I am a residential contractor in Maine. I am having a hard time figuring out how to price houses for people. I just met with a homeowner and we discussed what material he wanted in his house. Architectual shingles, custom trim, hardwood, tile ect. I came up with a price of $98.00 per square foot turn key. He almost fell out of his chair. He told me that another contractor would be able to do the same house for $70.00 to $75.00 per square foot. That adds up to almost $40,000.00 less than my price. The only way that we can compete is to cut way back on the labor costs. I dont know if I am doing something wrong.
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Blackbear,
Yeah, you're doing something wrong alright...pricing for the WRONG customer!
Tell that guy to take his business elsewhere. They don't build good quality homes here in Florida for less than $100. per square foot and I know the cost of living in Maine is higher than here. Trust me, trying to be the low priced, good guy killed me in business. Don't fall for that "someone will do it cheaper than you" line. The guy who will do it cheaper is the doofus with just a pickup truck and a hammer...No experience, no license, no insurance! He'll start the job, maybe even finish it (not likely) but there will a lot of cost overruns, things done wrong and in the end the client will say, "Jeez, I should have hired Blackbear in the first place".
Honestly, don't work for customers like that unless they meet YOUR price. They are the ones who hurt me in business (OK, actually I hurt myself but thats another story). Tell them thanks for considering you, your price is non-negotiable, heres your card if they reconsider and walk away.
Mike
if thats what it will take you build a house and maintain your quality, and make profit for your BUSINESS, youve done nothing wrong.
If you feel you have to lower your quality, charge less to compete with handyman turned contractor bob youre business will probably fail.
It may sound harsh, but its the truth.
Sell "your" company and its quality and dont worry about that other chap.
Whats that old saying? The taste of poor quality lasts longer then that bargain does.
I run into this all the time, and I don't budge on the price. My price is for me to give you what you want, if someone can beat me, more power to them. I think you will find that their final cost wil be right in line with where you "knew" you should be, and it is always interesting to follow up.
I should also mention that I get nearly every bid I put together, but I sell more than sticks and stones. I'd like to think I sell value, spec'd for the individual. Give them your fairest price, and smile if you part ways.
Check his allowances against yours......check his O&P if he gave it. Some new guys are cutting way back on O&P (maybe none at all) The allowances drop gives the illusion of a good deal, but .........
regardless don't play the (lowest guy in town game) You never win. Be smart.....build good.......get the price......the only way to do it.
These guys speak the truth. The only thing you do by lowering your price is drive yourself into debt, despair, and desperation to get the job done quickly. Give it up. The smartest thing I EVER did was to tell a customer to get bent when they said they could get the same job at a much lower cost. BS. I'd rather go fishing and make up the money elsewhere then be driven into that corner again. You know, as everyone else does, that there are certain costs that you are incorporating; your time, your labor's time, your overhead, and your proft. Anything less does nothing but drive you out of business faster than a depression. I'd guess that your customer isn't comparing apples to apples; and now is the time to sell your business and yourself; are they going to use the same materials, techniques, products, and quality? I'd guess not, and I'd also guess the customer doesn't understand that. If you want this job, at your price, then you need to show that to the customer.
By the way, how many custom homes have you built that your second-guessing your pricing now? This certainly isn't a slam...just wondering if your questioning yourself, or if you have a really savvy, drive-down costs kind of customer that you really should simply walk away from...
as dear old dad would say......
You never lose money on the job you passed up.
Jeff * Jeff J. Buck/ Buck Construction/ Pittsburgh, PA *
2nd Generation Buck Const, 3rd generation Craftsman
Its been said. walk on.
But on the other hand , the customer doesnt have his house built yet. Ive been known to pull that routine to get lumber down. He might be telling the truth and then again there might not be a 75 dollar builder. My brother worked up there off on Marthas Vinard Island . He was getting big bucks by the hour.
Sorry , I dont believe the homeowner..
I get this question a lot from potential customers, "How much per square foot to build me a house?" My answer invariably is, "It all depends on the materials you choose and the level of finish you want in your new home".
Oftentimes a competitor will give a lower price than me, but then I have to ask, "What's included in the price?". Is the septic and water in there, full basement or crawl space or slab, is the site work included, one- or two-car garage, discount fixtures and appliances or top of the line, hardwood flooring in the $10/sf range, or carpet in the $1/sf range, ceramic tile or vinyl sheet flooring in baths and kitchen, vinyl siding for $2/sf or cedar clapboards for $4/sf, and on and on. Another trick some builders will use when giving an estimate is to include the covered porches as living space, thus lowering the overall square foot cost by a good margin.
And, as has been pointed out several times in this thread, there are lots of pickup truck guys out there who don't even price in overhead and profit, they just work for an hourly wage, and usually not a very good one at that.
Another point is warranty....in my area I'm probably the only one that offers a written warranty in addition to the standard stuff that comes with the appliances. After twelve months have elapsed since we completed a job we call the homeowner and ask how they're doing. It usually results in some little call back, but it also usually results in more business, either from the homeowner or from their friends, and it always results in me being able to use that customer as a good reference. I wonder what that's worth in cost per square foot?
Hope some of this helps.
Regards,
Andy Lee
Sounds like the homeowner is on a fishing expedition to me. If there really is another contractor, what is he leaving out? Do you have some good well defined specs to work with? You have to compare apples with apples.
Call him and say, "I've just found out some costs are going up, so we need to sign this contract in three days or the price is going to be 110 instead of 98"
That's if you want to play games with him.
I'm in Maine too and in my area 98 won't make you any money
You can't use square footage pricing.
I don't EVER talk in terms of price per SF. When the question comes up, my reply is... "you know, Mr Smith, I have no idea what a house costs per SF. Let me get my calculator out and figure out a couple for you, just to see what we come up with". I then punch in a couple of numbers and tell them "Well Mr Smith, in the past two years I've built houses that cost anywhere from $85 (yes!, BUT no well, no septic, no flooring were in the Contract) all the way to $160 per Sf." Additionally, I will do a free ballpark "estimate" for a prospect by reviewing recent cost records for similar jobs. I spend no more than 1-1/2 hrs on this. If we are then in the same "church" after I present the free "estimate" , I charge a fee for a "Quote" to determine if we are in the same "Pew", and singing from the same page in the hymn book! The prospect has to be willing to commit to a minimum of one hour answering our specification questions for us to quote them a realistic cost of construction. By this time, they have shown a real interest and involvement. Since we are a design build operation, this fee is tied in with the fee for design. The amount of the fee is dependant on how much time I feel it will take me to produce the written quote for them. This includes time spent making up bid specs for my subs. By he way, my subs like this system, because the know I'm not wasting their time. They know these "prospects" have in effect been qualified, and there is a higher percentage chance we will get the job. None of the fees are refundable or applied to cost of future construction. Hope this helps!
Yeah.
And what is a square foot? You count the garage? How about all the decks, porches, etc., Finished basement?
What if you build a 3000 square foot house like I did last summer that has 29 corners, including 8 different roofs?
Square footage is only used by low budget builders, since it appears to give them a comparative advantage. If you're not using quality materials, and quality mechanicals, and other components, then square footage pricing is for you.
Well said!
$98.00 is not a bad price for all the extras your doing. If $98.00 is what it takes to run your business than that's what it takes.
Do what some of these other guys say.......don't negotiate your price and tell them thank you for a chance to bid the job but I can't do it for that price.
Your in this business to make money for your hard work. Not to go around and be Mr. Nice guy and give everyone a deal.
Your doing this to make a buck, not a friend!!!
I haven't quoted any complete houses, but in the remodeling/repair end I run into this frequently. I'm in southern Maine as well. Most of the time I just leave my card and tell them to call if they change their mind. Getting into a discussion about labor, materials and other issues that the "other guy" is quoting doesn't help matters at all. We all need to do work we can be proud of and make a decent living to boot. Stick to your guns.
Dana
Jeff's dear old Dad has got it right. It's nice to be working, but not for less than minimum wage, or free, or in the worst case, it costs you money. It's tough to bid when the specs are fuzzy or non existent. Better to walk than take a bath.
I think a very important question here is also.....do you have other opportunites? Can you walk from thsi one if you wanted to?
It's nice to say "Just walk and find something else". But if that means doing nothing for three weeks I'm not so sure that is always the best alternative. Now I'm not sayong do this at a loss to compete with Mr. DIY with a sign, but maybe make the additional effort to get it closer to an apples to apples without compromising your margin. If he priced carpet and you hardwood, switch to carpet, etc.
Just my thoughts on this.
SJ
It never does any good to discuss it. But, if you are out of work...................... maybe you can help change statistics.
Its always very hard to refuse a job when things are tight. My brother and I did a job for a condo; the guy stood over us every minute of the job stressing us out and making the project quite unbearable. We ended up getting stiffed for the work, for the first and only time. But we learned a valuable lesson (get signed contracts being another lesson). We were on the job two weeks and somehow survived without the money. Should have taken a vacation instead!
Please stick to your price. You are in the right ballpark and maybe a little low. Leave the guy alone to figure it out.
You are most probably not doing anything wrong except second guessing yourself. I recently put myself into a similar situation on a large addition. I bid the job and the owner came back with a 25% lower bid in writing. What he showed me was not specific in details but referenced the owners plans. My bid was already trimmed down a bit so i told him there was no way I could meet that price. Well guess what, 2 months later he calls me back because he can't get a contract or a start date out of the guy, so I end up with the job at my last price I gave him. I am about 60% through the project and am regreting every dollar i originally trimmed off. I have known the customer for 9 years, not that we are friends but our kids go to school together and we were in our school fathers club together. He's not a bad guy but he is a SOB about anything that is an extra or even things he is coming up with he thinks I should do for nothing. I think that he actually did get that lower price and he has that stuck in his head and he thinks I'm making a cool 25% for nothing. Did I mention he had two other bids that were in my range. What I want to say to you is stick to your price. If possible make sure the bids are comparable. And if you are desparate for the job rather than come down on the price maybe offer the customer a few freebies that you can work in, if you get the job you can usually find a few ways to save some money and pay for them. But you know that you can't meet that price and coming down a few thousand isn't going to make a difference anyway if you end up with the job your going to have a bad taste in your mouth when something unforseen cost you money.
5 for nothing