Small remodeling jobs $1,000 to $10,000. Variety of jobs, variety of working conditions.
If forced to bid, what percentage of error would you expect?
What would you add to CYA?
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We don't bid a lot of things and work T&M for the most part ($250k to $50k with a $2k small job a couple times a month or so) so don't take what I have to say to mean much.
The jobs we do bid are bid a bit high and quick. At times we'll break even with our hourly rate and at times we'll beat it by 50% or so. It's safe to say we are +0% and-50% since we are shooting for the 50% premium, but in the end we're happy with a 25% average premium.
On the rare occation we're asked, or rather we agree, to bid a larger job we're within +- 10% for most, but only if there is an agreement that the bid doesn't include hidden factors that are costly to fix. Much of our remodeling in the older part of town is demo and rebuild and we assume everything we touch needs to be replaced so it's fairly easy to predict and our historical costs have been consistent.
We were almost to the point of bidding more jobs to increase profits, but found a niche of sorts doing quick repairs and remodels in addition to larger jobs. These are still T&M but at a much higher rate, which spawns additional work at the same high rate. So far this year we've spent probably two months on smaller jobs that are twice as profitable as our larger ones. Overall I'm ahead 20% so far this year and don't mind a bit. The end of the year looks even better so I might come in 30% more profitable than had we not taken on these small jobs. When a client asks if we can have a kitchen remodeled in a third the normal time we simply say no problem.
If you are interested in this nich we let the other subs, architects and clients know that if they get in a bind and need a contractor ASAP we're the ones to call. Often it's nothing harder than shifting our days off to get the work done on a tight schedule and still keep the work week reasonable. Sometimes it a call from an electrican to fill holes after they run new wires, or a painter needs a hardwood deck repaired before it can be finished and it needs to be done by the end of business but the whole things needs to be rebuilt, or a significant remodel in 3 weeks because a house has sold more quickly than expected, or it's a laundry list of items needed for a house to close. The best jobs are referals for larger projects that get billed at our ASAP rate.
It's not pretty, but in a down market with new construction at a stand still and a flood of new construction guys in the remodel market we're just as busy as always, if not more so, with our normal remodeling and making more money on new jobs when everyone else has taken a big hit or gone broke.
It's like fishing. Making perfect casts (like good estimating) in a poor section of stream won't bring in as many fish as a poor cast (sloppy estimating) in a good section. In our market one of our competitors can estimate like no other, but he's broke because of a lack of clients from the tighter conditions and increased competition.
Good fishing
Beer was created so carpenters wouldn't rule the world.
Excellent post Don.
You are essentially winning the jobs because you have the time...not the right price. fka (formerly known as) blue
...not the right price
Yep. Funny thing when you start competing on price--if you win the bid you're the only person willing to work for that little money.
Keeping flexibility in our schedule on major jobs helps us take advantage of opportunities on smaller jobs as they come up.
Beer was created so carpenters wouldn't rule the world.
Getting to jobs quickly is important. We're a little larger company then most of our competition so we can generally "make things happen"
Recently though we're swamped and buried, not that I'm complaining, but so busy that are lead time is way out there. Again not horrible, but I lost two basement finishes last month that would have been great projects all because I could not get to them quick enough. That totaled about 110K worth of work.
Because we're "too busy"
could be worse though, I guess we could be the guys that were able to start tomorrow.
could be worse though, I guess we could be the guys that were able to start tomorrow.
That's for sure. In Bosie everyone is in a big pinch as new home sales are very slow with a big inventory unsold. Many new constructions guys have went out of business or simply say they are just trying to survive this year and will get back on their feet in the spring when new construction will have a better, albeit slow start again.
We are able to take advantage of the extra help and subs are dirt cheap. One plumber said he has lost so much business because of the glut of new construction plumbers getting into the remodeling market that he would work for $10/hr just to pay bills. Heck, at that price we almost hired him as a construction laborer.
Beer was created so carpenters wouldn't rule the world.
I've read several articles about the new housing slow down being a boon to remodels in regard to skilled labor available.
In theory it sounds great, I've yet to be able to find a really good carpenter out of those who have applied.
Our subs are charging the same price as always but most of them are diversified enough to take a huge hit from the lack of new construction.
That said, the subs we use, we've been using for a long while so while I think I could beat them up on price I won't.
The worst part of the new housing slow down is the amount of those guys that think that they can remodel also. In my area at least I think we are past point where most of them tried, and failed. It does offer a bit stiffer competition though.
When new housing really kicks into gear again I think I might push our company into that direction just to screw them back :)
Everything you said about your area applies here. I cringe at the new construction guys as they try to remodel a 100 year old house in our part of town. Many don't even know a historic committee exists and has to approve their plans.
We've worked with a few carps, but unless they are used to remodeling there is a lot of hand holding.
Most of our subs tried to keep the prices the same, but now that they have been hungry for 6 months many have either gone broke or fessed up that they will work for beans just to pay bills.
Mostly it's good for clients and doesn't effect us much since we're T&M.
We have been working with a contractor who has a couple guys working with him that does mostly labor and demo. The more we work with him the more money he makes us. A couple of us remodelers have him bouncing back and forth between us and it's really working out well.
Good building
Beer was created so carpenters wouldn't rule the world.
Don, your remark, "subs are dirt cheap," is what I was alluding to in a thread about costs and pricing, just a few weeks ago on this forum.
Quite a few forum members here disagreed.
I appreciate the good info! That's exactly what I was interested in-how different people approach things.I've come to dread the holidays because customers want things done on short notice and now I find out it's a profitable niche for someone.
I've come to dread the holidays because customers want things done on short notice and now I find out it's a profitable niche for someone.
I've got to admit, it's much easier working long days when after tax profit is really good.
Many times, especially during the trim stage of our regular jobs, there is enough energy left over to double my weekly income on the weekend.
Beer was created so carpenters wouldn't rule the world.
Nothing like a little cash to perk a guy up. :)
Time and materials with a cap can work, but only if you watch what is essentially a bid very closely. Remember you are providing a bid (the cap) without the upside of extra profits for coming in under that cap. Because of this you have to place the cap higher than a normal bid.
We often arrange our jobs so that some element can be finished more plainly or completely left out as needed if costs are more than expected. Along the same lines we try to insulate some portions of the finish stage that are important so they don't get cut. It's better to finish 100% of a slightly smaller project rather than 96% of the original.
Beer was created so carpenters wouldn't rule the world.
I can see it would be possible to get into a situation very easily where you have the worst of both bid and T&M.I like the idea of having plan B if A costs too much. It might alleviate some stress on the customer.I guess it all boils down to the customer having confidence in me and my communication skills.
We've had good luck with an alternative plan when talking with clients up front. They want to know what happens if our ballpack estimate is wrong and they just don't have any money before it's done. It sets their mind at ease if we can build in some wiggle room from day one.
Alternative time lines have also been good to us on tight deadlines.
Right now we're doing a 4 week rush job to gut and build a custom kitchen, including cabinets, from scratch. We've set aside all extras until it's a certainty that the kitchen will actually cook thanksgiving dinner. We haven't even guaranteed the cabinet doors or drawers will be completed before turkey day, but most likely they will.
We've also been able to expand the job into a second phase to accomodate the time overruns if any and since time is no longer a limiting factor the client has added a number of extras and our 4 week project is quickly turning into 8. On top of that we've helped her plan an addition out the back of the house, tentatively scheduled to happen in two years, which increases our options for the kitchen. By relocating a poorly built 2nd floor staircase we have gained 12 feet of counter and cabinet space (for after Thanksgiving of course).
I don't know that we'd be able to "grow" our projects as much if it were strickly a fixed bid.
Good building
Beer was created so carpenters wouldn't rule the world.
It ended up being a cooperative process instead of just a rush to get a bid done. Cool.
The down side to being able to expand the scope is it's just as quick to drain the bank so there is a period where the client is feeling us out to see if we are working in their best interest and we are getting a feel for what they really want and what the budget is. Even when the budget is given up front it might be half that or twice that in the end.
The best reward is when a client says there isn't anything that they would have done differently given the amount spent. The down side is we work on a moving target and it can get stressful.
Beer was created so carpenters wouldn't rule the world.
Thanks for sharing your experience. I'm going to change the way I do things and it's invaluable to learn what works.
I hate to sound like I'm back tracking, just passing on something else I've seen, but it seems that the formula that works best somewhat depends on the personalities of the clients and contractor. Others try what we do and it fails miserably and visa versa. Others make an art out of upselling and expanding the scope for the sake of profits rather than what the client really needs.
My personal motivation for how we do things is largely stress managment. I'm not out to sell for selling's sake so it's easy to bring up things that really make sense. We get paid a fair wage if we are under or over the orginal estimate, if the project grows or shrinks. The client pays a moderate price that reflects what the job actual took to complete. At the end of the day I can, for the most part, turn off my mind and think about something other than work (because I'd have to go back on the clock).
Eventually I'll have to change and be more to the point and let a lead carp come up with the good ideas on site, hold them responsible for the results, and try to no worry while reading the paper and actually sitting down at a starbucks rather than passing the drive through window like a tollbooth every morning.
Best of luck
Beer was created so carpenters wouldn't rule the world.
Don't worry about backtracking. Glad to hear more.You're comfortable about what you do and are acting in the customer's best interest. The customer picks up on your attitude, is then comfortable and trusts you.I'm like you in that I wouldn't upsell for profit. It would just mean more work I would have to do before moving to the next job. I would if I was excited about improving a project for a customer. That excitement could transfer to the customer and give them a better kick out of the job.I need to consider my own attitudes and those of my customers. It's a good point about being able to relax and have some piece of mind.
This is related to our current project. For a small island with range top I suggested we build a stained grade piece with a range hood styled to match to contrast with the paint grade cabinets. The client found this $8k gem at thos moser. We'll have to beef it up on the inside to handle a stone top, but we're running the gas line up one hollow leg, the electric up another. These designs are somewhat easy to build on site and the clients ends up with a scratch built piece 95% as well constructed for 20% of the cost. On this rather ordinary kitchen remodel I get to spend a week building a pretty nice piece. Pinch me. :-)
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Beer was created so carpenters wouldn't rule the world.
CraigF and I only wish we had people willing to spend 8K on a piece of furniture.
Wish I could work that kitchen.
Sound nice.
I like to slow down and do fancy work.
Rich
Neat project! Sounds like both you and the customer are going to be plumb tickled.So how did you approach the pricing? I don't need to know figures, but did you know pretty close from a previous project? Did you present the price with the understanding it was vague or did you commit yourself to a cap?
We talked over the project, agreed that we couldn't visualize the entire kitchen until some walls were taken out so planned to open things up and design the kitchen from full size mock ups in the actual space and go from there. At the end of that first meeting it was almost an afterthought to bring up $.
I simply said, "The other carpenter and myself are each billed at $xx/hr and, other guys that will help with demo are $xx/hr, materials are cost +xx%, and I'll get you an invoice every Friday." She said, "Okay." and that was the end of the money discussion.
There really isn't normally any discussion, or at least negotiation on the prices or invoices. That's simply how we work and what we cost. It helped that we were recommended by an architect we've used in the past so the client had some faith we provide a good bang for the buck before we met.
We've had a client shop prices, pass on our services, only to hire a yoyo contractor that they have to fire, ask us to finish the job, and they get put on the end of our wait list.
As soon as our latest kitchen space was mocked up and we finalized the counter top outlines, elevations, and appliance locations it was quick to get costs for flooring, plumbing, electrical, countertops and appliances, which are the major unknowns. With that out of the way in the first week we can get down to building the space. If the costs were out of her budget we'd let her decide which less expensive options she'd like.
On other jobs we look over the project and give them a guess as to the minimum cost if everything goes smoothly. Since we are generally working on similar projects from month to month there are examples close by that we can say, "The job on 16th was similar in #### ways and different in #### ways and it was roughly $####."
On some jobs I'll make up a materials list so before the client give the go ahead we can show roughly what the materials list is, and guess an amount of time we'd need. Often we'll even ask for a check for material costs up front, at least those that will will be stored on the job site.
We are essentially working on a design-build mentality that makes exact measurements and specifications up front not necessary. It's liberating to focus on what would work best for the client, then back into the specifications and costs. I still haven't measured the length and width of our current kitchen job, or that of any of the cabinets. It just doesn't matter until we're cutting the cabinet boxes. What's there looks right and will function well.
If a cabinet wastes an extra sheet of ply to scrap because of a strange size we could care less, and in the end the client could care less as well. Some would argue that we don't have a reason to minimize costs, but in reality sticking to good construction, good materials, and good designs results in a relatively small scrap pile and we're not wasting our time at $50/hr. on activities that don't contribute to the project.
Cheers
Beer was created so carpenters wouldn't rule the world.
It's been really helpful to get a different perspective. Thanks.
Variety of jobs, variety of working conditions.
Which makes for a variety of different pricing/mark up strategies. A simple job will have less of a CYA factor built in then a more complicated job, regardless of the size.
That said, smaller projects, anything less then 5k, I try to run time and material. The clients see it as the best way once I explain that if I have to give them a solid number it will be for the worst case scenario and they will probably end up spending more then they need to. So to be fair to both parties, they pay for work they receive and we get paid for all our time and material costs.
Typically on mid-range jobs such as kitchens, baths, basements, I will total the labor hours I estimated for the various portions of the job and round it up to the next even week, so if it comes in at 220 hours for 5 1/2 weeks I'll round up the labor to 6 full weeks or 240 hours. Larger jobs have an extra bit added on top of it, maybe a full 40 hours on something that will take 8-12 weeks.
Material and subs I usually tack on about 5% to my estimate if I have not received a solid bid.
The real key is covering your backside in the wording of the proposal. Make sure your contract has a hidden conditions clause, because as far as I know, no-one can see through walls and a rock clause for excavating.
Beyond that, if there are areas are that un-clear from the beginning of the project make sure you specify how much labor and material is included for that section and note that additional work will be an added expense.
Here is a section from a recent job we are doing where I knew there would be framing damage but could not know to what extent until after demolition.
Framing:
Repair rotten or damaged framing on six columns as necessary with new framing material. This proposal includes up to 8 hours of labor and $200.00 in framing material. Additional labor or material will be billed at $60.00 per carpenter hour plus the cost of materials and 25%. Any unused labor or material will be credited back on the final bill.
That's pretty vague but has enough in it to protect me.
The other option is to leave those areas completely out of the proposal and just note that entire section will be billed on the hour. Most of my clients like to see something included for their own piece of mind even if I explain to them it is just a wild asz guess.
The way to be able to get close to your labor estimates in the first place is to track your previous jobs. All jobs are different but certain jobs are similar enough for a gut check, a 12x12 kitchen is pretty basic, a 5x8 bathroom is pretty basic. We typically average about 110-120 hours for most all 5x8 baths for example. There's only so much you can change in them. You need to start building a data base of how long certain projects and certain tasks take you, doesn't have to be fancy though, just something to reference.
And then check yourself after the job to see where you succeeded and where you failed in your estimate so it doesn't happen again.
So that's long winded enough, what type of particular problems are you having that brought up the question?
I didn't think it was long-winded at all. I appreciate your time spent writing it.I really liked your framing example. I had a similar situation this summer where this would have worked great. My problem is I need to add some allowance for error in my bids. I was wondering what percentage or approach others use.
"My problem is I need to add some allowance for error in my bids. I was wondering what percentage or approach others use."
We started using an "errors and omissions" line on our bids and estimates. We line item each task, with labor and materials sub lines, total the lines, multiply by the errors and omissions %, then multiply by profit %.
We use 6-10% for errors and omissions multiplier, depending on several factors.
We make no bones about showing the customer this line, which often illustrates how much better off they are doing their job t&m.Loren Wallace for president.
Thanks
You're welcome. I got that from Dennis Dixon at a JLCLive! session. Has helped me immensly.Loren Wallace for president.
"what type of particular problems are you having that brought up the question?"I was going to explain my situation last night, but my mind was vapor-locked.I work in a rural area in which some of my customers are as much as 35 miles away from the larger towns here. It's easy to get someone to come out here for a large project or something that is cut and dried. Anything else customers can't get anyone. So, I do oddball jobs. If it is related to carpentry in some way, somebody is going to ask me to do it. I'm all over the map with what I do.The houses I work on vary from 100 yrs. old to modern to manufactured housing. Some were built by masters at their trade, some by people who disassembled old buildings and built their own house.I almost always work on occupied houses. There is a huge variation in time spent on clean up, tool storage, access, etc.I have come to the conclusion I am going to have errors in estimating my labor. I can hit materials dead on, but there are variables in labor.It would be logical to go to T&M, but there are problems with that related to my customers.Most of them are Farmers, Retired or working for a wage. It's hard for them to comprehend the hourly rate that needs to be charged. It's best to state a figure.Most need a definate figure to line up the money.I like to do careful layout and the details that make a job last and look good. If the clock is running, I feel I will spend alot of time arguing about how I do things.So, I am thinking about forcing myself to always add a % for error which I would vary according to how confident I was in my estimate.
Waaay back, I worked for a GC that made his fortune doing jobs that no one else would bid. That is a bonafide niche market.fka (formerly known as) blue
I think there is a lot of promise in what I do. I always have some sort of work lined up. I also like the variety and challenge. I just need to dial in the money part.
I noticed you're in Western Kansas, what part? I'm in Lawrence.
To me it sounds like you are in an excellent position. If you can corner the market for these smaller jobs that no one else wants, then the rules are up to you.
My opinion is, if you're having a hard time being accurate with your labor estimates then you need to sell these projects at an hourly rate. Some projects lend themselves to a fixed price, some really can only be completed on an hourly basis.
The trick is figuring out which is which or which parts of a certain project can not fully be figured until other stages are complete.
It shouldn't be to hard to explain to the customer why certain projects, or portions of, are better left to T&M. If they simply won't here it, you have 2 options in my opinion, make the labor estimate so high you know you are covered, or let them find a different option.
Part of your job as a salesman is to educate/explain to the customers well enough that they trust you and your judgement. If already have a reputation of doing good work and not screwing people most will come around.
You should always add a contingency to your estimates anyway, when was the last time you had a perfect job where everything went just the way you planned? Hell I couldn't even hang a picture for my wife last night without screwing something up.
The size of the contingency would depend on the type of work and like you mentioned, how comfortable you are with your estimate.
I'm up by Colby and Goodland.I appreciate your advice. I need to consider T&M more often. Sometimes I'll have problems with a particular part of a bid. Maybe a combo of bid and T$M? Or, maybe T&M with an estimate that I know is high enough to CYA. The customer can still have a number to plan off of and I am covered.Thanks for giving me things to mull over.
I tend to go on a job buy job basis. My clients go from limited income(low income families, retired, etc.) to the rich and shameless. I try to be fair with all but I will tighten things up for those with limited means.
When I know a client can afford it I make sure that every one of my expenses are covered plus estimated labor plus 10%. It should probably be more but I find it keeps me competitive with every one else.
Dave
Thanks Dave. I know what you mean about a job by job basis, however, I know everybody in town and tend to try to tighten things up too much because of it. I'm starting to hurt myself. I'm leaning toward having to get a system and stick to it.
Sound like your jobs and communtiy are similar to mine.
If I am uncomfortable with an estimate or bid I mark up the labor by 10%
If I don't care if I get the job I mark them both up 20%.
My standard markup on materials is 10%.
Some guys in my area don't mark up materials at all.
Rich
I noticed from you other posts it seems like we are in a similar situation. Thanks for sharing your numbers.My main lumberyard I do business with gives me a discount which varies on different items. Their invoices print out retail and discount prices. I bill retail which gives me 0-15%.Other yards don't invoice like that but if I add 10% it comes out pretty close.