Episode
237
Tue, 05 Mar 2024 09:00:00 +0000
Do unexpected job costs and hours spent on bids that go nowhere keep you up at night?
Then get ready for a crash course in charging for estimates, and passing on true costs to customers.
During this episode of The Profit Toolbelt, I met with Steve Cederquist.
He is a seasoned contractor with over 30 years in construction (starting at the young age of 13)...
Steve has showcased and proved his skills on TV as well. For over 16 episodes he’s appeared in the “Flip Or Flip” reality hit show.
Join Steve as he shares a bidding strategy that won't leave your pockets bleeding and tips for passing on true costs to customers.
In every project, there are hidden costs that you might not be aware of.
The good news is - realizing where you’re losing money is half the battle.
One of the, biggest reasons for lost time and money is poor planning and preparation before you even arrive at a site.
A missing widget, like a forgotten screw, might seem like a small hiccup.
But when you break it down a seemingly insignificant 10-cent widget can snowball into a huge loss.
An extra hour spent at the hardware store translates into extended labor costs, increased overhead, and a dent in your project's profitability.
That seemingly negligible 10-cent widget now incurs all these hidden expenses:
Extra labor hours, fuel costs, and the opportunity cost of missing out on the next potential job.
Suddenly, it sets you back by $200.
Similarly estimates, bids, and planning for contingencies require resources.
So the question then becomes - how do we get paid for all that upfront work, before we even start building?
Crafting a comprehensive bid takes more than a quick glance at blueprints.
It requires attention to detail, cost calculations, and sometimes the involvement of outside experts.
Your time is valuable, so why not get paid for it?
Now a lot of contractors keep telling me that they can’t charge for estimates.
They are concerned that the customer will choose the next guy or gal.
But the truth is charging for bids communicates that your time, skills, and industry knowledge are precious commodities.
So, clients perceive your services as a premium offering. This sets you apart from competitors.
That’s why Steve has adopted a $500 refundable deposit system.
This not only ensures commitment from the client but also covers the costs associated with bid preparation.
Offering a refundable deposit serves as an incentive for clients to stick with your bid.
Once the project is a go, you can credit the deposit back into the job cost.
When it comes to crafting bids, you should cover every possible contingency.
One significant aspect that is often overlooked (depending on your local regulations) is testing – asbestos testing and lead testing.
The testing procedures can send the costs soaring, easily reaching around $600 for collection and testing alone.
In his bids, Steve doesn’t shy away from disclosing these costs.
Instead, he makes it a point to educate clients on the necessity of testing.
Some clients may hesitate due to the additional costs associated with testing or other contingencies.
In such cases, he offers an alternative approach.
He proposes a consulting arrangement where the client acts as their own contractor, handling the operational aspects independently.
He then takes on the role of an advisor, guiding them through the project and connecting them with subs.
And he makes it crystal clear – if any contingencies arise the responsibility lies squarely with the customer.
This consulting model comes with its own pricing structure.
Instead of a traditional bid, he charges a percentage of the overall project cost.
If it's a million-dollar job, the consulting fee might amount to $100,000.
It's an alternative path that some clients find beneficial, aligning with their specific needs and preferences.
How to handle price objections, when passing on the true costs to the customer
When someone tells Steve, "I can't afford you," he tries to understand what he’s being compared to.
Are they stacking him against the local handyman?
Or the guy with a pickup truck from Home Depot?
When he finds out he can then address prospective customers' concerns directly.
This allows him to demonstrate the value he can bring that his competitors can’t.
There will always be someone quoting lower figures.
But Steve shifts the focus away from price to the value he adds.
He even shares anecdotes of clients who, lured by lower bids, ended up with regrets.
Because in the end, your customers would prefer to spend more and get the job done right - rather than pay less for a lousy job.
Steve also recommends including a contingency fund in your bids.
It’s a financial safety net designed to gracefully pass on the unexpected costs of the project to the customer.
The goal isn't to nickel and dime your clients.
Instead, it's about being proactive, prepared, and fair.
A contingency fund allows you to absorb unforeseen expenses without disrupting the overall project flow.
It also helps you and your client avoid the frustration that comes with constant change orders.
Typically, Steve’s contingency fund ranges from $5,000 to $8,000.
During the podcast episode Steve also shared a bunch of personal anecdotes from his time spent on TV, his family life as well as his journey to being a highly-demanded contractor. For a more in-depth conversation make sure to listen in to the full podcast episode.
Show Notes:
Links and Resource:
.svg.webp)
