Itemized estimates/quotes

[rnt80]

I typically don't review an itemized account of a quote or estimate with  customers/potential customers but I did today.  I'm already contracted to build a large wardrobe for this customer and they asked me to design and price out a 12x10 wall of cabinetry for a  Murphy Bed.  I gave them a figure that they were uneasy about so I offered to go over the pricing.  I don't pad any of my estimates so I have nothing to hide.  I went over all the material costs (about 40% of the project price) and labor needed at $50/hr - my shop rate.  At the end of it all they decided to wait until the wardrobe was done - this decision was made unilaterally and came as a surprise to one half of the couple, making it kind of awkward to be sitting there.
I'm so busy/booked right now that it really didn't phase me much but I wondered if this is considered a  bad business practice.  Do any of you guys share or offer to share itemized accounts of your bids/quotes? 

 

[tbellemare]

I've contracted a lot of work to a carpenter I know on several projects around town and he always produces an itemized bid with materials and time broken down per task. I've never turned his bid(s) down but I think it's better practice to get it all out in the beginning. That way, if I think he's missing something or is getting carried away on something, we can fix it before the project starts. It eliminates any bad feelings when some unknown or scope change occurs.

Tom

 

[stvrowe]

The only thing that should matter to a prospective customer is the bottom line of "how much" and the quality aspect of your work.  Take this with a grain of salt as I don't do woodworking for a living.  I have however, in my professional career evaluated more bids/proposals for engineering design and construction projects than I can count.  Sometimes these have been fixed price and in other instances time and materials (T&M) estimates.  Unless this is a T&M job, the information you provided is unnecessary and immediately focuses the customer on your shop rate rather than what the final price is.  I suspect they homed in on your $50 shop rate and believe that you actually make $50/hr which we all know is far from reality.  IMHO, you provided too much info.

 

[tjbnwi]

I itemize every estimate/proposal to a new prospect. For a repeat customer, not normally necessary.

You say you don't pad your estimates/proposals, I add 20% to all material, I don't consider that padding the proposal. Labor is calculated by the hour at a fixed rate. A lot of info went into coming up with the labor rate.

Tom

 

[rnt80]

I itemize every estimate/proposal to a new prospect. For a repeat customer, not normally necessary.

You say you don't pad your estimates/proposals, I add 20% to all material, I don't consider that padding the proposal. Labor is calculated by the hour at a fixed rate. A lot of info went into coming up with the labor rate.

Tom

Tom, it's funny that you mentioned the 20%, that is exactly the figure I use.  I went over that with them this morning.
Steve hit the nail on the head.  As soon as I was done explaining everything the customer zeroed in on my hourly rate.  He wanted to know what was driving that figure.  I didn't get past machine use/investment and skill level/work quality before he cut me off with "Thank you, that answers our questions."  It's interesting to read the different perspectives on this subject.

 

[tjbnwi]

They would have had a myocardial infarction over my hourly rate if they questioned your $50.00.

Here a plumber $100.00+ an hour, electrician $75-80.00 per hour, HVAC $75.00-80.00 per hour. Auto repair labor is $90-125.00 per hour.

Tom

 

[tiralie]

Unless this is a T&M job, the information your provided is unnecessary and immediately focuses the customer on your shop rate rather than what the final price is.  I suspect they homed in on your $50 shop rate and believe that you actually make $50/hr which we all know is far from reality.  IMHO, you provided too much info.

I completely agree with Steve.
You provided too much information, particularly in light of the fact that you are booked solid.

Don't volunteer to go over your pricing. If you want or need the work, offer to reduce the quality of materials or have them do the finishing etc.
Basically, people ask about price because they can't afford what you are offering. Even if they had another price in mind and you came in higher than what they thought, they effectively still can't afford you. There are always cheaper solutions to what they think they want.
If someone wants to negotiate the price I tell them they will have to either assume finishing or take lower quality materials or hardware.

I always price a job based on what I believe the job/project is worth.
Sometimes I loose work because of this.
Too bad.

In my quote I break the project down under the following headings without the bracketed explanations. All detail (spread sheet) numbers are rolled up to one number under these headings.
- Materials (type of wood with markup etc.)
- Hardware (slides, fasteners with markup etc.)
- Fabrication (time, consumables etc.)
- Finishing (coatings, time etc.)
- Delivery and Installation (truck rental, dumping fees etc.)

When someone asks what hourly rate I base my quote on, I ask if they are unhappy with the quote. If they are, I go to the option above (finish it themselves etc.) if they back off and say no then we don't have to have the discussion.
Hope that helps.
Tim

 

[Wood_Junkie]

I am a firm believer that transparency is generally a good thing.  However, really detailed information usually backfires if people aren't actually equipped / informed enough to understand it.
For example, the first thing that occurs to most when seeing $50/hr is "That guy makes $100k a year!??".  Right?  (50 x 2080 hours)  That's probably what your client thought.
I think many/most people think they are paying YOU a "paycheck", in a very simplistic view.

But we all know the reality is very different if you own your own business.  That labor rate has to cover your various (and many) insurances, Federal and State taxes; SSI and Medicare taxes (both sides if you're self-employed); gas to their home, gas to the lumberyard; electricity for your shop, tools, wear and tear, consummables, etc etc etc.   So the actual reality may be that you're "taking home" more like $20-30/hr *for your time/wages*.   You aren't in business to work for free or at a loss!

Perhaps the customer would have been better off with a "summarized" quote, which included only materials costs and labor dollar costs (not hours); tax and a final total.
They can then see that all that wood adds up and comprises 40% of the bill.  And the time of the skilled person to shape that wood into something valuable also adds up.  I really like Tim's breakout categories, as it shows phases of the job progressing.  And, as he explains, allows them to excise out any stage(s) they want to take on themselves.  Keep in mind here, that some phases are probably more "profitable" than others... right?  Anyway, bottom line says $xyz dollars, and they take it or leave it.

Parallel to that summarized quote, I would recommend you create a detailed quote, that provides the line-item justification and breakout of your summary.  This is for your back-office record keeping; not ever for presentation to a customer, except if it comes time to pay and they get pushy and argue "Whaddya billing me for?" and want to ruin the working relationship by examining your business practicies.

You can then take the summarized quote they signed and they agreed to, and show them what went into the price they agreed to.  If you think it's informative (for yourself as well as them), break out the business costs (using consistent rates/percentages!) versus the actual "salary" rate you're paying yourself.
For example, if it's a large project, allocate 2% (or whatever is appropriate) for consummables (sandpaper; jigsaw blades, vacuum bags, finish, etc)
List all those allocations (by percent!) and then back it out.  That leaves your labor wage rate, in it's stark reality for you/them to see.  No one should begrudge your fair pay.  If they do, forget them as a customer.

But the end of the argument is:  They agreed to the quote/contract.

What's the old phrase?
You can have it:
> Quickly
> Quality
> Cheap
... Pick two.  
Your customer wanted all three.  Can't happen unless you're willing to lose in the deal.

 

[Jonhilgen]

I never itemize quotes, Russ.  Sometimes, I will separate  materials and labor costs, but I never offer up my hourly which can vary from 45-60 per.  Like wood_junky said, people fixate on that and think you're making more money than them!

I'm with Tim, if a client wants a lower price then materials and finishing are the two that I will change.  Never my labor.  As far as 20% markup on materials...that's fair, but I always try for more...

Jon

P.s my wife thinks I'm an idiot for putting this kind of information on this site...

 

[rnt80]

Sometimes I think I should start a blog/write a book entitled "How not to run a business."

 

[Jonhilgen]

Sometimes I think I should start a blog/write a book entitled "How not to run a business."

Hahahaha!  Tell me about it.  I'm just making this up as I go along, Russ.

Don't be so hard on yourself, I've seen your work and I'm glad I don't have to compete with you.

Jon

 

[Jalvis]

Too much information for the project.

Like stated above....unless its a T&M then no one gets to know how much you make an hour.  Although I don't see a problem with splitting the numbers for materials and then giving a set number for Labor.  When a client wants a change in the price I always give them the option for lower quality either in materials and/or construction.....but then this change will also be reflected in my warranty.

I started my business doing what you described and its a horrible road to go down.  The largest problem comes in the future when you raise your rates and everyone thinks you charge $__.__.  Then no matter what you do your now defined as being "expensive."  Getting away from that definition is more difficult than finding clients to pay a set amount for your labor!

 

[Scott B.]

I think what consumers like this are asking for in their own disfunctional and tongue tied way is a menu of options. Substitute knotty pine for antique oak and save 7%. I swear, if you offer three different packages, it is human nature for people to pick the middle one every time.

I agree that you probably provided them with more info than necessary, but its easy to get sucked into that.

It comes down to whether you are perceived as selling a product or a service. The customers perception of which one you are delivering has everything to do with whether or not they can bring themselves to look at you as a commodity, or a custom service.

First of the year, after 90 days of analysis and prep for the transition, we changed our entire shop pricing structure. Hourly rates are no longer part of the discussion and are not available upon inquiry because they are irrelevant to what we deliver. We get paid for how much and how well we produce, not how long it takes. Hourly rates are for internal estimating purposes only. You really have to know your own numbers, as others have suggested, but this makes it a very simple arrangement with little gray area. People hate gray area. Don't we all.

 

[tiralie]

Sometimes I think I should start a blog/write a book entitled "How not to run a business."

...I was gonna ask, are you getting any teaching in these days. Sounds like you got enough going on for a full time job.
Tim

 

[rnt80]

Tim, we're on Christmas break.  I can't imagine having to do this full time, it's crazy enough trying to juggle weekends and after school.  At this point I'm booked out at least 3 months.  That schedule is the major reason I didn't sweat this mornings screw up too much.

 

[GPowers]

I completely agree with Steve.
You provided too much information, particularly in light of the fact that you are booked solid.

Don't volunteer to go over your pricing. If you want or need the work, offer to reduce the quality of materials or have them do the finishing etc.
Basically, people ask about price because they can't afford what you are offering. Even if they had another price in mind and you came in higher than what they thought, they effectively still can't afford you. There are always cheaper solutions to what they think they want.
If someone wants to negotiate the price I tell them they will have to either assume finishing or take lower quality materials or hardware.

I always price a job based on what I believe the job/project is worth.
Sometimes I loose work because of this.
Too bad.

In my quote I break the project down under the following headings without the bracketed explanations. All detail (spread sheet) numbers are rolled up to one number under these headings.
- Materials (type of wood with markup etc.)
- Hardware (slides, fasteners with markup etc.)
- Fabrication (time, consumables etc.)
- Finishing (coatings, time etc.)
- Delivery and Installation (truck rental, dumping fees etc.)

When someone asks what hourly rate I base my quote on, I ask if they are unhappy with the quote. If they are, I go to the option above (finish it themselves etc.) if they back off and say no then we don't have to have the discussion.
Hope that helps.
Tim

Tim has the best cleanest perspective on doing Quotes. Love his break down and his alternatives on reducing the customers cost if the price comes into question.

In the past I worked at on on-line advertising company that does not have a clue in how to work up a quote. Their clients always beat them down on price.  And the sales staf ALWAYS gives in to a lower price and/or doing more work for free.

 

[tiralie]

Tim, we're on Christmas break.  I can't imagine having to do this full time, it's crazy enough trying to juggle weekends and after school.  At this point I'm booked out at least 3 months.  That schedule is the major reason I didn't sweat this mornings screw up too much.

I wouldn't look at it as a screw up just a bit of a bump.
Despite my best intentions pricing or rather the spread sheet gets me everytime.
I always learn a ton from your posts if that's any consolation.
Tim

 

[honeydoman]

i hardly never give a breakdown  only a few times over the years.  tell customer this is my price either you want what i do or not  and sell yourself and what you can do for them over anybody else..

hgtv and diy have messed up people and pricing  lots of times you see them using mdf on projects and boost how much money they have saved etc,,,

 

[Scott B.]

i hardly never give a breakdown  only a few times over the years.  tell customer this is my price either you want what i do or not  and sell yourself and what you can do for them over anybody else..

hgtv and diy have messed up people and pricing  lots of times you see them using mdf on projects and boost how much money they have saved etc,,,

Seriously...+1 on the thanks for nothing hgtv...

Kreg, most of us would love to have your charm on sales day!

 

[nclemmons]

It's the bandana.  American made! Right in your garage!  Right before your eyes.  He should charge admission for entertainment value as well!

Nothin' better!

neil