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3 Tips for Charging for Estimates

Free estimates hurt your company in multiple ways 

March 05, 2020
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It’s crucial that you see your time as just as valuable as the client’s. If a homeowner doesn’t agree with that concept, they are probably not a good fit for your company.

There have been countless articles, classes, and roundtable discussions on why remodelers should stop offering free estimates. Yet when I speak with colleagues from all over the country, there is a great deal of pushback against the change. I am regularly met with statements like, “In my market, the competition all offer free estimates. I would lose too many clients if I tried to charge.” 

Rather than argue for the merits of actually charging for your time, I want to instead focus on how one might convince clients that they should willingly pay for a proper accounting of the cost to construct their project. Here are three tips. 

1] Convince Yourself of the Value

Let’s start by defining what I mean by “estimate.” I have no problem ball-parking for a homeowner what a typical project like theirs might cost. If you’ve been at this job long enough, you should be able to do that without even stepping foot in the client’s home. We talk about budgeting during the pre-qualifying process and walk away if a client isn’t receptive to a realistic budget for their project. 

The free estimates that I’m discussing here are those that include any level of material, labor, and allowances for specific components that are formalized in writing.

The first thing is convincing yourself that there is value in your time, just as your client’s time is valuable. It’s taken you years to learn remodeling. You are an expert. You are experienced. You will use those highly specialized skills in creating a job costing. Why should that come for free? 

2] Explain Your Value to the Client

A reasonable person has a hard time arguing that their time is valuable but yours is somehow less so. Furthermore, if they don’t value your time, you probably don’t want them as a client. As we all are acutely aware, in any significant remodel there are numerous variables in both scope and selections. Until all of those are defined, it’s not possible to know what a specific project will cost. After outlining that simple fact, I then flip any “free-estimate” argument on its head and explain that it is simply disingenuous for someone to suggest otherwise. The free-estimate model is a derivation of the competitive-bid model that comes from commercial construction. The competitive-bid model starts with a defined set of plans and specifications—a service that the client pays an architect to develop. Then, multiple bidders offer up their “best” price to construct that set of plans. 

I take the time to explain these truths to homeowners, and most of them are extremely receptive. The ones who aren’t are not our ideal client.

When was the last time a client came to you with a set of construction-ready plans and specifications that you could “simply” put numbers to? Residential remodeling doesn’t work that way. The client expects you, as the remodeler, to present your best plan and a construction estimate. There is no way for your plan and estimate to be apples-to-apples with any other bidder, so why are you even trying? Not to mention the exorbitant amount of time it would require you to dedicate to developing specific-enough plans and a takeoff without a guarantee of getting the job. 

The reality is no one actually does that; in the free-estimate game, it’s a balancing act: Specific enough to guess at each element of the scope of work, and general enough not to waste too much time if you don’t get the job. You know all of these things to be true. 

3] Avoid the Term “Estimate”

Let’s change the narrative. We avoid the term “estimate,” since after all, that’s just your best guess at what a project could cost. Without diving too far into why you should also switch to a design-build model (that’s a story for another day,) we engage our clients with a design-and-project-development retainer. We package those project development services (read: takeoff and job costing) along with the design and drafting services, and we add value while also explaining how our project development is significantly more than “just an estimate.”

I take the time to explain these truths to homeowners, and most of them are extremely receptive. The ones who aren’t are not our ideal client. This brings me to my last point: Know when to walk-away. The right client can appreciate the effort involved and will value your time accordingly. Be different than your competition, know your value, and be uncompromising. 


NAHB Remodelers represents the nearly 50,000 members of NAHB who are involved in the remodeling industry.

About the Author


Nick Scheel is the owner of Untamed Construction in Spokane, Washington. 
Nick Scheel is the owner of Untamed Construction in Spokane, Washington. 

Comments

Comments

Thanx for the thoughtful article, I will pass it on top our RSA's... I am also in an area that everyone has FREE estimates, but I think that we need to be paid for our service and expertise.. Car Dealers do it, appliance repair people do it, etc... They disguise it as a 'Service Call Charge' and the public, for some reason accept it.. Plumber charge for it as well as you are at their mercy... Love the concept that I will tell you the cost AFTER the work is performed, the optimum 'OPEN CHECK' policy.. WE cannot do this with our bids, even tho they are clearly ESTIMATES.. Once again, great article..

Thanks Billy, I am glad that the content was valuable to you. It is still a struggle sometimes to get some clients to understand that just because I can throw an allowance at a bunch of line items doesn't mean that I am guessing right. The idea that when doing "free estimates" you're completely guessing at how much of an allowance can you get them to bite off on while actually putting enough in there to cover what you think they want. There is a lot of room for deception and down-right fraud with that system and is why I tell all my clients that we choose to use our system and model because it provides a clearer definition of expectations. Almost every construction horror story that you have ever heard is the result in ambiguity in the contract terms or lack there of.

I think #3 is the key. Too many contractors use several terms including estimate, bid, quote, proposal, etc. Look these up and they all mean different things. We only use estimate and proposal. We like to meet most customers and use the first visit to give a verbal rough estimate. We use historical data and other reports to show what typical costs will run. It's hard to say over the phone what a typical kitchen will cost but once at their home and see their scope we give them the $45K-$60K rough estimate. Reality kicks in for most but if when we leave they're on the fence we give them our Letter of Intent or Design Agreement form with our fee and tell them to call us when their ready. Sometimes they cut us a check on the spot to continue. Moving forward at this point it is no longer an estimate but a proposal with all allowances, costs, etc. which can go into contract signing. Most serious clients will gladly pay for this because they feel they're getting value but it's still up to us to sell them. In my early years I had to do this for free because I couldn't come up with real numbers and I spent hours on estimates with only a few that signed. We've been charging for proposals for over 5 years now and it works great for us. Quite frankly it eliminated the tire kickers who still think we should do this all for free but those are not the ones we want to work for.

Thanks for your comments Duane. I'm glad you have experienced similar results by charging for your time. To your point on estimates and bids: I have done a seminar at our local home and garden show for years where I explain that very point to the crowd. In this industry we tend to conflate the concepts of estimates vs. proposals vs. quotes. The key takeaway that I try to leave them with is that it doesn't really matter what the contractor is calling it; what matters is that whatever agreement they sign, the scope of work, the price for the work, and any undefined variables should be clearly defined. I advise them to ask one simple question: "What could cause this price to change?" If the answer to that question isn't defined and in writing, then they are leaving a lot of ambiguity on the table with a potential for costly changes during the project.

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