices. In fact, you probably view that as your right as a consumer. Why do you view the product you're offering -- building services -- in a different way?

          29. MEK_Construction | | #33

            *Heartwood and all so far...Thanks ALOT for all the advice-- I'm really begining to get this much more refined now. I agree that developing a sense of trust between a client and myself is pretty important and using my proposal to sell myself seems like a good way to go. This topic has really helped my get my method for doing proposals together tight. I have a couple coming due this week and I'm gonna try something different--from what I have been doing anyway. Thanks againg for all of the thought and expertise here guys its much appreciated.

          30. jim_"crazy_legs"_blodg | | #59

            *Heartwood - When you say "Unlike buying a car or a restaurant meal or most any other retail product, when you ask for a price from a contractor, you're not exactly sure what you're getting until you get it." you cut right to the core of my reasoning for preferring t+m over fixed price bidding. When I work for someone, I like to work FOR them. I like to work WITH them. T+m puts both of you on the same side of the table, trying to get the best end result for a budget the customer can afford. When you "bid" a job, the opposite is true - you try to do your best to satisfy the customer and maximize your profits, the customer does their best to get the most for the agreed price. There is way too much opportunity for conflict there - no matter how many prices you break out, or how good the plans are. One thing is for sure, there's room for all kinds in this world, people and businesses. - jb

          31. Mike_Smith | | #34

            *Heartwood: there's a lot of Mike's out here, but I guess you were referring to me, so........one of the things I keep in mind is that not all of the players are even sitting AT the TABLE, sometimes there is the son-in-law or the neighbor who is going to review your proposal after you leave thinking you have answered all of the customer's questions. If you want to keep the discussion of the right track ,you, as the expert , have to lead it. We all know by now, that if you go to a first meeting, you should be pre-qualifying your customer. If theyare thinking $2000 for a bath that you've never done for under $7K , you should straighten that out right away, NOT when you present your Proposal.And we all know that if there are two people in the family, you'd better meet with both of them or you're gonna take a beating in absentia.This business is a lot about not devoting twenty hours to a BID without some reasonable expectation of success. You read the ads, "Free estimates" what the hell is that ?What's an estimate ? That's right up there with "fully insured" usually an indication that they arn't.So, the process starts with where your leads come from, thru the first meeting, to the second meeting, to the PRESENTATION of your Proposal (how about these words of death ?..."just put it in the mail to me" BTW...unless you know them pretty well, don't do it).I've always got that breakdown info. in my folder, but I find that if it gets down to that discussion I haven't done my job and I'm probably not going to get this one.

          32. Ryan_C | | #35

            *Heartwood,I was opposed to offering any breakdown because I could adjust any item with the customer immediately out of a price book. (almost any item). I didn't see any advantage to showing my costs other than to allow the customer a glimps of my personal finances.I still am uncomfortable with doing this but I have to tell you, you make a good argument. I am going to really consider offering some sort of break down. I guess I have one objection that you haven't overcome yet. Some of my estimate is made up of guesses. Good guesses but still guesses. I guess that that item will cost about $300.00. I've built enough into my prict that I won't lose my shirt if it costs $350 and I get alittle extra if it costs $200 (this never seems to happen though).I don't want a home owner calling and saying "I found this item for only $200.00, what are you trying to pull?"

          33. Dan_Dear | | #36

            *Well, Heartwood, it seem we are similar in many areas. You mentioned that I'm "asking the customer to make a decision on the only information I'm giving them - the price." That's not really correct. I'm giving them a price based on the information "they" have given me after discussing their desires, design, products, etc. My contracts specify what cabinets and style, countertop name and color, faucet brand and model number, down to the floor tile and grout color and name. So, it's like after the discussions are completed, I become nothing more than an order taker listing their decisions on the above. So, the price becomes nothing more than the compilation of the result of the "order" presented to me.Back when I was a lot younger and still lived in Michigan, paneling was popular and when asked if there was any way to save any money I replied with my standard retort. "It takes the same amount of time to install a $6 per sheet of paneling as a $12 sheet, so the labor time and cost is the same. You might consider looking at less expensive paneling/cabinets/faucet/flooring, etc.Back then, labor cost, subs and materials were all marked up 50% and then later up to 67%. So consequently, substantial savings were available using less expensive materials. Now I use the Proof system so the savings is less since 100% of overhead is put on labor and then the combination of labor, subs and materials are marked up a minimum of 25% for the net margin.I still maintain that any remodeling or building project must be sold as an "experience" with emphasis on it's inherrent "processes", which negates the necessity of line item breakdowns. However, selling that way is alien to most contractors. Our industry is too hung up on price structures. I will agree that based on current excepted selling practices in our industry, the only comparison or "value" the consumer has to make a project award decision is price - a lousy basis for both them and us.

          34. James_DuHamel | | #37

            *Mike,I basically got tired of doing design work, and then another contractor getting the job (and using my design to remodel with).I do a design, charge the customer for the design work, and if I get the job, I deduct the design fee from the total price of the job. I do not "add back in, then subtract". I am fair and honest with my clients. I would much prefer to use my own designs to work from than someone else's. Since I would wind up designing the bath/kitchen anyway, I figured I would at least get my labor and time paid for if I didn't get the job. I felt that if another contractor was using my designs, I should be getting paid for all the time I put into it. If I got the job, then I don't see it as a waste of time, or even an extra amount of time since I would do it anyway.To All...After reading these posts, I have come to the conclusion that there are two types of contractors here... those that do it because they love it, and it's a way of life to them... and those that do it for the money, and only the money. If you are in it for the money, then everything is about profit. EVERYTHING. When you are in it for the love of it, you find yourself doing things that you know will probably cost you, and at the very least won't make you any money. Yet we still do it. We do it because of pride in workmanship, pride in who we are, and to keep our good name just that...GOOD.This is just my humble opinion, and there is nothing wrong with being in it for the profit. If I were in it for the money, I would be working several crews, and charging way more than I do. Personally, I don't want the headache, the heartache, the extra paperwork nightmare, and the stress of running several crews. I gave up a high stress job to get back into what I love the most... repairing and remodeling homes. I get up in the morning and smile. I love what I do, and it shows. I find myself getting excited right before a new job, and I even have trouble getting to sleep sometimes because of it. My wife is my helper, and we have spent the last couple of days working hard... but while we are working hard, we laugh (a lot) and we have a very enjoyable time together. I couldn't get that running crews. Just a thought...James DuHamel

          35. William_Swales | | #38

            *James, I think you missed the third type of contractor. The one who loves building and is in it for the money. All my career(22yrs.) I loved building, being a carpenter,cabinetmaker, and yes, a businessman. I have always wanted to do only the best quality work. I worked harder than anyone I know to be better,spent money on tools always,took risks many wouldn't, and made it a practice to buy books,magazines,etc. to futher my knowledge and exposure to great work/new techniqics.As a result of all this effort to be better I learned that my clients hired me not only for the quality of work, but also for my knowledge. As there is and always will be less contractors that work in the high end and I learned that I can charge accordingly. Your doctor makes you pay for his education, I make my clients pay for mine. I didn't get to the skill/knowledge level I now have without alot of sacrifice and I believe I am no less a professional than any doctor. I love building and my clients expect to pay more for the quality I can provide. Bill Swales

          36. Stephen_Hazlett | | #39

            *Very,very well said Mr. Swales.In fact I would venture to say that the vast majority of contractors(at least those posting here) fall somewhere in that 3rd group you describe.Who in their right mind would enter this industry with money as their only motivation. I can think of any number of business categories each of us could enter that would be more profitable,less time consuming,involve less skill and an easier learning curve,and involve A LOT LESS physical and financial risk.As for those in it only cause of their love of their trade,....That sounds a lot like some kind of reverse snobbery.good luck all,Stephen

          37. Ryan_C | | #40

            *I'm in because I love business. Building is the only thing I know how to do but If I knew how to do anything else, I'd be just as happy running my own business in any field.I need to do creative work where a good job is appreciated. I suspect there are many fields that would please me as equally as construction.About free designs, I do them. I first give a ballpark that I'll guarantee to be within 10% of the final price and then if they are still interested, I'll do drawings and a proposal. I know that others use a design contract for this but I just do it all verbally until it's time for the conract. I've done plenty of free designs that don't get me work but I consider it to be practice for the next time.My designs do have my co. logo across the drawings and they say, "for use by Cruzan Construction only...Do not build from these drawings". It would take a ballsey customer to show this to another contractor and a ballsey contractor to bid from them. I know it can and probably has happened but if the client is like that, I'm better off without them.

          38. James_DuHamel | | #41

            *I think ya'll missed the point completely.If you are invloved as a hands on contractor, then you are in it for the love of the trade. The third category that you mention actually falls into the love of the trade (AND you make some money at it).When refering to those in it for the money, I'm talking about contractors who's personal income gets up into the $150,000.00 a year or above category.For those who are in this business, a vast majority want the independence of being their own boss, doing what they love, and making a good living at it. This is where most fall in.Then there are the contractors who do not actually work on the homes they build. They manage the project, do all the paerwork, and have four or five crews going at the same time (on different houses). These are the guys who got into the home building trade to make money. When the money is no longer there, they will go into another business venture. Those of you who went through rough times, bad economies, and survived, YOU are the ones who are in this business for the love of the trade, the feeling of being your own boss, and because you want to make a difference. Someone in it for the money would have bailed out a long time ago. Again, there is nothing wrong with being either type. I was just voicing my thoughts and opinions about how this thread seemed to be showing both types of builders.As far as remodelers and home repair trades, we are definitely not out to get rich. I've only met a handful of rich remodelers, and that was because they had a HUGE company, and several crews (all working separate jobs). Just my humble opinion...James DuHamel

          39. Heartwood | | #42

            *Ryan Cruzan: What's wrong with guessing? Sometimes you don't know what part of the job is going to cost. You're always free to include this in the proposal as an allowance. What are you afraid is going to happen if you tell your customer, "I'm not sure what this part of the job is going to cost, so I've included it as an allowance. If I can find it for less than $300 I will reduce the price by that much."The costs of the project aren't "my costs," they are the customer's costs. The customer pays for every stick of lumber in the job. They have a right to know what you're charging them for.Let's explore the possibility that you reveal what you're paying for some part of the job and the customer calls to say they found it somewhere else for less. There are a number of responses you can make in this situation, but your response should always be guided by certain criteria: -- I have to be paid for all of my time -- I have to earn a profit of x% or $x -- My overhead costs have to be covered -- I won't be made miserable by you, my customerNow, if the customer finds a cheaper source, you may or may not choose to buy from that source. Your decision to buy from that source may or may not cost you the job. You may or may not be able to talk your customer into some alternative product or source of supply. Regardless, the customer is entitled to enter into a discussion with you about the price, and you're entitled to take a position with regard to the price, or the process, or the package -- any and every aspect of the project. A lot of the responses to MEK's question seem directed toward avoiding this fundamental discussion with the customer. Sometimes entering into a discussion about this deadly subject is the key to redirecting the discussion away from price and toward the other, more fruitful, criteria, such as Sonny Lykos's ideas about the process and experience of the job.I notice you're working in southern NJ, Ryan: I came up in Montclair. Remind me sometime and I'll tell you some stories about what happens to high end remodelling markets when a recession comes to town.Mike Smith: You're absolutely right that prequalifying is crucial. However, prequalifying only gets you so far, and budget is always a criteria. At a certain point you have to confront the money issue.We bid a lot of architect designed projects, where the budget constraints are much looser than on other kinds of work. We've learned that the basis for the bid is much broader than price, but the fundamental criteria -- professionalism, organization, thoroughness, committment, enthusiasm -- remain the same, and are conveyed through the proposal and the presentation as much as anything else. I repeat: what does a one line price convey about you as a builder?You've obviously confronted these issues and have developed a good approach: a thorough estimate and proposal followed by a comprehensive contract. You've also obviously put lots of time into proposals that didn't lead to jobs, and your frustration over that lost time has caused you to pull back from putting quite so much time into every proposal. Now you use prequalification as a way of avoiding the hopeless causes. I've travelled a very similar path. I've also come to accept that in a business with a tradition of free estimates, I will always be bidding against other builders, and so I try to use the bid proposal to maximum advantage as a sales tool. I also am trying to produce the same thorough, effective proposal in less and less time. If I can do that, then I have all the angles covered.Sonny Lykos: If you spell out everything in the contract, what are we arguing about? Are you saying that you spell it out in the contract but not in the proposal? It sounds like there's lots of back and forth between you and the customer before you arrive at a final price and set of specifications. This is as it should be. MEK, however, seems to be part of a more truncated process: meet the customer, submit the price, disagree over the price, lose the job. A couple of different things might be happening here: he might not be prequalifying a customer whose only criteria is price; or he might be completely off the mark with regard to what the customer wants. What are his customers really asking when they ask him to break out his price? They're not saying no to him immediately, which suggests that price isn't their only criteria. In asking for more information, I think they're checking to make sure that they're not paying for something they don't want. Or they're checking on his overall thoroughness, as indicated by the depth and breadth of his proposal. Or they got three very high prices and they can't believe their eyes: they're trying to get as much information to understand what could possibly be costing so much. Either way, there's an opportunity between submitting the initial price and the breakdown to step in and have another conversation with the customer.I agree that you should be selling "experience" and "process," but what does this mean, as a practical matter, with regard to the proposal? What experience, what process, does a one line price convey to a customer?MEK: why don't you show us one of your proposals?Jim Blodgett: I think you prefer t&m because it's the least amount of paperwork you can get away with and still get the job. Your goal is to get to the work as quickly as possible, and you've found a great way to do it. T&m shifts all the risk entirely onto your customer: if the job takes longer than you estimate, they pay the difference. I love t&m jobs as much as you do, because I never lose money on them. But I do lose customers unless I come right in on estimate. What has your experience been with going over your estimate? You're probably going to tell me you don't give estimates. Sheesh. It must be obvious that I'm jealous.Mike Smith: You're right, "just put it in the mail" does seem to be the kiss goodbye. I always follow up with a phone call, though, to learn who won the bid, at what price, and whether there was any other reason I lost the bid. It's one of the best ways to learn about my competitors' businesses.

          40. jim_"crazy_legs"_blodg | | #43

            *Heartwood, man, you love this business, dont you?You are right on about me not wantin' to do any more paperwork than I have to. I will admit though, that I realize that is where the real money is, buyin' and sellin'. I just don't enjoy it, so I avoid it - it's too much like "work" to me. I give estimates. And I do mean GIVE them. That is one thing I am trying to improve on, getting paid for that service. That is another great thing about t+m, once they agree, the clock starts ticking. If they prefer a bid, I immediatly start "pre qualifying" and deciding how deep I am willing to go before I require a commitment. "Once burned, twice cautious"As far as going over the estimate, when it does happen, it is almost always because of something that could not be forseen and that is obvious to the customer too. But after 25 years in this trade, I have a pretty good handle on most jobs that come my way - or I do more homework on any strange stuff I run across. When I just plain blow something, or forget to include something, I usually eat that, without mentioning it to the customer. The big payoff is when I bring one in UNDER the estimate. I don't say anything, I just bill the t+m. You talk about your word of mouth advertising!I'll tell you another truth though, Heartwood, I think most folks really enjoy the decision making authority they have as we work our way through the job together. If we save a little in one area, they can get a little extravagant in another, no sweat. Or, when the time comes to decide on fixtures, they often decide to spend more than we had originally budgeted to get that soaker tub, or add a couple skylights. Or if they don't like the way something turns out, no sweat, I'll redo it until they like it. Service. To me, that's what makes remodeling so much more satisfying than building new anyway, the way the job evolves. Hell, I don't have the ability to visualize what a change here or there can do for a job, by commiting to a "bid" you are asking the customer to do just that. I can't remember ever having an argument about unmet expectations, we work together. I've said way too much already, but I'm really enjoyin' this thread and frank discussion. - jb

          41. MEK_Construction | | #44

            *Heartwood,Here it goes-- and I'm really gathering alot froom this discussion guys. i mean the day I stated the start of the thread I was thinking to myself 'He wants me to do what???!!!' Now just a couple weeks later I'm trying very hard (read HELP) to get a proposal format together that sells my service rathar than a one line price quote. I have absolutely no problem breaking out 'phases' or parts that are a significant cost to the project. On the contrary I believe that is good faith and I need to do it anyway to get to my price. I want to be up front here so that I can really get this off on the right foot. i'm new at running my own business and I have a shitload to learn on the business side. I've been a carpenter for 10 years and that doesn't make me god or anything but I feel like I do pretty nice work. I hold myself to a very high standard and want my work and product to speak for itself. Back to the point-- Damn its late! I'm including my latest proposal for critique and/ or humilation any suggestions- good bad or otherwise are welcome as I don't want to lose a job due to my lack of presentation. ok so I couldn't get quickbook to export to here so I took a picture of the bid and posted it- Hope it isn't too big for load times....

          42. MEK_Construction | | #45

            *GuysI checked to see how the time was on that and its about 4 minutes sorry-- I didn't know how else to make it show the print.

          43. Mike_Smith | | #46

            *MEK: that took about 5 seconds to display....Basically, I think of the following things when I read your Proposal:1: its not a Proposal, its an estimate. You need an action document. A proposal is simply an unexecuted contract. It has all of the basic terms to bind the contract. It can be a one page document that has references and attachements included. It should say who you are, who the customer is, the job location, the job description, the scope of the work,it should include your boiler-plate, the terms you are required by your state law under the general laws for Contractorsit should include some sales tools, if you have competition that doesn't do some of the things that you do (insure your workers for WC, clean up job site daily, etc) that should be includedit should have a payment schedule or the method that will be used to bill the jobit should have the Contract Lump SumIt should have a signature block for you, with your signature on it (or wait and sign it in their presence )and a signature block for them.Part of the payment schedule should have the amount of the deposit that will bind the proposal into a contract. And it should have the boiler plate that tells them how many days they have to execute a Right of Recission2: i would go ovewr that document with them but I don't think I would leave it with them. A good accountant could pull that apart and determine your markups. Will they be any more enlightened after reading that than they were before. I would say, this much for labor, this for subs, and this for materials. If they have choices, I would say ......if we use this material this is the price, but if we use this one the price will bve this much more or less. Thatis what they need to make an enlightened decision.How much it will cost them for YOU to do it this way, or that way. Then , if they like your act, you will get the Contract at your price, not at some other guys price.I mean you can already tell from this thread that if all these guys were bidding that job and they all lived where you live, the prices would go from $30K to $110K, and you know what.......They would all be legit. At the end of the year some will actually have a net profit (you know, to buy groceries, pay the mortgage, etc).Hey , just the other night, a very intelligent woman told me about her daughter who has a handyman come and fix things for her, and he only charges $15/ hr., and he makes money at that BECAUSE he DOESN"T HAVE ANY OVERHEAD. Geez, I think its a crime thatt they don't teach business fundamentals in school. I mean how do you expalin to anyone that getting $15/ hr. in a regular paycheck ain't the same thing as charging $15/ hr.So, the Proposal, its YOU, this is what you are leaving for them to make their decision on. Its gotta seperate you from the pack. You spent hours and days doing that , didn't you ? And finishing it up at 4AM ! Been, there , done that, still do, damn......Get a program, or create a template that you can plug the variables into, that will help you organize your bid process....if you're a buildeer, or a remodeler, or a woodworker, or a painter, etc..its all a sub-species of CONTRACTOR, you write and execute CONTRACTS.If you want to see one of mine, email me your fax number and your handle, mine ain't great, but they do cover the bases.b Lets make our world a little more green this year.....Kermit

          44. Stephen_Hazlett | | #47

            *Heartwood, I am afraid I disagree with you on several of your points. To me they simply don't make sense.In a previous post I think you mentioned that breaking down your costs on an item by item or operation by operation basis is an effective selling tool because it convinces the customer that you are very thorough and that you haven't missed anything.I accomplish the very same thing by writing up a very detailed proposal of the work to be done,basically describing the entire job progress step by step and specifying specific products used.However I give one complete price at the end of the proposal WITHOUT an itemized breakdown.I often then list a couple of alternative material choices(upgrade) and give the increased costs involved. There is really no need for me to give a breakdown.You mentioned to Ryan that you can sometimes guess at an items cost and include it as an allowance. If you find it for less than the allowed price you reduce your charge to the customer by that amount.That seems counterproductive to me. First off you are demonstrating to your potential customer that you lack knowledge about what you are selling(that is ,its' firm price)and second off,I don't understand why you would rebate money to a customer merely because you found the item for a lower cost. My customers would not pony up additional money if an item cost me MORE than I thought,so why would I return money if I found the item for less than originally thought?You say that the customer pays for every stick of lumber on the job and has a right to know what he is paying for.My clearly detailed work proposal,and the total price provides him with everything he needs to know and is entitled to know.He is not entitled to know what those items cost me. You also say that the customer is entitled to enter into a discussion about the price,the process,the experience,the whole package.Very simply put,NO HE ISN'T. He may feel he is entitled,and you may feel he is entitled,but let me assure you that if he is dealing with me he has no such entitlement.The price is the price is the price. Any discussion is at my discretion,but there is no entitlement.You also mentioned that these policies seem to be designed to avoid the give and take of a discussion on various issues.On this point you are absolutely correct.I have no interest in handholding,re-assuring,convincing,consulting and most importantly dickering,with my customers.In fact,idealy I would never even meet them.My method may seem rude and abrasive to you.In real world application it is very smooth,honest,direct,and efficient. The customers find it very liberating because I have simplified the entire situation down to one question."Is Stephen the guy to handle this job?"Money isn't even an issue at this point.Every part of the way is designed to show the prospect that his job will be done smoothly,efficently,on shedule,with high quality work and materials. After all how could I be this direct and un -yeilding if I wasn't supremely confident that I am the best guy for the job.good luck,Stephen

          45. Peggy_Koontz | | #48

            *Finally investigating the fine homebuilding site. Interesting. I'm a general contractor in california and, oh my god, female. I agree with S. Hazlett on the bid info. I don't break down bids on a step by step basis either. I do though give very detailed bids, so the client and I know exactly what products we're talking about. I also usually specify that the client has color and style choices, but I make the brand choices. I have to work with the installation and stand behind the product, so I don't want them shopping for the least expensive product, because I can't back it up. Twice, I have been asked for a break-down. Once it was because the client wanted to "help" do the work and wanted to pick out their projects and know the bid would go down a specific amount-I declined the offer. The second time, the client eventually came around to telling me that he wanted to know my mark-up amounts. I re-wrote my bid for him, with my material and labor costs listed, and them my overhead and profit added in. I don't have a problem telling clients what percentages I add, they're legitimate, but I don't usually list them out in a bid. Peg

          46. Dan_Dear | | #49

            *Peggy, the problem with "baring" one's markup method, is expaining to a client that in order to get a 33% margin for overhead and profit, you must mark up your costs 50%, if one used those percentages. By doing that, you fall into the trap of having to "teach" the client Construction Finance 101. This concept of baring costs and finance methods came from how large commercial and industrial projects are bid. It's a disease that somehow infected the residential industry and it "stuck" like glue. Last week when I bought a new truck I would have been embarrased to ask the salesman what their overhead and profit was. Similarly, when a lender mortgages a new house or finances a large remodel project, they do not ask the builder or remodeler what they "figure in" for their overhead and net profit.This is another reason why I've always advocated that the first priority of any contractor should be to get him/her self in the position where 100% of sales comes from repeats and referrals. Once a reputation is establised the numbers game is moot and never an issue. Only two questions are asked: Who much and when can you start? Unfortunately, very few buy into the concept of "Customerization", which as the foundation of sales from 100% repeats and referrals.Finally, the 5% to 7% net profit as the average in our industry is a joke considering the many forms of liability we place ourselves into when signing on each contract's dotted line. It should be at least double that 5% to 7%..

          47. jim_"crazy_legs"_blodg | | #50

            *amen Sonny. Welcome aboard Peg.

          48. Jeff_J._Buck | | #51

            *I had to read all the way thru this thread to finally see the problem(I Think!) Mike Smith's post on Dec 17th seems to hit the nail on the head.What info has been provided to the customer prior to their seeing the photo'd estimate/bid ? More to the general point, I don't even know what half of you are talking about specifically when the terms proposal/bid/design meeting/etc. are thrown about. Most of the business for my fledgling company comes thru customer referal and/or word of mouth. Usually the first time I talk directly to the customer is when I return their phone call, at which point I ask the what's the specific project, the scope of the project, how long they've been considering this, if they've bugeted for the project(not how much, just if)and if they've had anyone else over to look at it.When I meet at the job site, with ALL the decision makers, my initial design/estimate involves a tape measure and yellow legal pad.I can design a whole addition with a full kitchen and bath,not charge for it and not worry about someone else using the master plans!Basically draw a square shape and take notes.The customers don't get to this point until they hear the story of my little company and see pictures of almost everything I've built up to that point.They learn how I worked with Dad, and where I went to school, most even learn what my wife does for a living!I put the initial focus of the first meeting on ME.My qualifications, my work standards, my personality.We then tour the project, I hear their wants and needs, their ideas and questions and I don't stop talking for one minute.They are about to hire a PROFESSIONAL and I'M in control.We talk specifics and generalities,very seldom price and then only wild ball park.I then go home and draw working plans by hand and stick estimate the material prices and how much I feel I should get paid for the work.I then get a proposal out(I know it's a proposal-says so right on the top!)and list specific item by item as I would build it. This job will entail: Walls/2x6 bottom plate/studs/double top plate...and thru out the entire process up to and including 1 1/4in gal.roofing nails.(no nailing schedual needed)This is now my Proposal.I read over the entire proposal with the customers at my side, confirm everything and show them the set amount at the bottom.That is my bid.After I ask if that's EXACTLY what they had in mind, if they say yes I hand them my pen and ask them to sign the bottom line.If they say no I ask what are the design changes? If they indicate the price is higher than anticipated, I ask if it's more that they thought, or more than another contractor told them.If it's another contractor I ask if the other proposal included all the specifics,etc. usually no then I say I don't know where the other guy is cutting costs, but to get the best built project, this is what it's gonna cost.Which items would you like to downgrade?I discuss my costs as MY costs.I've determined how much money I will take to take on this job.I won't take less, because I'd have to lower my construction standards and I don't work like that,which by now they already know.If they sign, I guess that proposal/bid now becomes my contract.Works very well for my small scale company.Seems to push the design/presentation/bid/build process right along.I never do anything over the phone or mail-if they don't have the time, I'll make it for them...I'll meet ya for breakfast, lunch ,or dinner.I'll be there at 5am or Midnite-what's good for YOU; and everything not in the proposal is an additional charge/change order which is signed by both parties before started and paid in full before started.I try to set my proposals apart by listing all the intangables, estimated start time/quit time,nonsmoking job site, radio at low volume,no profanity, sweep and bag,where dumpster or debris will be put,if they have small children I demand a child-free work environment/same with pets,where the designated(by them) truck parking will be, if they work from home -advance notice of particular loud activity(Hilti gun/severe demolition).Basically everything that will occure.It'll all fit if you paraphrase. I do all this for first time clients and on bigger(for me) jobs.For a referal I closed tonight, the contract read..."supply mat. and construct built-in cabinet as per drawing No.1." They had no questions after the first meeting aside from how much and how soon,I drew up 3 versions w/3 prices, so that's all it took.I use the detailed proposal to sell jobs for me and take the quick way out when I'm pre-sold.Jeff

          49. jim_"crazy_legs"_blodg | | #52

            *That sounds like a mighty thorough proposal Jeff. I just like to give a range and let the job unfold as it progresses. I can sure see how your approach would get you a lot of work, I just have a hard time visualizing the potential changes and customized features in the beginning. In variably I, or the customer, get an idea (or several) that would really improve things later. I guess everyone just has different strengths and it sounds like you are capitalizing on yours.

          50. Ryan_C | | #53

            *Jeff,You do exactly what I do. Your post is great. This is the best approach I've come up with too.however, I hate doing it! I hate spending all that time writing the proposal and selling. I hate selling. I've really been working on my selling skills and I'm getting better all the time but I hate selling!I'd love to do it the way JB does. I want to give a ballpark price and just have the home owner tell me to get started and we'll figure out the price later.I've only done repair work T&M. If I could get all my work T&M, I'd be much happier in this business than I have been lately.

          51. Jeff_J._Buck | | #54

            *JB, Ryan , thanks for the replies.This way does reflect my strenghts.More to the point, I can't ballpark for shit!I'm very good at visualizing and design,my wife even brings me clothes shopping so I can remember styles and colors from one store to the next!But I haven't done enough of the same thing to visualize a price. I have to work out each one to be sure I'm even close.We had to do proposals detailed like that back in trade school, and I've found it a very helpful closing tool.After all the design ideas back and forth, only after it seems all the ducks are in line do I write it out and present it to the customers.This way, if it's the project they had in mind(I make several drawings also)and they can afford the asking price...it's all said and done just by asking for the o.k. signiture.They think I'm an extra honest contractor just because I put things on paper so I don't forget to use rafters!This method is using the "assumption close" , you simply assume they ARE going to sign, because you're the man for the job and have drawn up exactly what they want/need.Have fun with the sales end of it. That's how I get to know my customers.And as you pull the truck into the prospective clients driveway, remember how fun the drive home was after closing your last deal! For once in my life I'm selling a product I have 100% faith in...ME!Do ya like making the old waitress smile at the donut shop? That's sales baby. Everyday, all the time.And something I learned while selling cars.Everyone is a prospective customer...everyone drives.Same for us, who doesn't want a new kitchen or bath?On a good day, even the girl at the drive-thru at McD's gets a Buck Construction card!

          52. Chuck_Martonicz | | #55

            *The way we do our estimates, and the breakdowns is by CSI Masterformat Divisions. We do restaurant remodeling, and so our clientele may be a little different than all of ya'll, the thing is we still get asked for a unit cost breakdown. We typically will subtotal, and show the subtotal, for each of the divisions(ie. Electrical $16,500). However, we do line item each subitem within the division, without a unit cost or extended cost showing (ie. install duplex receptacles 23/ea).When asked the question of breakdown, we normally respond with: "What difference does the individual unit cost make, if the bottom line number is acceptable." After all, aren't we all selling a complete project, not one line item?I know I cannot be the only one frustrated by the fact that clients' are always trying to "cherry pick" an estimate, or to negotiate a quoted price downward. How many times have our clients' asked the sofa store how much the springs were, or how much is the padding. Or how about: in the steak and eggs breakfast what is the cost of the eggs, and toast is how much a slice?Seems to me, that contracting, or construction (all trades) and car dealers are the only two industries where the client expects to haggle the final price. What up with that?

          53. Dan_Dear | | #56

            *Chuck, to answer your question, we allowed it. I'm reading a book about "Proposals" for business by business consultants. Here's a quote from it:"Another mistake I've seen is to provide a detailed price list in a proposal for a complex system. By including the price of every component, down to the smallest piece of coaxial cable or the tiniest bolt, you are essentially giving your client a shoppong list. He or she can now bypass you, go to resellers or to your competitiors, and buy the system you have envisioned. You don't make a dime.The other danger you face when yu prodice extremely detailed pricing is that the clients may start nit-picking."The author goes on to state: "Consider asking a fee in return for technical specifications. This can be a tough one to sell, especially if nobody in your industry is doing it. On the other hand, it certainly seems fair. It forces the client to get serious about the review process......."On another section of the same book, he talks about loosing a large compicated consulting job in which 400 firms were asked to bid on, (imagine that) when they made the mistake of ofering the 200 page document with all specifications and later found out their concept was handed to a relative of one of the firm's owners to produce.Sounds familiar doesn't it? Unethical sleaze abounds both in private and business sectors. Now you know why I suggested getting paid for estimates, really called SCAs. Sure, it's difficult when no one else is doing it. But then again, I'd rather take a 50% reduction in my sales, BUT, get paid for 100% of my time instead of only gettting paid for 50% to 60% of my time. All that's needed is to reverse the current thinking of technician 1st and business person 2nd. It also means that at the first sign of dealing with an unethical client (often during the first sales call), run, don't walk away, lest some of that sleaze attitude doesn't rub off onto you. I just did exactly that, yesterday. I don't call it a "sales call". I call it an "exploratory visit". What my exploration uncovered, I did not like, so I bowed out and went home. That was the best use, not lost use, of my one half hour. It saved me a tremendous about of time, grief, and I'm sure, money.

          54. Ryan_C | | #57

            *Excellent points as usual Sonny:I don't know why we feel the need to actually provide proposals to those clients we hope we don't get hired by. I know that I've added the PITA factor in the hopes that it makes me too expensive, not just to make it worth my while.I'm right now trying to get paid by a client I knew I shouldn't have gotten involved with in the first place. I couldn't get paid on the day the job was completed because he was asleep and couldn't be disturbed. Can't get paid now because there are some warranty issues (I don't believe his laundry list), and I haven't been able to return to solve his problems because he had a doctors appointment on Thursday, the grand kids were around on Friday, Monday's no good, etc. It's only about $900 but I knew the day I met him that I couldn't trust this guy.

          55. jim_"crazy_legs"_blodg | | #58

            *Well, since getting so much advice from you guys, that hit home (and hurt), I am now charging for everything after the initial meeting, at which I explain that I will be charging from then on. We'll see how long it takes me to backslide, but I'm tryin'.

          56. Jon_Jordan | | #60

            *Man, Sonny, and Chuck both, yall have now pushed me to my breaking point and unless I am dealing with repeat "good" clients, I will now do what I always muttered I would eventually do, and start charging for my time, Bottom-Line! Hell, I wouldn't mind posting yalls points in this little "po-dink" paper of ours down here along side a "new" law that has been enacted about haggling with your contractor,(just to get a rise)! Just kiddin' boy's, but it sounds like a bowl full of grits-n-gravy, don't it!

          57. blue_eyed_devil_ | | #61

            *I like your style Jeff.blue

  2. MEK_Construction | | #62

    *
    I'm relatively new at being my own 'boss' but I like it so far. Get to work 60 hour weeks instead of 45 hour weeks, but its nice doing things right and seeing a client pleased with a job well done. Anyway heres my question. On two of my most recent proposals (a basement finish and a bathroom redo) after the client has recieved my proposal-- which is a single number at the bottom of a list of all of the services and materials i will provide. I get a call from the client asking if I could break all of it down line by linefor them so they can see where I get my Number from. Sorry this is so long and drawn out but I have tried this approach - line by line- and I get beat up by it so whats a young contractor to do.? I'm not trying to hide anything-- just streamline my proposal process because we all know how much time goes into getting a proposal to a client. Not to mention the hours spent writing up free proposals for work not closed. Any help from the more experienced contractors out there would be greatly appreciated.

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