I’ve been giving an earlier thread on “objections” some thought. It just dawned on me today, that many of the “objections” should be ironed out in the opening interview or the first sales appointment in which the needs, wants and desires of the client are explored.
So, with that thought in mind, I’ve decided to create a written list (for my estimator) of questions that need to be addressed BEFORE the proposal is calculated and presented. The reason is simple: if we don’t ask the right questions, we won’t know what to offer. There are secondary considerations. By asking the questions in the first phase, it eliminates the need for the difficult answers in the presentation phase.
So….what are the questions that you ALWAYS ask. The basic ones are easy: Name, Address, Phone #’s.
What are some of the key questions that you use that help you decide whether you want to work with this client or that help you formulate your proposal?
In another thread here, I realized that if I explore and explain the fixed bid proposal vs the cost plus proposal in the first meeting, it closes the door on them asking for a breakdown after you have put together a fixed bid proposal. It is much easier to say no to a free breakdown before the scope and proposal is decided because they would have to paying for a cost plus proposal instead of receieving a free fixed bid proposal. At least that is how it will work in my business model.
So, one of my core questions will be: “Do you want a fixed bid proposal or an open ended cost plus proposal?”
With that question explained and answered, I don’t think we’ll ever have to answer that dreaded question again “Can you break out the materials and labor on the proposal?”
Bob’s next test date: 12/10/07
Replies
To be honest, I don't even discuss business on first meeting. If they really, really, really need a rough idea of what it will cost before I leave the door (and they usually do), I don't mind giving them an uncommitted round number. But the important thing is, I want them to see that my focus is on delivering an exceptional product and service.
If T&M is what they have in mind, I'll give them my rate along with my terms. More likely, at least on bigger jobs, they need a price. After I go home and figure out the price I'll tell them. I don't feel any commitment to keep anywhere close to the round number I might have given them earlier. If that number stuck in their head, that's okay, they'll get over it. Bottom line is I'll do such and such a job for such and such a price. If they feel somebody else will do it cheaper or better, they should go for it. If they feel somebody else will do it cheaper and better, they should think really hard about that. I'm pretty good, as are my prices.
I guess basically, I just lay my cards on the table. They're some pretty good cards.
--------------------------------------------------------
Cheap Tools at MyToolbox.net
See some of my work at TedsCarpentry.com
Edited 6/15/2008 2:36 pm by Ted W.
Edited 6/15/2008 2:37 pm by Ted W.
I've been asked to break out the materials ad labor thing in the past and it is not too hard the fist go round because I had to do that in my estimate anyway. what becomes a PIA is when they say will it be cheaper if we do this or that and can you price those diffeences. While I can respect a person trying to save money I also don't want to re[rice a big job 5 different ways. One thought I had was to say right fom the beginning is to tell tem I will provide a free estimate based on our initial meeting free. after that any pricing changes and additions will be charged for. what do you think?
"it aint the work I mind,
It's the feeling of falling further behind."
Bozini Latini
http://www.ingrainedwoodworking.com
what becomes a PIA is when they say will it be cheaper if we do this or that and can you price those diffeences...
That's exactly why I don't like breaking it down. Either they get T&M or they get a bid.
Does anyone charge a base fee for change orders? Is that heard of?
--------------------------------------------------------
Cheap Tools at MyToolbox.netSee some of my work at TedsCarpentry.com
Edited 6/15/2008 6:18 pm by Ted W.
On new construction last year, we charged ten percent on top of the gross total of the change orders (and there were several in this case). But even so, with all the headaching and paperwork and follow up and renewed supplier and subcontractor coordinating, we felt like we were getting ripped off most of the time, even at ten percent of an overall change order price that we could live with. in that case, we were usually passing materials for changes at or around cost, because we were already building their house. Labor was what it was, depending if it was us, or an outside sub...we thought after that experience that we should make change order clauses in future contracts scary looking, with larger fee, so that it would discourage the practice after coming to terms with an original set of plans...
"we felt like we were getting ripped off most of the time,"You weren't getting ripped off. You were shooting yourself in your own foot! There isn't any reason why you shouldn't get your full markup and clerical costs on every change order. Remember...nice guys finish last and no good deed goes unpunished. Bob's next test date: 12/10/07
Edited 6/15/2008 7:25 pm by Jim_Allen
We just got our change order forms printed and I wish I had included a preprinted line somewhere in it charging at least a one hour clerical fee...maybe $45 or something for each change order. The idea would be to limit them or at least make the client aware that they are costly and not free. Bob's next test date: 12/10/07
Only once have I heard of a "FIXED' base fee for change orders. Company charged $50.00 fee no matter what the cost of the change as a base, then added a 5% fee to the top of all the costs including that fee to actually execute the change order.
They can't get your Goat if you don't tell them where it is hidden.
The first appointment is the place where you can set the tone and avoid the request for five free alternative pricing scenarios. I agree that I also respect a client that is trying to save money. It's human nature, necessary for most of our clients and is basically to be expected on every appointment. But, that shouldn't give them a license to work us for hours on end free of charge. That's why I got excited when I realized that some of the later objections or difficult questions can, and should, be handled right out of the blocks. Your case is a prime example of why you need to establish the ground rules for your bid process, in order to minimize your time, while still giving the clients what they want/need. So, at some point in your initial presentation you need to lay out your bid process and explain how it works. You might ask them if they are seeking a fixed bid, or a cost plus bid. After a brief explanation, you get to preempt their ability to ask you for five free alternative proposals after they choose the fixed bid process. You might say something like this "Mrs Jones, I'm glad that you've chosen the fixed bid process. We'll do a thorough interview with you about your design goals and provide you with a firm fixed bid proposal. After that, if you want to explore further design options, we'll be glad to offer you our design and consultation services on an hourly basis. For instance, after the initial proposal, its not unusual for some people to want to explore multiple alternative proposals to gain additional value by lower the cost using a reduced scope or lower end products. Those types of proposals are very costly and time consuming so we won't do that free but we will provide you with the very best fixed bid the first time by exploring your wants and needs and fitting them to your budget...the first time." I would pause for a second then immediately follow up with:
"Mrs Jones, do you have a firm budget in mind for your project at this time?" Bozini, can you see how you would preempt them from asking you later on for five more free proposals? Bob's next test date: 12/10/07
Geting the HO to tell me the number they have in their head is difficult for me. I know Im not very smooth in my delivery and I know that its a number I need to proceed with a reasonable estimate but every time I get there I just end up stumbling my way thru making us all uncomfortable. Sometimes I get a number but most of the time they just say " I really dont have any idea how much this should cost." Is this the truth or do they have no idea that a simple bath remodel could be 10-15k, or a basement 25-40k?
So my question is how often do the clients that you deal with have a reasonable budget in mind for the project that they tell you they want? This question is for everybody.
I think asking the budget goal is a very high priority in the first appointment. In fact, I don't think I'd ever agree to return with a proposal without knowing their budget. Frankyly, I'm just too busy to create a proposal for anyone unless I know they are serious buyers. I won't know they are serious buyers unless they honestly discuss their budget goals. I just had this discussion again a couple days with my estimator. Her theory was that the clients were afraid to reveal because they hoped that they could get a lower price by keeping the number secret. My suggestion to her was this: "Mrs Jones, one of the universal truths in most remodeling projects is that homeowners typically budget only half of what the true costs are. Homeowners typically budget 5k for 10k jobs or 15k for 30k jobs. I'm only telling you this because you don't have to be embarrassed if you don't know how to properly judge the remodeling costs. I don't blame you, I do them all the time and the numbers always continue to surprise me. We've already agreed that I will be providing you with a fixed bid proposal at no cost to you. However, even though I will be providing one free proposal for you, they are not free to me. They take a lot of time and earlier in my career I made the mistake of doing multiple free proposals only to find out that the clients like you had budgets that weren't anywhere close to the goods and services we were specifying. It was a huge waste of time and effort and I'd end up re-doing everything twice which only adds time and cost to your project. Nowadays, I determine the budget first, before starting the proposal process. That is the only way I can minimize the office time, which gets you the best value for your dollars. " I'd continue: "To properly serve you, I'll need some direction with regards to your budget. Perhaps we should explore it this way: are you going to be paying cash or financing this project?"FCOH, by restarting the conversation along the cash or finance line of questioning, you will be leading them down the path where you can ask "Okay, so your budget is really pretty simple. Since you are paying cash, you can only spend what you have saved up for this project. How much is that?"Then silence. Don't speak until you hear their answer. If the silence continues....DON'T SPEAK FIRST. Make them tell you that they are not comfortable disclosing their budget. If they are not comfortable, you have some trust issues to overcome.
Bob's next test date: 12/10/07
"If they are not comfortable, you have some trust issues to overcome. "what have you done to earn their trust?Are you willing to disclose details of how you markup?
bobl Volo, non valeo
Baloney detecter WFR
"But when you're a kibbutzer and have no responsibility to decide the facts and apply the law, you can reach any conclusion you want because it doesn't matter." SHG
"what have you done to earn their trust? Are you willing to disclose details of how you markup?"Lets remember that this is the first appointment. So, the ability to trust each other is a bit of a fleeting grasp at each other's abilities, personalities and presentation, including first impressions. First, I didn't call them for the appointment. They called me. Their must have been some reason why they chose to let us look at their project. After passing the first test: answering the call and setting an appointment and getting to it, we shift into our next primary task: introducing our company and sharing enough information with the client to establish that our company has the ability to perform the task requested.So, after some dancing and establishing the relationship, we have to move forward with the actual deal. We have to establish the scope, budget and timeline. Not every client understands that but we do because we are the professionals. If there is no trust established, then the salesperson has to take some giant steps back and start over and find a way to establish the trust. Sometimes its not possible. We met with one lady that wanted a price on some work upstairs and wouldn't let us in the house to go look at it. After 15 minutes talking about some other outside work, she finally relented and let us upstairs. Among the items wanted: she wanted me to cut 12" off the bottom of her exterior door jamb and replace it because the bottom was rotted. This lady certainly needed the budget talk! Bob's next test date: 12/10/07
"Their must have been some reason why they chose to let us look at their project."maybe cause Allen Construction was listed first in the yellow pages? that may read as flippent but not ment to be. while not the subject of this thread, finding someone to call back is some times tough, you maybe the 10th call but you answered.you really haven't answered the question as to why you should be trusted. are you willing to disclose financial details of your business to the potential client at this first meeting?
bobl Volo, non valeo
Baloney detecter WFR
"But when you're a kibbutzer and have no responsibility to decide the facts and apply the law, you can reach any conclusion you want because it doesn't matter." SHG
I did answer the question about why we should be trusted. We give a sales presentation explaining who and what we are and do. We will answer questions about our financial situation. I'm solvent and able to do the job and it says so in the contract! Also, we are TRCC licensed. They run a criminal check before they issue them. But....you gotta remember, we are talking first appointment here. There's no money changing hands. There's nothing to worry about. It the first conversation...not even the first date, first dance, first kiss...nothing. We are just exploring each other to see if we are compatible. The time for vetting each other comes later. Theres absolutely no risk exchanging information. If we can get past this first appointment, I fully expect, and want, the client to call every reference that we provide and call every governmental agency...BBB or whoever they feel comfortable with. I welcome that vetting! There will be plenty of time for that.As for the advertising. I've never used the Yellow Pages. Too expensive. And, we don't waste any time calling back when a lead calls us. We get right on it. Thats the difference having a full time salesagent. She knows how important it is to make contact, set an appointment (usually within 24 hours if that fits their schedule) build rapport, explore the project and get back with a proposal. Bob's next test date: 12/10/07
Edited 6/16/2008 6:19 pm by Jim_Allen
"I know Im not very smooth in my delivery "There is a very easy solution. Practice your delivery on the known issues that have stumped you. Do it on video tape and watch yourself. Bob's next test date: 12/10/07
It was mentioned in a thread not long ago about making a CD with photos of the work to hand out to new potential customers on first meeting - a sort of CD Portfolio. I like this idea of handing them something more than a business card. Something that would go a really long way, I believe, would be nice folder with a CD, a business card (or 2) and a few documents outlining the business process. Do them all up nice and organized, with company headers and tucked in a pocket in the folder. I think they sell all this stuff at Staples and Office Depot. Might even go as far as having the company logo printed on the folder. Make it real classy like!
The documents outlining the business process can stipulate how issues, such as change orders or oversights, are handled. It could also nicely explain why it is necessary to have this process in place and maybe even describe a typical scenario as an example.
Of course, other documents might include information, such as insurance and liscensing, possibly some references, info about local building commitees.... The customer feels confident with you as a professional, you get all your cards laid out on the table without stumbling over words.
After discussing the project, then you can sit at the dining room table and briefly go over the documents with them. After going through all the documents, which is theirs to keep, then you can as about budget. If they're still not comfortable with telling you a number after all that, then you tell them what you think it might cost. You'll be happy to write up a proposal, for which you charge a fee of $#### or XX% of the total contract, which (and this is important) would be deducted from the total, or the retainers fee, however you work it.
I like this folder idea. Way professional!--------------------------------------------------------
Cheap Tools at MyToolbox.netSee some of my work at TedsCarpentry.com
Yes, a professional presentation book is very important. The problem with some sales people is that they feel inclined to open it and pour over it page by page which is a big mistake. Your idea of having something professional to leave with them is good. I like the idea of leaving something like that. I'm going to add that item on my first appointment agenda. Thanks. I do not think I would walk out of a first appointment and agree to bring them back a free proposal without them telling me their budget. No way...no how. THEY KNOW THEIR FINANCIAL SITUATION....I DON'T! At some point, I'm going to make them say "If I tell you what I want to spend, you'll take advantage of me and I won't get my best deal.". They'll have to tell me that, or I'll tell them. "Sorry Mrs Jones. These proposals can eat up too much of my time and I refuse to do one without some idea of your budget in mind. Even if you don't know how much things should cost, you know how much money you have to spend or want to spend. For some reason, you are not being forthright with me and maybe you don't trust me. Is that the reason? Do you think I'll pad the estimate and charge you more than you deserve to be charged? Are you afraid you won't get your best deal? ". Ted, that is bringing the issue right to a head. There is no dodging the issue now. There is only two answers left. She is going to give me a number or tell me shes worried that she won't get her best deal. If she admits that is the case, I'd answer "Mrs Jones, most homeowners get three bids from three qualified contractors. You strike me as being a sensible person and I'm going to assume that you will do just that. So, if I charge you $10,000 more than the job is really worth, won't you just buy the services from the other contractors anyways?" I think her answer would steer me in the direction I need to go. If that isn't enough for her to tell me her budget, I'd say "Mrs Jones, after the other contractors give you their estimates, you'll have a much better idea of what your budget is and I'll be glad to start working on our proposal based on that budget number. Please give me a call when you get those numbers worked out. I'd then excuse myself and leave and wouldn't care if I ever got that job or not. I'm not going to work for free with someone like that. I don't charge for proposals like some do, but I'm not going to waste my time on someone who may not be a real buyer. I need to know how they are going to pay for our services. Remodeling is expensive. It's not uncommon to find people who think they can afford it but can't. I'm done wasting my time on those situations. Bob's next test date: 12/10/07
Oooo... Ouch. I see a lot of negativity there.
At some point, I'm going to make them say "If I tell you what I want to spend, you'll take advantage of me and I won't get my best deal.". They'll have to tell me that, or I'll tell them. "Sorry Mrs Jones. These proposals can eat up too much of my time and I refuse to do one without some idea of your budget in mind. Even if you don't know how much things should cost, you know how much money you have to spend or want to spend. For some reason, you are not being forthright with me and maybe you don't trust me. Is that the reason? Do you think I'll pad the estimate and charge you more than you deserve to be charged? Are you afraid you won't get your best deal? "
Confrontation. That very paragraph is a guarantee to not get the job, whether or not it's in their budget.
Ted, that is bringing the issue right to a head. There is no dodging the issue now. There is only two answers left. She is going to give me a number or tell me shes worried that she won't get her best deal...
.. or tell you to get the he11 out of her house, assuming you're talking to wifey. If it's hubby he might help you find your way. :D
If she admits that is the case, I'd answer "Mrs Jones, most homeowners get three bids from three qualified contractors. You strike me as being a sensible person and I'm going to assume that you will do just that. So, if I charge you $10,000 more than the job is really worth, won't you just buy the services from the other contractors anyways?"
What are you selling junk bonds? Sorry, but that sounds like a fly by night hustler if ever I heard one.
I'd then excuse myself and leave and wouldn't care if I ever got that job or not. I'm not going to work for free with someone like that. I don't charge for proposals like some do, but I'm not going to waste my time on someone who may not be a real buyer. I need to know how they are going to pay for our services. Remodeling is expensive. It's not uncommon to find people who think they can afford it but can't. I'm done wasting my time on those situations.
Your entire post is reaping with attitude. I can see not charging for an initial visit, but why wouldn't you charge to sit down for 6 hours to possible 3 days putting together a proposal? Others do because they're smart.
I don't charge for a formal proposal only because I never write one. My customers are good friends of mine and pay me by the hour. But on the rare occasion when architectural drawings are involved, or the project falls into the $10K and up range, I charge for my time to write up the proposal. It's just the professional way of doing things.
--------------------------------------------------------
Cheap Tools at MyToolbox.netSee some of my work at TedsCarpentry.com
Edited 6/16/2008 12:21 am by Ted W.
"Oooo... Ouch. I see a lot of negativity there."Yes. There is a negative in there. That would be MY DECISION not to spend any time on THEIR project after spending some considerable time trying to prod out their budget. You may be working with friends and referrals. I'm not. So, it has been my experience that not everyone has realistic budgets that fit their dreams. I'm already too busy to play cat and mouse with someone who doesn't want to do business in a NORMAL manner. MY NORMAL! Also, most of our projects are more than 10k. I don't think I'd need a budget from someone wanting 6k worth of work. That's really only one small "remove and replace" on an existing bath. We'd banter that number around in a conversation like this "Mrs Jones, are you going to be interested in putting a 6k bathroom back in this space or something more elaborate in the 12k or up range?"Will I possibly lose some clients? Yes. I don't care. I learned long ago that NO is a very important word in business. I also learned long ago that we create 80% of our success dealing with 20% of our contacts. We all need to spend our time wisely because it is a fixed amount...you can't add hours to the day and if I spend time creating a 20k proposal for someone that can only spend 2k, I don't think I'm going to get the job anyways, right? "Your entire post is reaping with attitude. I can see not charging for an initial visit, but why wouldn't you charge to sit down for 6 hours to possible 3 days putting together a proposal? Others do because they're smart. I don't charge for a formal proposal only because I never write one. My customers are good friends of mine and pay me by the hour. But on the rare occasion when architectural drawings are involved, or the project falls into the $10K and up range, I charge for my time to write up the proposal. It's just the professional way of doing things. "We obviously have a different method of doing business. We don't work hourly and we don't spend 3 days writing proposals but we bring a detailed scope of work and an 8 page contract to every client. It's not really that big of a deal. The 8 page contract is a "fill in the dollars" and "fill in the draw schedule" document that refers to the detailed scope document. The detailed scope document is basically written out in the client's home during the discovery process. Everything they say they want, gets written down, and then gets a reference in the scope of the job. Most of our clients tell us that our detailed proposal and scope has been the deciding factor when they are making their final decision, if the prices are close and they feel confident about both finalist contractors. We don't win any contracts when the clients are shopping price anyways so it's imperative that we get to the budget fast. We can save ourselves a lot of time because we know we can't beat the $25 guys that give their services and materials at cost. Remember, our markup has to be a minimum of 1.67 to achieve the desired 40% gross profit markup. One other thing. The "selling" junk bonds comment is way off the mark. The best sales people will understand the idea behind the statement that triggered your feelings. They don't repeat a statement like that verbatum. Good salespeople find a way to get the point across in a natural conversation and usually the best way is to ask questions. Everything I post in a thread like this is conceptual and brief because the conversation about budget might be 15 minutes before I got to the point where I'd have to say "I'm sorry Mrs Jones. Company policy dictates that I only spend time with clients that we feel we have a good working relationship with. You don't fit that profile. Goodbye!" We don't offer proposals to all of our leads. I've learned the lessons about taking jobs from the wrong kind of clients. We screen too...just like they do! Lastly. We don't provide any plans for free. We offer a design package for most small additions for $3500. For that, we'll provide plans that will get a permit pulled. Anything more elaborate than simple design plans and we use an architect. We'd get his price and markup from there so theres no real limit on a design package. Good conversation. Thanks! Bob's next test date: 12/10/07
That is an excellent post ! Well put.. Now when you bring that little presentation book to leave with them have some nice photos in it of the past jobs and some where on that page put the $ amount of the project shown. You will be amazed at what happens when people look at a photo and realize how much it costs to change their bath to match what is in the photo.
Short list of materials used conveys the sense of the up or down scale of the costs of the job shown. Pictures with that text are worth the thousand words it takes to explain it all.
They can't get your Goat if you don't tell them where it is hidden.
Uhh.. dovetail,
that was my idea. ;)--------------------------------------------------------
Cheap Tools at MyToolbox.netSee some of my work at TedsCarpentry.com
I am sorry , I knew that and didn't give you credit for it. It is a good idea.
They can't get your Goat if you don't tell them where it is hidden.
That all I wanted to hear. :)--------------------------------------------------------
Cheap Tools at MyToolbox.netSee some of my work at TedsCarpentry.com
"So, if I charge you $10,000 more than the job is really worth"so how does someone determine what a job is really worth? 3 bids doesn't do it. it just tells you what those 3 prices are.
bobl Volo, non valeo
Baloney detecter WFR
"But when you're a kibbutzer and have no responsibility to decide the facts and apply the law, you can reach any conclusion you want because it doesn't matter." SHG
The job is really worth what a good and dependable contractor is willing to do it for. That's why the client would get three proposals from reputable contractors, and not just anyone willing to bid.
Actually, I think a lot of homeowners miss that point, and how we often end up competeing with Acme Fly-by-Night. --------------------------------------------------------
Cheap Tools at MyToolbox.netSee some of my work at TedsCarpentry.com
how often do the clients that you deal with have a reasonable budget in mind for the project that they tell you they want?
About 3/4 of the time they have a pretty good idea of the price range they're in. In kitchen work I'd chalk this up to the number of home magazines that list price ranges for everything from appliances to countertops.
The question that follows after I've determined what the client wants in the kitchen is, "What's your budget?". If they're truly not sure, I can use other projects that were similar for a cost estimate. It's probably easier for me to do this because the scope of my projects is more defined than a contractor's would be.
I generally will not start drawing on a project unless I get some kind of feedback on budget. If they want a total remodel with new s/s appliances and granite tops, but the budget is $18,000, there's no way for me to provide that in their price range. If they're willing to work with me on compromises to get as close as possible, then I'm happy to do it.
"About 3/4 of the time they have a pretty good idea of the price range they're in. In kitchen work I'd chalk this up to the number of home magazines that list price ranges for everything from appliances to countertops."I think you are right about that and that works in our favor. We don't have to walk into a kitchen remodel with the client thinking it will be only $5000 when it's really going to be $25000. One of the appointments today told us that she is having a real hard time getting bids. We are the ninth contractor shes talked to. Only one other has gotten back to her. I don't know if she actually received a quote or just a return call. We'll have a detailed scope and proposal in front of her tomorrow or Fri. Bob's next test date: 12/10/07
I've found the info in those articles is pretty accurate. Even the remodeling mags for the consumer offer some idea of cost. Good for us because lots of people check out these magazines when they're planning a project.
It's hard to get bids around here, too. We've had some slowdown in housing, but not nearly as much as other areas. So most trades are still working lots of new construction, and there are not so many remodelers around here. So wanting something like my 5' bumpout on the back of the house is pretty small potatoes, and no one wants to come out.
Unless it's just a single bathroom vanity or utility room cabinets, etc., I always make an effort to at least see a project before I turn it down.
So, one of my core questions will be: "Do you want a fixed bid proposal or an open ended cost plus proposal?"
With that question explained and answered, I don't think we'll ever have to answer that dreaded question again "Can you break out the materials and labor on the proposal?"
I guess I really don't get it. You can tell the chisler type customer a thousand times "That is the best price I can offer you" and they will continue to ask.
"I guess I really don't get it. You can tell the chisler type customer a thousand times "That is the best price I can offer you" and they will continue to ask. "I would suggest that you follow your answer with a trial close: "That is the best price I can offer you....do you want to make the deposit by check or cash?" Bob's next test date: 12/10/07
Some people are just convinced that everything is Negotiable, they just have to be persistent at it.
They can't get your Goat if you don't tell them where it is hidden.
This isn't really a first appointment agenda item, but hijacks is always welcome....
I asked my estimator today if any of the clients ask her to break out the materials and labor. She said a few have asked when she got back to them with the proposal. Her answer? "No. We don't do that.".
End of subject LOL!
If they ask again or asks why she tells them "This is the price for our materials, labor and profit. We have to make a profit!"
I just laughed when she told me that. She is so sincere too. In her mind, there would be no reason to offer any contract if all of the costs weren't covered AND A PROFIT IS MADE. To her, the profit is the most important thing.
I love that girl!
Now, compare her attitude with a lot of carpenters who feel they are "ripping the customer off" if they markup materials or their labor or make enough to actually make a profit on a job.
Bob's next test date: 12/10/07
"No. We don't do that.".
Brutal honesty, the foundation of a good working relationship. :)--------------------------------------------------------
Cheap Tools at MyToolbox.netSee some of my work at TedsCarpentry.com
"I asked my estimator today if any of the clients ask her to break out the materials and labor. She said a few have asked when she got back to them with the proposal. Her answer? "No. We don't do that.".End of subject LOL! "I find it funny that you feel untrusted when you're not told the clients budget, but you feel no need to break out materials and labor.I also don't see how breaking it out gives you less profit.
bobl Volo, non valeo
Baloney detecter WFR
"But when you're a kibbutzer and have no responsibility to decide the facts and apply the law, you can reach any conclusion you want because it doesn't matter." SHG
You are right. Breaking out the materials and labor won't reduce the profit and a firm is not wrong if that is how they do business. The clients are not wrong if they only want to work with someone that breaks out materials and labor. Each of us have to make a choice and decide which system is best for their business model.As a GC, I'm also in the exact same boat when I'm soliciting prices from the subcontractors. When I give them a plan and ask for a fixed bid, I get to choose if I want them to break out materials and labor. I don't though because I'm really only interested in the bottom line. Occasionally there are times when I will request an alternate proposal which uses different materials. I still done want a breakout. I only want them to tell me that it will be X amount extra to use the premium product. I think the idea of asking the contractor to break out materials and labor is akin to micro-managing which is a warning sign to me. I don't mind working for finnicky clients that want things done right and details paid attention to but micro-managing takes it to a new level. So, I won't rule out working for everyone that asks for a breakdown of our costs but it certainly sends up a warning flag and I'd start looking for other signs. Bob's next test date: 12/10/07
More on breaking out material and labor.Some industries are easier to split out the materials without sending out the wrong signal. Since we are primarily talking about residential remodeling in this thread, lets explore why it's problematic.Lets say a homeowner wants a kitchen. They call me out and ask us for a fixed bid on an exact duplication of the layout. They even know what style and color cabinets and top. They have their sink and faucet picked . Lets just say it's an easy kitchen...10' long with one long countertop.We gather the info, figure our costs and add our .67 markup. That creates our retail selling price. Fairly simple. We know exactly what our wholesale costs are. We guess what our labor will be. Lets say that Mr Jones wants the materials and labor shown on the proposal. Lets say that the cabinets and top is ($300per foot) which equals $3000 wholesale. We would have to show our materials at $5,010 which would be our retail selling price. The problem with this is that Mr Jones also knows our wholesale price because he is the one who specified the parts. He saw the "$300 per foot) sign at the store too! So, when we show our retail price at 5k, he gets fired up and wants to know why we make so much "profit" on just that one set of cabinets. This forces the discussion into an area that won't be good. We'll have to teach Mr Jones about the fundamental lessons of creating and maintaining a business. We'll have to explain all about labor burden, overhead, pensions, office supplies, professional magazines, taxes, insurance, continuing education, reserves to honor warranties, licensing fees, etc, etc, etc. We might have to pull out all the threads that Jerrald and Mike have written to explain why it's so necessary for us to have the proper markup and profit. By entering this discussion we risk a lot. Will Mr Jones understand or agree with our business model? Will he agree that he needs to send some money into my pension fund? Will he agree that we need health insurance? Will he agree that we need a college fund? What if he didn't attend college and doesn't see any value in it? Will he want a reduction in that area of our "overhead"? The point is that the conversation is going in the wrong direction. instead of focusing on the scope of the contract and the bottom line price, Mr Jones is now delving into my business model. I'm not hiring him to be my business consultant so I just don't think we need to talk about it! These kinds of discussions don't surface on proposals where the clients don't have access to the wholesale costs of the goods we are delivering. They seem to be a problem in the remodeling business because Mr and Mrs Jones can get a grasp of what wholesale costs are. Thats why they'll ask about the materials and labor on a kitchen remodel but they don't ask when they are buying a car. Could you imagine a car salesman calling the factory and reporting that the wholesale cost for the steering box retainer clip was $35.45? Bob's next test date: 12/10/07
a lot of what you say in this post I agree with.some things to think about, Mike's model puts all his overhead on his labor, so if the client sees the cost it is unburdened. since you expect a discount as a GC, it would appear you are giving the client the discount (which you are anyway).regarding the car analogy, I normally use kelly BB and edmunds to get an idea of what the car costs the dealer.
bobl Volo, non valeo
Baloney detecter WFR
"But when you're a kibbutzer and have no responsibility to decide the facts and apply the law, you can reach any conclusion you want because it doesn't matter." SHG