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Free Estimates

| Posted in General Discussion on January 19, 1999 04:25am

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Let’s discuss the practice of giving free estimates to prospective clients. A general contractor I once worked for said “there’s no such thing (as a free estimate) I pay for them”. A good estimate (material take-off,schedule,costing) is akin to a feasibilty study for which other professions charge a professional fee.

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  1. Guest_ | Jan 17, 1999 09:25am | #1

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    If you figure out a way to charge for estimates let us know. I could really make a happy, healthy, and easy life out of estimating jobs. It is the cost of doing business. It happens in many industries. I can go to car dealers and haggle with salesman forever and I don't have to pay them a dime. I have lost a couple jobs lately that I have bid on and I have gone on with life. I spend probably 3-4 hours biddng a potential job and I lose many of them. If I could be paid to just estimate I may never touch another tool, ever.
    Bidding keeps us all honest. When I have plenty of work my price creeps up. When I need work I tend to lower my price.

  2. Stephen_Hazlett | Jan 17, 1999 06:31pm | #2

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    JD. I take the opposite approach. If I need work I calm the churning in my stomach and raise my price.Many customers get estimates and then wait months before proceeding with the job at which time I may be swamped with work. If I am swamped I don't want an other job at a low price.Also remember this can be a very cyclical business, I have many times when I am very slow but these times are always followed by periods when 5 jobs come in at once. When those jobs come in I want them to be top dollar jobs, then I will have a financial cushion to ride out the inevitable market slow down.Also I have been very suprised to learn that to a certain extent the more you charge the more willing some people are to buy.

  3. Guest_ | Jan 17, 1999 07:31pm | #3

    *
    I used to own a pizza delivery franchise. About three years after I had opened I met someone who, upon hearing my occupation, told me that they were in my store the first week I was open. They saw the menu prices and decided that the pizza couldn't possibly be any good at that price and left. At the time of the conversation, they still had not tried the pizza.

    Sometimes, the less you charge the less people are willing to pay.

    Rich Beckman

    1. Guest_ | Jan 17, 1999 08:23pm | #4

      *How long are your estimates good for? I couldn't possibly honor an estimate for more than 30 days. If some one came back after that, I might be able to do the job for the same amount, but wouldn't want to be locked into a bid based on old material prices. I make it clear that bids are good for 30 days only. If my schedule is more demanding, I might make this less.

      1. Guest_ | Jan 17, 1999 10:47pm | #5

        *Thomas,Ideally, we should be able to qualify the projects before we even bother to spend time on an estimate. Explain to potential customers that making estimates increases your overhead. Since the only people who pay your overhead are you and your customers, you would like to keep that part of your overhead down. Find out how much the construction budget is. Many times the ones who cause the most overhead are the ones who never pay it. If their budget seems reasonable, find out how many estimates they plan to gather. If they're going to get a bunch, don't bother. If they're only going to gather a few, find out what their criterea of selection will be -- price? qulaity of workmanship? speed?You want to make sure that you're not being used as a yard stick to measure if their brother-in-law's bid is reasonable. Ask them if there is any reason that you'll not be awarded the contract if your estimate comes in within their budget and your quality and speed are within reasonable guidelines. After talking with them for a while and asking questions such as these you ought to be able to get a feel for whether they're just tire kickers or not.David Gerstel goes over this in his book The Builder's Guide to Running a Successful Construction Company from Taunton Press. He calls it a "price planning agreement" where the client is essentially shopping for a builder as opposed to shopping for a deck (or addition or whatever). He charges a consultation fee which is deducted from the price of the job if he is chosen.The amount of work involved with planning a construction project warrents you to charge a fee. And by doing this you in turn are able to keep your overall fees lower for your paying clients. Furnish past-client and fellow-builder reference lists to potential clients. Sell your company, not a price tag.If you do decide to submit a bid, make sure that the bidding guidelines are standardized for everyone submitting a bid -- blueprints with all details and changes, waste removal etc . . .Basically, you need to cover your butt without being rude or unreasonable. Don't forget to smile.(But don't smile too much)Of course,all of this assumes you're a general contractor taking control of a project. If you're a framing sub, you can come up with a price much quicker and easier by looking at the plans . . .Hope this helps,happy hammering!Dan Morrison

  4. SteveM_ | Jan 19, 1999 06:58am | #6

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    I like most of the advice offered here. I aqm not an advocate of charging for an estimate but I have learned to ask if peoples budgets are reasonable. If someone wants to find out if the others bidding are giving reasonalble prices that is usually easy to determine. After years of doing this I almost always leave a customer with a dollar figure in my head based on what they want. It never fails to amaze me how close these figures are. Always within 15%. A big ball park, I realize, if your quoting but a good point of reference. Hats off to all of you who said you keep your price high even in hard times. It is really hard to come to, but, I believe it's true. People want to feel they are hiring someone of value. Anyone who is good CAN'T be cheap. We all want to get the job, be the best, and do it at the cheapeast possible price. But our customers are often willing to pay, even wanting to pay more to ensure they get a good job. A good subject for this forum. I hope others take time to comment.

  5. Guest_ | Jan 19, 1999 08:47am | #7

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    Thomas,
    I have gotten by with giving a bill for an estimate I made for someone. I told them that it was design fee. Those someones are usually commercial clients.
    L. Siders

    1. Guest_ | Jan 19, 1999 09:11am | #8

      *I think SteveM is right and this is a major failing of mine, I don't feel out the budget ahead of time. I am a commercial contractor and I recent lost a good tearout job based on price. (I asked) I priced based on Dodges Price Book. It may have been dead on for a bigger company, but I'm sure that I could have been more resonable. The problem is I don't know if cutting to the bone would have even met his price.(He got dumpsters and his own people to do the work)The only time in the last five years I've seen an estimate against me it was almost double mine, but I don't know if, as a sub said, he was trying to hit a home run. If pricing was easy, I guess more guys would still be in business.

  6. Steven_I. | Jan 19, 1999 09:20am | #9

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    Nothing is free. As others have already pointed out, estimates are paid for by paying customers in the form of increased overhead. It is analogous to the way in which losses due to shop-lifting get passed on to a retailer's paying customers.

    David Gerstel's price planning agreements are a great idea, although I've yet to implement them on a regular basis.

    Thanks to everyone for their ideas on this topic. Let's hear some more.

    Steven

  7. Thomas_Cummings | Jan 19, 1999 04:25pm | #10

    *
    Let's discuss the practice of giving free estimates to prospective clients. A general contractor I once worked for said "there's no such thing (as a free estimate) I pay for them". A good estimate (material take-off,schedule,costing) is akin to a feasibilty study for which other professions charge a professional fee.

    Opinions?

  8. Guest_ | Jan 19, 1999 04:25pm | #11

    *
    The learning curve in construction pricing, bidding, and business is a long one. Much longer than learning saws and hammers. Paying your dues.
    Remodeling has its uniqueness from new construction and the business of bidding / pricing is different for both.

    If I only knew 20 years what I've learned in the past 10 I'd have had fewer struggles and sleepless nights.

    I haven't given a hard bid on a job in 9 years. I usually charge for producing a project cost-out and have 'lost' maybe 3 projects to someone else during those years. It's not rocket science but it is difficult to teach the people mechanics. Some people have it, some don't and others like me take a long time to learn.

    I think anyone who sticks with the building business long enough and reads up in trade publications regularly will develop a 'bidding' process that works for them.

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