Let’s say my plumbingware spec says, “Toilets, Ajax Plumbingware ‘Sweetseat’ series, color white, bright chrome trip lever, standard seat,” and my cost is $100 but list is $180, do I charge up the full list difference if the client wants them in black? If I have not specified lighting other than cans and switches, and allowed some amount of dollars, is that amount as my cost, or list as explained by the lighting showroom salesperson? How can you be assured of getting your margin unless you limit them from shopping at only your preferred showrooms?
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First off, I would say the amount you charge depends on the terms of your contract. For example, do you have a time and materials agreement, or is it fixed price?
If you're looking for a general opinion, I don't typically charge my clients "retail" if I get a substantial discount on a particular item. Typically, I charge for my time, plus a nominal percentage increase (like 10 or 15 percent) to cover B&O taxes, etc. I explain to my clients that if the money passes through my company, the government wants a piece of it, and therefore I have to pass along that cost accordingly.
Sometimes, I'll suggest that a client purchase large-ticket items directly to avoid this mark-up if it's possible.
On the other hand, if you're not billing directly for your time, then you have to mark up items (retail vs wholesale, etc.) or you'll find yourself working for free.
If you're enjoying a big mark-up on a particular item, and the homeowner finds out about it, then you may find yourself in an awkward situation. I don't think there's any way you can avoid this possibility --- other than simply being honest with people about what you charge, and how you structure your charges.
Ragnar
Gene, if you spec. white fixtures at $$ and they change to black, you need to write a change order. Spec sheets and work scopes are biblical in the commercial arena, and should be in the residential too. When we get an allowance written in a quote, it commonly means the client can select any item that meets the specifications up to that amount. Exceeding that amount means a change order where the management cost and profit are added to the additional cost of the item.
Hope this helps.
Dave
Let me try to reframe this discussion. I need some advice on how to set up my presentation of the spec house I plan to start in early spring. I have a set of plans and a "guide" specification, but have not used the guide to flesh out the detail yet. The house I will build is one for which plans are purchased through the Taunton site, and I will replicate it without much modification. Photos of the house are available on the architect's website and in one of the Taunton publications. I have 8-1/2 x 11 copies of all the photos done for the magazine shoot, so a potential client has a lot more to see on paper and in photos that what might be available simply from plans. I did a rigorous cost estimate, and called in all the key subs for their estimates and bids. While I have not precisely detailed out and specified plumbingware, lighting, and room finish materials, I have used costs paid 12 months ago, factored up for price increases, for my own house, recently completed in this market. I own the building lot, and have done a detailed siting, calculating all cut, fill, driveway grading, and so forth, from the detailed topo info I had available. My surveyor has marked out the building corners, flagged the perimeter of tree cutting for clearing, and laid out the drive. Main floor elevation is benchmarked. Right now I am basically planning to build for the unknown client, but I having estimated my bottom line hard costs, I told my real estate agent how much I need to clear net of commissions and closing costs to be comfortable. Already, feelers have gone out to some of the agencies' clients that are looking for new construction here. My agent has a site plan, floor plans, and copies of all the photos, plus the book and website references. I am afraid I might have jumped the gun too soon, and might now get in a bind, having a client want to commit even before ground breaking, and then start driving me nuts with changes. I am working now to detail out the specs with detailed product information for all the finish stuff, and am detailing out all the modifications to the plans and specs for the house as it will be built. What else should I be doing?
If you sign a contract before you build it for a client, it is no longer a spec. house. You are now building a contract home and need to hammer out the details with the client. Be sure to clearly spell out you change order process, so that when they do happen, you still make your money.
If you get started on the home and sell it durring the building phase at any point, the same rules apply. Any changes a client makes, any time need to cost them, not you. that applies to money and scheduled completion time. Make sure thier financial backer is aware of your process and is a part of it. No point in making upgrade changes that take a home beyond the financial limits imposed by the bank or morgage company.
Dave