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Construction Programs & Results Inc

We Like to See The Good Guys Win!

Charging for Estimates

by Michael Stone

I've had a few requests on how to charge for estimates.

If you've been in construction sales very long, you've met more than a few potential customers who have asked for an estimate, and you learned after a lot of work that they were just shopping. Or, there are the customers who just like to talk. Money changing hands means a commitment - don't spend the time on a detailed estimate unless they are serious about the job. And by the way, if your advertising includes "Free Estimates", take the word "Free" out. The calls you get for "Free Estimates" are not from clients who want to buy.

There are a few ways to approach charging for your estimates. One is to just tell customers right up front that you charge for estimates. You will visit the job site and talk with the folks about what they want done, compile an estimate, give it to them and pray you get the job.

We have seen companies charge from $50 all the way up to $750 for estimates, depending on where they were located and the type of work they did. Those that charge for estimates this way all seem to have a different method of doing so. If your customers are willing to pay you in this manner, it's okay.

However, I would not normally choose to take that approach. I think that to build rapport and trust with a potential client, I would visit with them and talk about their project. I want to see if they qualify to buy from me, not just be willing to give me a check. I want to know there is some common ground on which to build some trust and eventually a good working relationship.

To do this, work through the four basic questions routine, which can be found in the book, Profitable Sales, A Contractor's Guide. These questions include setting the budget for the job.

Then tell your potential customer, "John, Mary, here is how we work. For us to put an effective package together for your consideration, we will need to set up a design agreement for you. With that agreement in place, we will design your job to meet your budget, we will do a firm price quotation for you, we will prepare the agreement to build your job as we have discussed and bring the whole package back to you for your consideration. If you approve our proposal, we will then get your signatures on the agreement, an initial down payment from you, and then take the whole package in and start the permit process."

Now, button up and listen to what they have to say. If they say yes, subject closed, start writing the design agreement. It should include enough money to cover the cost of all design time, drafting, estimating, proposal writing and anything else that you or your company personnel do.

Used correctly, this procedure gets you paid for doing estimates and you should be able to convert a very high percentage of those design agreements to actual jobs built.

What if they already have plans, the design is already in blueprint form?

If you've walked through the four basic questions, you have an idea of their budget. But you don't know if the plans will work with their budget.

So instead of suggesting a design agreement, suggest a feasibility study or value engineering where you will review the plans, review the job, and do a firm price quotation to see if the plans can be built for the budget.

Either way, asking to be paid for estimates will get you around those that are trying to get you to work for free. Remember, your time is worth the value you place on it and are willing to enforce. If you do estimates, design work, proposals, or any combination for free, you have only yourself to blame for the time you waste.

More on this, and a sample design agreement, are in the book, Profitable Sales, A Contractor's Guide.

Comments

Tisha Kuntz/Ver... (not verified) /

I got a lead on a job the other day, from a landscaper whose client said, "I need a kitchen designer in here immediately! My kitchen's been demolished for three months!" The lady who gave me the lead relayed the urgency.

It smelled pretty fishy to me. The prospective client was a 'shopper' not a 'buyer,' because TEN other people had been in to quote on that kitchen (some designers, some contractors). I explained to her that I charge for estimates. She never called me to firm up an appointment. I avoided being #11 to burn time and money on a person who wasn't serious.

I'm all for charging for estimates, because it's the determining factor for who's serious and who's amusing themselves with a revolving door of people who don't/won't qualify their leads.

Michael Stone /

Tisha:

Thanks for your note. Good observations and good read of your customer.

Michael

Sonny Lykos (not verified) /

I think its time to differentiate between the term estimate and the term proposal, or as I call it, and SCA - Specification & Cost Analysis.

I give free estimates, or ball park prices. I charge for an SCA and explain to the potential customer what it is, and whats involved in developing one to get to the point what I can give them a fixed price. I also show them a sample from an SCA of a previous, yet similar project to theirs.

I think you are right on target and we do something similar. We do a rough estimate and at this time try to see if this is a client that is shoping or building. If they think the estimate falls into thier price range and we can work together we sign the design agreement for us to get a plan drawn up and get them a firm quote. When they sign this agreement we collect a fee and this is credited to the project if we build the house and if they don't we got payed for are time & cost. The plan is ours to keep and we don't give it out until we have the contracts done and signatures

estimates ; very touchy subject, i try to weed them out,stone kickers that is, first how did they hear of us phone book etc, if reffered by past client or from other business that means solid lead, i also found what works great is for them to submit photos via e-mail, ive gotten quite few projects this way and saved myself on wastefull trips spent.if your are well experienced in your business you can give ballpark range quotes over phone etc.with low and high end pending outcome of site visit.if its simple and they know exactly what they want and they seem interested in your business i say dont charge its worth the gamble, however if their clueless you will end up planning designing for free your plan will be used by someone else not worth the gamble thats where i explain a consultant fee to be applied. if i didnt take carefull time to closely evaluate each person that called me i would be out of business, helpfull tips return call a.s.a.p. schedule non emergency visits for potential rain days or fridays i try to do few on sameday.masonry business is 100% weather dependent, i use raindays or fridays for estimates and office work.ive been in business for over 20 years also been taking advantage of as well. i just spent week and 1/2 estimating for co. bridge project they had no intention on using my services just my bid, if the potential client calling for your estimate is, insurance agency, realtor,or municipality you need to charge for your time they require detailed, itemized quotes.you will spend hours for nothing. they are seeking barley acceptable workmanship with a cheap low bid, so learn from my burn! the key word to business today is survival. interview your calls closely and profesionally !!

 

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