Man, this forum may wind up saving my
from my own foot.
I’m new at most of this. I was a wildlife biologist for a state agencies for 10 yrs, and I hated everyday of it. Maybe not every minute of everyday, but hated working for gov’t daily.
Did a good bit of construction/carpentry work growing up, summers/breaks from college, between undergraduate and graduate degrees, and on my own circa 1957 ranch here in SW Georgia. My dream the past ten years has been to go into business on my own being a GC that does his own framing, siding, trimming, etc. So, I left June 30 to do it. Wanted my best friend also a biologist who has commiserated with me daily about leaving to go with me – he decided last winter to start building a new house. Way too much house, so now he can’t leave – I finally decided F&@
# it I’m gone.
So, I’m 38 with 3 kids and a wife that is more than a little anxious cause her Dad came home from his Civil Service Job at the local Marine Base at the exact same minute everyday for 30 yrs. To top it off I didn’t start just one, but two businesses – a wildlife nuisance control and game/pond mgt business. I did this cause I know these things well, and I figured it would help keep us fed.
Construction wise I’m starting small and slow, just me “repairs, remodels, additions, decks, blah, blah, blah.” My slogan is “Small enough to be the best.”
So, many questions I’ve had and screw ups I’ve already made have been discussed here. But, I have a few more now and thousands more to come.
Here in the deep, sh*$$y end of Georgia the cost of living is low. Translation: we can’t charge nearly as much as people in other areas of the country. Even though the insurance sellers, doctors, dentists, teachers, etc. all want to make the same as their counterparts elsewhere they bitch when someone like me wants to “overcharge” to do something that some other SOB who has no insurance, way fewer teeth, his nipple hanging out of a t-shirt that shows some kids pissing on a “Insert brand of vehicle here.” And yet they have the nerve to also bitch about how poor the quality of the craftsmanship on homes is here.
Anyway, I digress. On to the questions!
When you give someone an estimate for a job is it truly an estimate, or is it a quote? Do you tell them it will probably cost about this much, but then you keep up with your actual hours and charge them that no matter that it went over by 10-50% due to things beyond your control? Or, if you finish faster and cheaper (rare) to you pat yourself on the back and just eat it when it takes longer than you thought.
Example: I put a PH ext door in two days in a row, because the first from L(Big Box name withheld) was warped just enough that I couldn’t get it to seat adequately against the weatherstrip – I could see light the bottom 6 inches. So, I got a good unit from a local lumberyard the next day. Wasn’t my fault, but the customer’s neither.
I’d be interested in seeing about how much others in different areas of the country charge per billable hour, day, sq ft for basic tasks (framing, trimming out, roofing, etc.) Please list if you’re urban, suburban, rural, big-time contractor, regionally famous and in demand, or an unfortunate local DA like me.
I live in the Albany, GA “metro” area 250-350K people w/in 30 mi radius, have a cotton field across the street from my house. I charge about $30 per hour, but have been told by a friend who’s been in the business for years that that’s way cheaper than others. But, I’m not exactly covered up with business yet either.
Please for those who don’t mind providing $$ amounts about their business let’s here it.
Replies
"Example: I put a PH ext door in two days in a row, because the first from L(Big Box name withheld) was warped just enough that I couldn't get it to seat adequately against the weatherstrip - I could see light the bottom 6 inches. So, I got a good unit from a local lumberyard the next day. Wasn't my fault, but the customer's neither."
Well maybe it was your fault, maybe it was the customers?
Who selected that door? How close did you inspect it before installing?
"10-50% due to things beyond your control? "
Well is it really beyond your control or because of inexpierence in doing that job that you did not plan for the "problems".
Your proposal should indicate the scope of the job. Then if there is something outside that scope them you should do a change order. For example if you find rotten framing when you pull the old door out.
Well, I inspected the door to the extent that I picked the best LH, IS, 6-panel 36" door unit they had at L's. That is to say I got the pick of the litter from all 3. I got it at L's cause the customer (old guy who just got out of hospital with pneumonia) insisted on putting the materials on his L's charge card.
And, yes I told him that the price could go up significantly if the framing behind it had problems or was rotten at the bottom (had the telltale sign of mushy bottom on brickmold). But, do you regularly overestimate by 50% in case you have to reinstall every piece of material twice? I somehow doubt it.
So, in some ways it was a little of everyone's fault - my inexperience on underestimating the potential problems, his for insisting on using crappy materials. But, he needed a front door as his had been kicked in, and I needed the work. I worked with the first door for 6 hours trying to get it right. It was a lot worse than just 6" of light at the bottom after it was first tacked in plumb and level. I tossed and turned all night knowing what was ultimatelty going to be required to make it right. But, I knew the old guy couldn't afford much more cost, and when I do a job I want to leave knowing it's as good or better than I would do on my own home.
I thought I made it painfully obvious that I was new to the business end of this stuff and very painfully inexperienced when it came to estimates, charging for hours, etc. But, it's what I want to do for a living, and thought I could possibly slightly diminish the amount of learning pains that I might have to go through by asking the more experienced guys on this board. In fact, the forum states in bold print for new guys to ask questions and veterans to try and help.
Frankly, the only lesson I can find in your post is that maybe I should be a little less compassionate about others and be more assertive. So to take your advice I kindly recommend that if you don't have anything positive or helpful to add to a discussion then stay the hell out. If you ain't helping pull the wagon, at least don't push it in the other direction.
How's that for assertive?
MikeVB
Hey Mike...
If it helps any, (in the "misery loves company" sense) I'm in much the same place as you, asking many of the same questions, and learning many of the same lessons. But I have learned it does get easier ;) Hang in there, that's what I'm doing (have no choice). Good luck...
Paul
I thought Bill's post was in the right direction.
Things to think about...all grotesquely simplified theoretical at this point:
A typical door takes you two hours to install...in a perfect world. You estimate the cost at materials ($200) plus two hours labor ($60). The customer sees the $260 "bid" and gives you the okay.
YOU pick up a defective door. Mayber because you didn;t notice the defect, makbe because it was the least defective door they had and you figured you could work with it...but still, YOU provide the materials on your own. You can't get the door to fit, so you go back and get another. Now you're at $200 for the door and two hours time for the original install, two hours to remove the defective door, go back to the box store and get another, and yet another 2 hours to install the better door.
Can you charge the customer for the additional 4 hours labor, taking the original "bid" from $260 to $380? Not really.
Flip the situation to the customer supplying the defective, or as you wrote, for him "...insisting on using crappy materials..." and now who is liable or responsible? Why should you pay? But, how does he know he should pay?
It has to be spelled out up front. Remodeling is a totally difeerent animal than new construction, you're certainly aware of that.
You have your perfect world of new, plumb, and level construction where you get the scope of work, bid it, build it, and get paid.
Then you have the slightly muddled world of the customer providing materials and you estiating your labor on what you think it will take, and hoping that all goes according tot he estimate. Will the materials be of good quality and easy for you to install, or will they be from the returns bin and double your labor.
Then you have remodeling, and unknown, with materials provided by, or insisted upon, by the customer. An unknown with anohter unknown. With nothing known, how can you bid a fixed price? With certainty?
Add a rider in your bid, or at the least, do what Bill said...a "Change Order."
You bid it, or estimate it, based upon a slightly imperfect world. $260 in a perfect world becomes "$260 for door installation prvided by the customer plus two hours labor. Any labor overages due to defective materials provided by the customer or unforseen problems within the structure (water damage, rot, etc) will be billed at an additional $30 per hour for labor.
You're in a tough spot. when starting out you want all to go well. You're sympathetic to the homeowner on a fixed income and a damaged door...but on the same note, you have to make sure you don't work for free, or worse...pay the customer for allowing you to work on his house.
I don't think it's really a matter of being less compassionate. But if you want to be in business for yourself, you have to also bring a businesslike attitude into the mix. You;re here to earn a living.
That said, every once in a while you'll end up with a job being a write-off. Every once in a while you eat one.
The important thing is to figure out why you ate it. Did you overlook the scope of work going in, ie, bad estimating? Did you have uncertainties going in, and you verbalized them, or didn't verbalize them to the customer...but more importantly, did they get put in writing? ie, a bad contract? And realize that a contract doesn't have to be a seventeen page wonder. It can be written on the back side of a napkin, or it can be a handshake.
There is common sense involved, and it has to be on behalf of both parties. Sometimes you pony up additional hours, sometimes the customer pays out a few extra dollars.
I almost get the impression that you now know where things went wrong and why they went wrong with this job. You even know how to avoid a replication of this in the future. You'll soon develop the smarts on how to bid in your locale without offending the customer, scaring the customer, or taking bread off your own table. All while bringing more security to your wallet.
One thing from your post that I'll emphasize:
"And, yes I told him that the price could go up significantly if the framing behind it had problems or was rotten at the bottom (had the telltale sign of mushy bottom on brickmold). But, do you regularly overestimate by 50% in case you have to reinstall every piece of material twice? I somehow doubt it."
In cases like this you either make a bid ($260) and then submit a change order (plus $30 an hour for extras), or you bid time and materials ($200 plus $30 an hour for labor). You can do T&M and give an hours estimate so the customer has a ballpark figure. But again, it's an estimate, not a firm bid.
All said, I doubt it my post will help you, as I think you're aware of all this already. You just need to take what you know massage it to fit your local market,and put it into practice.
Knowing what to do and knowing how to implement what you know are two different animals.
1.0 --- Time spent to go on the original sales call.
0.5 --- Time spend on getting door price and typing up the Proposal
1.0 --- Time to pick up door and drive to site.
0.25 --- Time to unload door and take tools to opening
1.5 --- Time to switch doors
1.5 --- Clean up time and put all tools back.
5.75 -------- Total project hours
Now, becasue it’s a small job, net profit MUST be tripled at least to cover
all safety, legal, and warranty "potential" problems, both during and after completion.
Even if you do't want to charge the initial sales call time from of 1.0 hours, you stil have 4.75 hours.
The above does not inlcude taking and disposing the old door.
First I want to publicly apologize to Bill Hartmann for the rudeness of my response this morning. Inexcusable on my part.
Second, thanks for everyone's input so far, and I'd still like to know about labor rates from different parts of the country.
Mike,
First let me commend you on your attitude adjustment. I think Bill H. will appreciate it as well.
Secondly, I would like to respond to your labor rate question. I will not give you the answer you asked for so in reality, this is a pretty lame response.
What are your costs? Forget for now how many billable hours you can accrue, first you must learn your costs.
Tools, truck, payroll taxes, GL insurance, comp, printer paper, business cards, storage space, phone bill, and the list goes on.
You might be concerned with what others are charging in your area, but you generally can't afford to do that, especially out in the sticks. Your business costs $xxxx.xx to run each month whether the competition understands that or not.
Your responsibility is to understand your costs then figure out how you will achieve that rate.
Remember that the only easily variable expense is your income. Your suppliers, phone company, and insurance agent will not settle for less. When you give a 10% discount you typically cut your earning by 30% or more.
Jon Blakemore
There's no job that takes two hours. Business-wise, there are very few jobs that take less than a day, unless you do stuff that's so predictable that you KNOW you can get to two jobs per day at least 90% of the time. Every job has supervision, research, mobilization, material ordering, material pickup & delivery, set-up, clean-up, demobilization, and contingencies. Most of us could not get to Lowe's, buy a door, get to a job, and get our tools out in much less than two hours.
No sense in bidding on penny-ante stuff like hanging one door. Charge T&M from the time you get to the supplier, and charge a solid profit margin for things that go wrong. A lot of guys won't put in a Lowe's door or other stuff from a box store. Get your materials from a good quality lumber yard and you'll have less trouble. If the HO insists, it's got to be his risk, not yours.
I am not a building pro, but I have done a few small jobs for others. But I am also self-employeed.
So Mongo's reply is a much better. My reply is just a mind starter. But I want to add one thing to what Mongo added. He give the job that wenetd perfect. $200 for the door and $60 for the labor. But even a job without hidden problems runs into problems from time to time. Even if the go to the best yard in the world and get the best door in the world from time to time you are going to get a bad door. Yes they will replace it for free. But they won't pay you for the time to go back and get a replacement.
You need enoubh pad in your quote to cover those kind of problems. Not put the worst case on each job. But rather figure that you will have these kinds of problems on 1 out of 10 jobs and they cost you an extra $60 in labor so you increase the quote by $6. Time and experience will give you a better feel for how much you need to pad for these.
Now if you look look back through the older threads in the business section you will long discussion about adding a surcharge to material or adding your labor rate.
But DON'T forget to include the cost of the truck to get the door, time to get the door, caulk, wear and tear on your tools.
"I should be a little less compassionate about others and be more assertive. " "But, I knew the old guy couldn't afford much more cost, and when I do a job I want to leave knowing it's as good or better than I would do on my own home."
I think that there are couple of alternate view points here.
First look at the job, not at the person. Do you best job at what the cost and time will be to do the job correctly. Not the fanciest, but servicable quality job.
Kept track of your time and material based on this. Do EVERYTHING just like the (business wise) the same job for anyone (except Bill Gates <G>).
THEN if you think that he can't afford it and YOU CAN AFFORD TO MAKE LESS offer it as a senior discount.
That does several things. First it helps you run the business part as a true business and to keep that in mind at all time. And second it gets you know at the higher rates.
Also, as I have learned working on my own home. Trying to save money will often end up costing more.
"insisted on putting the materials on his L's charge card."
This might be the hardest thing to do. You need to control the situation. I have "learned" that lesson many times, but not well enough and have to re-learn it each time.
Mike,
Dollar statistics from the NAHB Remodelors Council Survey. Mind you that these are national statistics, which include the high rent places like New York and California.
I am assuming you would be in the "less than $250K" total volume category. The average salary for remodelors in 2001 was $36,980. 26% made less than $30K. 53% made $30-$49K. 21% made $50-$74K.
One other gruesome statistic that I can remember offhand is that in 1995, according to IRS records the average income for a sole proprietor in the construction business was $8,900.
It is not pretty out there.
By the way, welcome. I'm 39 with three kids also. I was in business before we got married so my wife didn't get to freak out about it.
Bowz
" The average salary for remodelors in 2001 was $36,980. 26% made less than $30K. 53% made $30-$49K. 21% made $50-$74K. "
If the figures above are right, they show that not one remodeler made over $74,000 last year. I find that hard to believe (as I know many who make far more than that). I know they're not your numbers, but they're ludicrous for sure.
Bob
Actually, Bob, what it demonstrates is why so many home improvement businesses go out of business within three years...
But I did also get a sense of doubt. The lowball figure from the IRS esp[ecially. I would not be suprised to find that many self-employed contractors and especially subs forget to include all their real income on their 1040s. That not only skews figures but draws suspician of the tax man to the rest of us in this field.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
bob.. i find those numbers to be about right..
first.. those numbers are adjusted gross income .. right ?
and 2d... they are averages.. so...it's my experience that most builders/remodelers have a lot of trouble making a true profit..
one of these days i may get into the top bracket myself..
i know some remodelers who make big numbers.. but most can't sustain it.. they burn out or get burned...
another thing is that a lot of successful remodelers don't have good incomes.. but they do have great assets...Mike Smith Rhode Island : Design / Build / Repair / Restore
could be worthwhile defining terms used. I keyed in on 'salary'
How amny guys in this business you know that actually pay themselves a salary? I think 'income' mnight have been more accurate for that quote, but if more guys paid themselves a salary, they would probably end up with a higher income. my first big loss came because I was loking a big number cash flow and not the bottom line, dazzling myself at the pretty money going overr the waterfalls.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
i never made any money until i incorporated.. once i did that , i put myself on the payroll and now i get a check just like my employees..
the old " pay yourself first ".. finally made sense when i changed it to "pay yourself when you pay everyone else"Mike Smith Rhode Island : Design / Build / Repair / Restore
That's the point - but I learned rto pay myself when i was a DBA several years ago too. basicly, I was running my DBA like a corp long befopre the legal thing happened. so the transition wasn't too hard.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
Bob,
You may have missed the qualifier, that the figures are for those with gross sales under $250K. I didn't want to light a rocket under Mike by telling him that overall 10% of the respondents made over $150K, 16% between $100-$149, 15% between $75-$99, 33% between $50-$74, 21% between $30-$49, and 5% below $30. Those making the big coin have been in business for awhile. So yes I realize there are some that make more, I just don't think Mike will be one of them to start off. (And who starts at the top) The average salary overall was $78,064. The whole study is available from NAHB for $37 for non members.
As far as thwe $8,900 figure goes, I recall reading that in an editorial in one of the trade mags, must have been late '97, because I used it in a discussion with an electrician who convinced me to boost my rate at that time to $30/hr. (7 yrs ago). I would agree that seems very low. It probably does not include a lot of cash payments, but does include a lot of part timers like fireman. But hey Mike will be at it part time if he is running 2 businesses
My point that I would make to Mike is don't always take to heart what other people claim to be making. It amazes me the number of people who I've heard are doing so well right up to the time that they go back to working for someone else. Like others have said, you need to work up your own figures. Then use those figures to set your pricing.
Mike,
An actual story about "just knowing they could not afford it." A few years back I did a kitchen for a little old lady, in a less than desireable nieghborhood. Not the greatest house, and she wants to put in custom cabinets, Corion counters, needs a new electric service, wide cherry trim. Dumb Azz me keeps shaving off the hours while bidding, because this is getting expensive, and after all this is just a little old lady. I get the job, and while doing it she tells me how she is going to switch brokers because her last broker lost her over $200K. Turns out she had paid her house off at age 34, kept working fulltime and kept investing. Don't know how much she had but $200K seemed like water off a duck's back to her.
Bowz
Thanks for a very informative discussion on such an important point.
I went to the JLC forum looking for the Excel spreadsheets for recording costs, but got lost for 3 hours in a super thread about Hardiboard products.
Is there a particular location someone can lead me to by the nose to safely download or at least see some examples of Excel uses for estimating, cost ledgers, take-offs, etc.?
MikeVB
"If you always tell the truth, you'll never have to remember what you said."
mike... we use the program GC Works... which is now BuildWorks..
this is a great program.. i've used about 4 different ones since we first went computers in the early '80's..
take a look ..
http://www.synapsesoftware.com/Mike Smith Rhode Island : Design / Build / Repair / Restore
First... welcome to the world of the self-employed!
Rates across the country will not be much good to you. What you need, instead, is a business plan. It is like a blueprint for your business.
The business planning process is helpful in determining overhead costs, administrative costs (etc)... and heaven forbid... costs for you to live and earn a living!
Do you have a local SCORE office close to you? This is a good place to start... and it's free! They will assist you in developing your business plan and give some valuable advice along the way. SCORE is a govt program that is comprised of retired business types that have been trained to help people just like you.
Without a business plan (or a semblance of one).. it is impossible to assess your particular situation. What works for me, might not work for you.
Example... I assisted a friend of mine in developing his business plan. He was all tooled up... had the technical skills... knew what the market would bear... seemed to have it all together. When we sat down to do his business plan, he discovered how long it would take to be profitable. At this point... he had a decision to make. Either finance the business... or wait until he had more of a "cushion" of $$. He opted to wait for a year (when his auto would be paid off and he had saved a bit more scratch.
In addition, the business plan will assist you in targeting your customer. If you are thinking of making a living at installing ex doors one at a time... you may be in for a sad surprise. Instead, you can target your average job size that you need to survive.
For the particular situation you have spoken of... eat it and chalk it up to education. It's a hard lesson... but it's a valuable lesson. The guy is probably incapable of paying any more... your conditions were vague... it has the potential to be much more trouble than it's worth.
Sit back and develop a plan... be sure that you stick to that plan... and when in doubt... go back to the plan. If you plan appropriately... you have a much higher chance of succeeding than the 100s of folks who fly by the seat of their pants and get it ripped to shreds on a 16d nail.