I’ve been a carpenter for several years and have always wanted to go off on my own. Well, last year I did just that focusing on remodeling work and trying to get my name out in the industry and area of new construction. The remodeling end has gone very well although I’d like to move into more new construction of residential homes. The last half dozen homes I have given proposals for I have been told I was one of the more expensive bids. Most if my business sense has come from the school of hard knocks and I am trying to avoid mistakes in the future. I need some sort of guide line or methods to help produce competitive pricing for new construction in the midwest. Should I use a sq. ft. price and roof separatley depending in if its trusses or cut? Should I use a ln. ft. of wall and roof separately. I have tried using estimating books and programs with little success. I need some new ideas and going rates if you will.
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Lots of good reading in the business folder about pricing. And virtually ALL of it says to stay away from square foot pricing.
Women and cats will do as they please, and men and dogs should relax and get used to the idea. [Robert A. Heinlein]
How do you usually price new construction (if that is what you do)? Do you recommend the linear feet of walls being built? Do you just look over the prints and guess-ta-mate the labor costs for each phase? Not to sound like I want the cake and I want to eat it to, but I want to be pricing competitively and be efficient about it.
Edited 5/13/2003 5:44:26 PM ET by VICHAMMER
Start by getting Michael Stones book, Markup and Profit, then get books on estimating and selling. New construction tends to not have the higher markup that remodeling does. Remodeling is a service (primarily) and new construction is a product (mostly). I'm assuming you are using the same markup for both and that is why the other guys bids are lower, their overhead (markup) is lower. Ultimately though it is not how much you charge but how you sell it. I just learned that this year. I stopped being competetive and started being profitable. My business has trippled in profit in 3 months.
Good Luck
I think that Pincone hit the nail on the head. Try not to spend to much time on making your bids more competitive, instead work on making your homes the best value. Higher standards, better reputation, Customer Satisfaction. Most profitable is a much better bid than Cheapest. Try to nicely remind them that normally you get what you pay for. Would you really want to get the project at the price they ended up paying? Sometimes not getting the job is the best result.
Dan
Thanks for the reference and advise. Just one more part of the equation which I failed to mention is all of the bids I turned out were for spec. homes for other GCs. I understand where you are coming from with " you get what you pay for" but this seems to be the hardest sell to someone who is only look at the bottom line. I feel I'm in a "catch 22" (where did the phrase come from anyway?) because my name is not familiar to customers who are building houses yet so I have to settle for the contacts I have to get visible. Even further, when I sit down to talk with these people (the GCs) they want to know what I charge per sq. ft or lin. ft. of walls to build a house as if I should have this set fee and be able to give a price over two eggs and bacon. Again I must mention, I am a carpenter gone business man without any formal business training and maybe this is my problem, but it seems alot of successful people got a start this way.
Lol Catch 22 by Joseph Heller, Another book I never finished. From what i did read . It was about this fighter pilot, who had very minor injuries. From being shot down. In one of the world wars. For some reason when he was in the hospital the doctors found he was always running a temperature, and his skin had a natural yellowish color. They interprited it as something wrong, they thaught he had Jaundice. They could never find out what it was. So they kept him. Shaken by almost being killed. He never told them that For his entire life He had run a temperature. Naturally. I don't know how it ended. But it was about him wrestling with this, while seeing people come in to the hospital all butchered . And Whether it was crazy, not to go back to the front. Was he a coward? I think a famous line was : "If you are insane. And you know that you are insane. Then you can't possibly be insane. Only people who think they are sane can be insane." I shouldn't quote it , but thats the just of it.
Like i said i didn't really read it. i think it refers to when you are making a list of pros and cons everything is greatup till catch #21 and then you get to catch #22 and your back to where you started . no where.
Edited 5/14/2003 9:28:16 PM ET by MuleSkinner
Edited 5/14/2003 9:33:18 PM ET by MuleSkinner
You learn something new everyday! Thanks for the cliffs notes.
no problem . but you might want a second oppinion before the exam LOLWhere there's A wheel there's a way, got any wheels?
Try not to think of it as "bidding" a job. Start giving your customers a "price" or a "price quote". Until you reach 3-4 years of business maturity you really won't know what you can build a house for so just politey tell these people that you don't offer your services on a sq ft basis but rather on a "quality of service" and "happiness of my customers"basis. Then go on to explain that you perfer to work with them on an individual basis to see what works for them. Try not to get discurraged. When I first started out, I was only closing about one out of every 15 bids. I relied on word of mouth and friends for business (I was dirt poor). It wasn't until I bought Markup and Profit and talked to some veterans that I understood the value of advertising hard when your first starting then after you build a reputation, being able to pick your clients. These first years if nothing else will make you meet all kinds of people and do a lot of learning till you get it right. Even then, if your closing one job out of 5, your doing great. All of us have taken jobs that didn't pay enough. Those of us that are still around are the ones who learned it's better to loose to a lower bidder than to lose our shirt.
Later Gator
might i suggest you try to borrow the money to build the spec house on your own and then sell it for what the market will bear? that way you can build your reputation while you get a good idea what it costs for a certain type of house. also if you eliminate the GC's markup you increase your profits and if you can manage to move into it for two years before you sell it a married couple can make $500,000 a single person $250,000 before you pay any capital gains tax
So you would also recomment the book "Mark Up and Profit" by Mike Stone?
Disreguard that last ? as I now realize you are the first person to recomend the book in the first place.
well, no help with your dilemma, other that to commend you for remembering that it's not so much fun that you want to pay the GC to do the work -
catch-22 - Muleskinner- 'Yossarian' ring a bell? a good/great book - WW2 - lots of laugh out loud humor in the book - - catch-22 is that 'you have to crazy to get out of the war, but if you want to get out, you're not crazy' -
I just tried the 2003 National Estimator I bid a 3000 sq.ft Remodel sheetrock job. A customer building their own addition, with some help. The guy he had lined up to do sheet rock was not available till later in the summer, and had passd it up basically. The framing was done well< all the nailers etc.small rooms but anyway. I didn't get it. They said I was too high.
My buisness is very slow, for some reason. I didn't get it. They said I was too high. I figured I was willing to take that job because it was right down the street. And I really wanted the job. And not being a regular wall hanger. I intentionally bid that job on as cost only. Using the sq.ft. method with 2003 National Estimator numbers. I also cross referenced it with my usual Estimating technique It was very close . Which tells me that my estimates are too low. Yet the customers have been telling me they are too high. I haven't changed my prices in 4 years. I usually get most of the jobs I bid on. I have missed 6 in a row. And the customers are telling me its too high. Just because they can't afford it doesn't mean I am too high. Yet I need to make money. I know that was a very solid estimate . and I also know it wasn't too low. So you tell me. I need to get alot more comfortable using sq.ft. pricing which will mean doing it both ways for a while I guess. Checking my work. What percentage do you mark up above cost?
Where there's A wheel there's a way, got any wheels?
Generally I mark up about 9% above cost. I have no clue as to what the standard is and how I should differ from remodeling to new construction. I am a small company with only 3-4 guys and I run the company from my house, but is this a good reason to ajust my prices to the union shop with 50 guys and a business location. Would'nt that do more damage to the industry than good?