Better Things to Do than Waste Time Estimating

Last December I received a note from a gentleman who runs a concrete business with his brother. He asked a great question on estimating and made a few other comments that I want to share.

Hi Michael & Devon,

I hope things are going well for you and yours. I will apologize in advance for two things, the length of this question and butchering the english language.

Anyway my brother and I are partners in a concrete construction business, currently residential only. We have been in concrete since 1978. Have went from 5 employees to 50 and now with 11 total (my brother and I, an office manager and seven guys.) Our projects have ranged from 60 square foot dog kennel to multi level parking ramps.

In 2009 when the bottom fell out and we went from sixteen guys to six, sales dropped by 45%. Dang if we begin to do better, much better. After all, the six guys we kept were rock stars, we paid close attention to our costs and did just fine. We have a great reputation and most of our work is for high end customers who are more concerned with quality and trust vs. low price. So, we decided to stay small, pay attention to the numbers and have done quite well. I came across your website, bought your books, read your weekly newsletters and now we are REALLY doing well. This year may be our best ever, as far as net profits anyway.

I’ll get back to his note in a bit, but I need to point out that it isn’t often you hear someone say that the recession of 2009 made their business better. Sales dropped by 45% so they made changes. They reduced payroll and kept the rock stars, paid attention to nickels and made more dollars.

Too many people believe that the measure of a company is the annual volume or sales revenue. They’re wrong; the measure of a company is net profit. It’s possible to earn a higher net profit with a smaller company, and this is a great example of doing things right.

That being said, here is my problem. I do most of the bidding and my brother oversees the projects we complete. We average about 100 projects a year (115 this year to date). I usually quote around 400. Typically I meet on site with the owners, go back to the office, type up the proposal, email and mail it out and wait to hear back from the owner. I will either text or email the owners to let them know the quote is on the way.

This year, as of today I quoted 538 projects. (Being December I doubt I will have many more bids or any more projects this year.) It was terribly hectic and I did miss getting back in a timely fashion with many of the phone messages I received. It was impossible to return ALL phone calls the next day and I actually stated that on my voicemail. I get about one job for every five I quote. Knowing our numbers our price is very high compared to our competitors. That is the way it is, has been and always will be. I get that, but it seems that I spend much of my time with tire kickers, people “just wondering” how much it would cost. It being a new patio, sidewalk, driveway etc.

Here my question, I (we) are thinking about charging $25.00 to provide a written quote. If awarded the project the $25.00 will be deducted from the quoted price. What is your opinion of this?

Last summer I heard that one of our competitors was charging $25.00 for quotes so I called him about it. He basically said that he was sick of all the racing around for nothing. He also said that the fee was working out ok. According to him most were fine with the small fee for a quote. Also, I talked with two other concrete contractors and they said that if we began charging for bids they would do the same. So… my mind charging a small fee for a quote will take some getting used to. After a year, perhaps two a small fee will be the norm. Right?

I truly look forward to each and every one of your newsletters. I have read Profitable Sales and Markup & Profit several times and browse them often. In the offseason I spend a lot of time re-reading your writings. I truly cannot express how much I appreciate the knowledge you have shared.

Getting a commitment from potential clients is critical if you want to save yourself a ton of time and work putting together an estimate that won’t go anywhere. You have better things to do with your time. If they won’t make a commitment and help you put the project together, walk away. You wouldn’t have sold the job anyway and it will save you a bunch of time and work. A commitment involves money changing hands.

I suggested he reread the book, Profitable Sales; A Contractor’s Guide. By doing estimates without getting a commitment from the potential client first, he’s creating a lot of busy work but not much business. As a specialty contractor, a design agreement might not be applicable because he doesn’t do a lot of design, but charging for estimates makes sense.

Now let me comment on a few other things. He’s doing a good job of getting leads in the door, with more leads than he can handle. But a sales-to-leads ratio of 1 in 5 is too low, it should be 1 in 3.

He could improve that sales-to-leads ratio by doing a better job of qualifying potential customers over the phone and frankly, by improving his sales skills. It doesn’t matter whether or not your competitors are charging for estimates. When you sell the value your company brings to this job, the potential client will realize that you are the contractor of choice and they’ll be willing to pay for your time to put the job together.

Don’t get in the habit of emailing proposals and waiting to hear back from the owner. That’s not sales, it’s wishful thinking. I think some company owners get in this habit because it’s easier than having someone look at you and say “No.”

Sales involves face-to-face presentations, and every “No” gets you closer to the next “Yes.” Once you start charging for estimates, you’ll be putting together fewer proposals and it will be easier to schedule the time to meet with the owners and get a signed proposal. They’ll be willing to meet; after all, they paid for that estimate.

So, all that said it boils down to getting the four basic questions answered and getting commitments from your potential clients before you do any work. Your time has value. Your sales to leads ratio will improve, and life will be easier, when you eliminate the tire kickers, price shoppers and time wasters up front.

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Ken and Elle
August 7, 2020 9:42 am

Thank you so much for the email reply.
We definitely wanted to be paid for the time 
but could not think of the correct way to state it concisely.
I turned to the resource that I knew would be 
equipped with that answer! Thanks Mike.

Ken and Elle
August 4, 2020 11:03 am

We’ve been in business over 30 years and this is a first time request from a client that is looking to buy a house locally. Most of the homes he has looked at need a major remodel such as a kitchen and bathroom. He is requesting if Ken could come and look at the homes they are interested in before they bid. Also, “wants to see who aligns with them best and will help them hit the ground running when they find the best home for their needs”. How would you answer and charge for a request like this? Ken’s… Read more »

Ken and Elle
August 5, 2020 11:17 am
Reply to  Michael Stone

Thanks Mike. That was the impression I was feeling. However, how can you answer the inquiring client politely and/or get paid for your professional services prior to the actual home purchase and work proposal? Have you ever heard of a request like this? Thanks!

Jeffrey A Eckes
July 29, 2020 8:21 am

This has come up again and again, usually by the same proponents. Yes, there are occasions when one would ‘charge for an estimate’ (a client that is abusing the process is one) but it’s FAR from universal as proposed. I am a professional estimator and have been for years and I’ll tell you that if you proposed charging a company on a commercial project for an estimate you would be laughed out of their office. Estimating is a COB, simple as that. Period. Full stop. Good estimators are paid north of $100k in nearly all major markets for a reason,… Read more »

Blaine D Oshaughnessy
July 22, 2020 11:59 am

I only started charging for Estimates at the beginning of 2020. I have been in business for 13 years and charging for Estimates has been one of the best things I have done. I have been doing it for 7 months now and work has been just as busy as ever I do not know why I would ever give a “Free Estimate” again. The process I use came from the Profitable Sales Book. Basically

Lorena Correa
Lorena Correa
July 22, 2020 5:58 am

Really great topic, we seem to get a lot of those people here where I have my construction business, most of them ask if we charge for estimates and sometimes people are just shopping around and is a waste of time to put huge numbers together to just get it declined at the end of it, So are you saying YES charge for it? Or give them a price upfront?
thank you.

Jon Lane
July 22, 2020 6:23 am
Reply to  Lorena Correa

I am in the habit to shoot a free ballpark upfront and ask does this price work for you. If so, then I either charge for a design agreement or if the project is small and easy I will give them an estimate.

Lorena Correa
Lorena Correa
July 22, 2020 6:57 am
Reply to  Jon Lane

oh ok that makes sense. Recently we’ve got emails from GCs that want prices on multiple items that require a lot of work to bid we obviously know ppl shop around but sometimes we don’t have the time to sit and break it all down for them to just “ shop” or compare numbers. How do you go about that?

Devon Stone
Devon Stone
July 22, 2020 8:21 am
Reply to  Lorena Correa

Working with GC’s is different than working with subs. Michael talks about setting ground rules with generals here:

Quoting from the end of the article: If you are introduced to a general and they ask for a quote, tell them you get one of every three jobs you quote. You will find out real quick if they are the type of general you want to work with and for. And generals, if you get a quote from a sub and you get the job, that sub gets the job. Don’t use a sub to price shop other subs. Period.”

Blaine D Oshaughnessy
July 22, 2020 12:00 pm
Reply to  Lorena Correa

Read the book it covers all your asking.

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