When it comes to pricing your jobs, you need to keep it simple, especially if you want to make the sale.
This contractor didn’t keep it simple:
“I met with a contractor today and have questions as to whether or not I should hire them.
This contractor has multiple fees. Is this normal charging? This contractor wants to do time and materials and mark it up 20%. This contractor also has a separate fee for project supervision, a separate fee for office administrator, plus a separate fee for Msc labor, and a separate fee for carpentry work. And an hour fee for his supervisor.
Also, I asked if I found a subcontractor with a less expensive bid, how would they approach it. This contractor said that the contract would allow him final decision making with which sub to go with and if this contractor chose the lower bid I found, this contractor would charge me his percentage based off the higher bid he had. And if I found appliances, cabinetry, etc that ended up being more than what he had provided with his suppliers, he would charge me 28% markup on the money over his suppliers cost instead of 20% on entire amount.
He also could not give me a job completion time and end date.
Please let me know what you think and, If possible, offer advice.”
My advice was to find another contractor. Red flags everywhere.
There’s a reason for this detailed pricing structure; the contractor knows that the 20% markup they’re using isn’t enough to cover their overhead and profit needs, so they’ve developed other charges to help pay the bills. The client doesn’t know what the final bill will be, let alone when the job can completed. They don’t trust the contractor, for good reason: the contractor isn’t willing to make a commitment on either time or money, both important issues.
I wonder how much time it takes to create the invoices for a pricing structure like this? On the other hand, with a pricing structure like this, I doubt they make many sales. Most homeowners would be uncomfortable with this much looseness in a major investment.
If this contractor spent their time learning how to estimate so they could present a firm, fixed price quotation, they’d probably be able to provide a reasonable completion date. With a firm, fixed price quotation and a completion date, they’d have a reasonable chance of making the sale. The client would have more confidence, and be more apt to go ahead with the project.
People who want to do remodeling on their home or building are just like you and me; they don’t like surprises. Chapter 6 of Profitable Sales, A Contractor’s Guide is titled “Your Customer’s Three Fears”. Potential clients want to know if you’ll do the job they want done, at a fair price, and in a timely manner.
Give them that confidence. Estimate the project, present a firm, fixed price quotation, and make the sale. It’s that simple.