I took a sales call to do work on a home in a nearby residence. The guy I went to see owns the home in a beautiful neighborhood 15 miles away. He wants me to fix some drywall from a busted pipe that burst during the winter, install a new high-efficient toilet in the bathroom and add rubbed-bronze fixtures to the sink and tub. Photo: urlesque
I agree to work up an estimate on these items and decide to get back with him the following day — to go over details of cost. I head back to the home office, pour over the internet for supply costs and recommendations for the homeowner, estimate the time it will take to complete the project, multiply my hourly rate, procurement fee, error/omissions percentage, mark-up, ect., ecetera, ect.
I call the homeowner the next day and schedule a meeting at his house. I go through the details, ask for input, and a start date — should the customer sign and is in agreement with the quote.
He reads and looks over the estimate, then pauses, for like 15 seconds.
“Is there a problem?” I blurt out.
“Well, yeah. How much is the materials? I’d like a breakdown of each of these things are gonna cost!” he replies.
How do you handle that? Should you give him a revised estimate, or should you hold firm with explanation?
Would you ask for a cost breakdown of a meal at a fast food restaurant?
“Umm. How much for the pickles? I need to know the cost because it seems kinda off. What is the price breakdown of a slice of cheese, the meat cost, and the bun cost. Also can you tell me how much each french fry will set me back?”
“Now go back and work up another estimate for those items so I can see them listed, because I feel like you are overcharging and I don’t trust you.”
Sounds about right, huh? Wrong!
First off, when a customer asks for line item cost, it could indicate they are extremely cheap and will beat you up on those line items. Listing line items gives way to nit-picking — on every line. You have already invested time and expense to prepare a written quote and drive over there to submit it. Now they want another printed explanation.
Ouch.
I’m not saying that all people that ask for price breakdowns are not trusting you; they may have been conditioned this way with doing business in their everyday lives from listening to others. Lawyers and accountants.
What I’m saying is that if a customer wants a price breakdown of materials and labor, they must be charged for it. Calmly explain to them that there is a fair amount of time involved in preparing a quote (although they may not believe you — with the “free estimate thing” permeating our business, lol). However, it is the truth.
I don’t know one contractor that prepares written estimates and drives them all over God’s Green Earth, who doesn’t incur gas costs and time spent putting these quotes together.
Sale your services as a full package deal.
In order to avoid headaches, which take the form of the client knowing your profit on their job and asking you to lower it, as well as taking away your material mark-up (by way of line item breakdowns), simply sell your company’s worth as a full package. This is completely fair and legit. Your profit on a job is proprietary. You control the information: the secret recipe of Kernel Sanders chicken with it’s delicious herbs and spices didn’t get out from a customer’s squeeze play did it? Should yours?
“Mmmm.. chicken..”
Decide: should I give a breakdown?
You must decide if you are going to agree to separate things for them, so the customer can see the prices of each item. In standard contracts, I break down work procedures to be performed and materials to be installed. But these blocks of information are general in nature — standard contract writing procedures. Photo: kfc.com
However, if the client wants each and every line item broke down and the price indicated next to it, there is a cost associated with doing that for them. That cost is purely decided by you and what you think your time, effort and energy is worth.
“I charge $75 per hour, and it will take 3 hours, Mr. Homeowner. I’ll have that prepared for you in a day or so, no problem.”
If they are willing to agree (pretty sure they wouldn’t; as cheap clients usually request these things and will balk at the site of an added cost), then more power to your construction company..
Control the power
Dealing with certain customers, it becomes about control and power. You are the contractor and have it. Don’t let the client take it away by breaking your will to succeed and profit. Having a calm, steady demeanor when dealing with the general public — and not sway because of emotions — will take you father in your business pursuits of success than not.
“Grow some of these, too… They’re needed in construction!”
Remember: Don’t loose your cool when confronted with problematic clients. You can always just walk away. The next prospective client won’t be so bad. Photo: friendsoftheprogram.net
{ 6 comments… read them below or add one }
Er – I just went through this with a contractor.
His rate was several thousand over the estimates of other contractors. We went with him because he seemed more experienced.
First, I stupidly gave him the 3/4 deposit he requested. After that, he treated us like dirt. I won’t go into the worst parts and will stick to the point.
In the middle of the job, he asked for a lump sum of thousands more, because he bought several necessary things. I was fine with that because he should be reimbursed.
But then he refused to give me a receipt. And he refused to provide any receipts so that I could check his math. I am positive that he padded the billing. (On his final bill, he indicated that the money I paid him was for something else – not what he had told me)
Another time, he went out and bought a ton of fixtures, and told me to pay him. I didn’t like the fixtures he had bought. He said he couldn’t take them back because he’d thrown away the boxes. I asked to see a receipt. He wouldn’t give me one.
The fixtures had no brand name on them. They looked cheap and plastic.
It was obvious that he bought cut-rate and was billing us top dollar.
He should have bought one fixture for our approval. He didn’t want to go to the trouble of returning them, and could care less what we thought.
We paid him for the fixtures in full. In fact, we paid him in full for the entire job, and told him not to return.
He cost us thousands of dollars, over this and many other things.
So you really think a paying customer has no right to know what in the hell we are paying for?
My question to you is: Why on earth would you give a 3/4 deposit? There was really no incentive to finish your project (in the mind of this unscrupulous contractor); you gave the guy more than half down before he ever started your project. That is one of many red flags that would have me rethinking this contractor. Did you do due diligence in selecting this contractor? That means checking his license, insurance, Worker’s Comp., references, etc., etc. It is really sad when homeowners get burned after the fact. The “guy in a pick-up” types really bring the true professionals down and devalue our services.
What did your contract say in regards to allowances, time, and budget? A good contract protects both parties involved. Never go without a contract — which I suspect is your case. Any reputable contractor will provide a blank contract for review by your attorney beforehand. I would have submitted a flat fee contract (fixed price), with allowances included for decent materials that you could have selected yourself. That way you would be happy with. You should never pay the guy in full if you weren’t satisfied. There are a lot of unknowns here in your story and I’d like to hear from you. We can talk directly in this comment section; I’m a licensed professional and I’d like to help you figure this one out.
And the answer to your last question, “So you really think a paying customer has no right to know what in the hell we are paying for?”
Yes and no.
Yes, there should be specific allowance amounts agreed to by both parties stated in your contract for things that you wish to pick out because tastes are subjective — such as the kind of tile, the kinds of fixtures, etc., with a threshold price attached to them — for instance $3 to $5 per sq. ft. tile allowance.
No. When you sign a flat/fixed fee contract with a company (which, by the way is the best and saves you money), they handle the entire project for you and you sit back and relax — let the pro take care of your solution. Your solution is a package deal — the contractor handles all material procurement, arranges pick-up and delivery, dump fees, the whole shot — for a specific contract price.
The prices he pays at the supply house for materials for your project is proprietary and shouldn’t be itemized; it just causes you as a homeowner to pick apart these line items and you are in for a battle with each other. However, these line items can further be quantified by allowances to your project. You simply go online or to the home store and advise the contractor of the products you’d like installed, provided that the product doesn’t go over the allowance amount.
Finally, here’s an example that further explains this theory. When you go to the doctor, do you request him to break down each specific price of the products and services he provides so you can see if his prices are in line with what you assume to be correct? I’d like to think not; you simply pay the bill agreed upon. Next time, do not hire a family member or guy-in-a-pickup-type who “does this on the weekend”; that lives in his mom’s basement and will work for beer money. I may be assuming things here, please forgive me if I am wrong — I’d like to hear back from you.
I disagree with you. It is not the contractor that “has the power”….it is the customer. The contractor was hired by the customer and is therefore an employee hired to perform an agreed upon service. If the performance of that service is lacking, substandard or dishonest the customer has a right to demand remedy. As far as receipts go, there must be some accounting because how is the customer to know that the materials you placed in someone’s house did not fall off the back of a truck somewhere? I’ll give you an example, in my kitchen renovation I asked for a specific type of appliance…and got it….but it was a faulty cast off piece of junk. How is the consumer supposed to protect themselves from this kind of underhanded practice? If I pay for cabinets, appliances, flooring, sinks and so on…please note…I have paid for them, they belong to me and I have a right to know where they came from and what they cost. Period. Now you make analogies to fast food and medicine…those industries are in fact highly accountable to the consumer and there are numerous agencies whose sole purpose is to protect citizens from scams, faulty products and practices. Even a fast food joint has to pass health inspections, food products are in fact labeled with a complete breakdown of the calories and ingredients. You cannot pay somebody to do a job in good faith and then get “cheaped” to death on materials and have no recourse. The courts have a word for that…..”fraud”. I suggest that you seem to have some kind of ax to grind with the people that use your type of services. We are not a stupid public, some of us read and research things, get informed so to speak. So you can’t pay somebody to do job x with materials y and then come up with materials c and expect not to account. This is America and that dog just won’t hunt.
@ Patti
It pays to research who you decide to hire. I’ll repeat it again: the contractor must maintain control the flow of his/her business. I’ve ran across more than enough P.I.T.A. customers who expect you to do wonders for a 10k kitchen. They then get substandard materials and worksmanship when they hire the “cheapest tradesman”. Take a look at the contract you signed. If you aren’t fully satisfied with whom you may hire then why hire them?
I would never work for a customer that wanted me to install materials they bought beforehand. That’s red flag city. It tells the Contractor that these folks are cheap. These customers pick the wrong size item, not enough of the item, can’t return the item, waste my time, etc., etc., because NOW they expect me to dig them out of their mess. Install it yourself. The DIY channels make it look easy and will show you how.
But you know the biggest problem is with most folks? They pay to have the nicest cars, eat at the best restaurants, buy the most expensive outfits, send their kids to the best schools, but will cheap out concerning one of their most valuable assets: their home. I’ll never get it.
Thanks for commenting though.
This posting made me laugh, as it is exactly what NOT to do or how to think as a contractor.
Of course you have to give a CSI breakdown. I have been in the commercial and residential construction business for 20 years and can count on one hand the number of times some contractor came back to me with a lump sum bid for something like this.
I didn’t even return their phone call.
As a customer, they need to know the breakdown for two reasons.
1. If their are change orders, they need a unit price to reference the cost differential.
2. I need to know that quality isn’t being sacrificed in one area to make up for your profit in another. If I ask you to build an addition onto my house and I can’t see in the price that you decided to buy $100 dollar windows from some fly by night “off the truck” supplier, rather than the Marvin Integrity windows that were spec’d. Then we have a problem.
I don’t know where you get this “The Contractor has all the power” BS, because it is completely wrong, especially in this economy where even excellent contractors are barely staying above water.
@ Frank
Are you a contractor or not? The fact of the matter is that you DO NOT give a full price breakdown for individual line items. This is contracting 101. Any competent contractor realizes this. You’ll easily set yourself up for problems. There is no CSI breakdown. Are you kidding me? Most homeowners want you to break every single line item down because they are inherently CHEAP. They then attempt to force you to lower your costs based on what they think you should charge them for each individual line item. Check out what Micheal Stone says about this.
Also, I’ll note, subcontracting with other contractors and working for a homeowner is like comparing oranges to apples. I doubt you have ever been in business for 20 years successfully — to make a blanket statement like that.
Reply to question #1: There shouldn’t be a need for change orders if you bid the project correctly and have everything spelled out and agreed to — in your contracts. To hit a homeowner with change orders AFTER you realize that you UNDER CHARGED THEM is just plain wrong. Now if they initiate the change order because they want to upgrade something — that’s different. Homeowners are notorious for asking for “little extras” — free of course. You simply pull out your estimate sheet and CHARGE for these things.
Reply to question #2: You will know what “quality” is, spelled out according to the contract. The contract should give detailed description on items and the quality to be installed, but as far as separating labor charges + other costs and showing each section of how much each costs is the wrong way to conduct a business. Any competent contractor knows this and charges for his services as a package. Period. My company includes a summary of what we will do and when we will do it and at what time we expect a draw according to the contract. These are usually blocks of text describing the phase with blocks of costs due at those times. We then let the clients pick finishes — through allowances described in their paperwork.
And Yes. The contractor should control the method at which he is willing to work. The contractor should always attempt to maintain power and order in interacting with a customer — Not because you are doing something to get over on them; but because you decide what you are willing to do on the job and who you work for.
And by the way. Never base the way in which you are willing to work on the economy and pressure to “keep the doors open”. You’ll be out of business pretty quickly with this type of mentality. 90% of small businesses go out of business in the first 5 years. You know what the main reason is? NOT CHARGING ENOUGH FOR YOUR SERVICES. Your bills are the same aren’t they?
Some contractors make it and others seem to barely stay above water. It’s not magic or luck. Its charging a fair price for your work — no matter what.
Thanks for stopping by.