Estimate vs. Proposal
ESTIMATES ARE FREE . . . AND WORTHLESS!
BEST Techs Contracting Design Build Remodel, Inc. has been in the remodeling business for over 30 years. In the past, the first site visit to a potential client’s home would consist of Jason to show up on time, take plenty of notes, run all over town to gather prices, and provide a detailed estimate for the project. Then send that estimate in the mail (snail mail that is), remember this is over 30 years ago. Then, he would sit down and wait to hear back from the clients that wanted the work done.
Some of the time there was silence, many would call back and either politely tell us no, and some would do the work if it fit into their budget that was never set. It was spinning our wheels and costing us a lot of lost revenue that we could no longer afford.
This left our company frustrated about how we were doing business. Our entire sales and estimating process felt broken and left us feeling like we were not good enough. We were tired of being one of those FREE estimators to people who were just tier kickers, or looking for cheap! So we started to change our approach on how our company (should and will) conduct business from here on out.
As good general contractors, we decided to devise a sales system that would benefit the homeowner and enable our company to turn a profit, so we could stay in business. This new sales process needed to enable Jason to thoroughly understand and appreciate exactly what must-have information the homeowners needed in order to safely sign a remodeling contract with our company. Rather than refer to it as an estimate, he came up with the term “Comprehensive Project Evaluation”, or (CPE) for short.
Let us take you back to 2001, to one time my family purchased a car, it was a FORD Expedition. The salesperson at the dealership said, “Prices range from anywhere between $30k and $45k, depending on the options. This wide range of costs became a problem. So, for us to figure out the specific amenities we needed in the car, it came down to fitting it into our family budget.
You know the drill, go down to the car lot, talk to the salesperson, test-drive the specific model you can afford, pore over the sticker price, gas mileage per gallon, negotiate the price, and finally realize what the precise investment would be. We could not have done it without all of this information. I know that back then, end consumers certainly would not purchase a new car without all this information.
So why would a potential client purchase a new kitchen, bathroom, or room addition without this same amount of detailed information?
Certainly the first several years of BTC being in business, we did not deliver comprehensive estimates. Nor did we feel as if we were providing our potential clients with the substantial information they needed to purchase from us, or from any other contractor that was not providing details.
If BTC was going to charge a professional fee for this information, and really make it a service that we could significantly put our clients in a much better position to succeed with their remodel investment.
We now are deciding to keep things simple at first and still offer a free ballpark estimate (Guesstimate) for the initial meeting with our prospective clients. But I mean an estimate that is true to the sense of the word. The dictionary calls an estimate, “A rough, or approximate, calculation”.
At this point, the closest the BTC can come up with is a price range for any particular project. This is the only thing that is realistic without putting pen to paper and filling every blank of what the project entails. Ultimately, however, homeowners need every blank filled in and that is exactly what the CPE provides.
BTC ‘s FIRST VISIT IS FREE
BEST Techs Contracting Design, Build, Remodel, Inc. wants to get to know our potential clients, as they need to get to know us. My wife Penny, and I, Jason, will make an Introductory Appointment (over Zoom) or sometimes in-person to consult and learn more about your project. This is the time to prequalify both parties and to make sure that the project would be a good fit for our company. We learn about you, and you learn about us, at this first consultation.
But the Introductory Appointment is not an order-taking session where we would jot down tons of information about projects that the homeowner would like an estimate for. Usually this is exactly what the homeowner has in mind. But at this first session, it is our job to follow a process that will be valuable to everyone.
Inevitably, when we arrive at the home, the first thing the homeowners want to do is drag us right to the project and start discussing the details. We stop them from giving us the immediate tour, and ask if there is a comfortable place for us to sit for a few minutes so we can ask some “very important questions.”
At this time, BTC needs to understand the intended time frame for the project start and finish dates. We would like to know if they are interviewing other remodeling companies. It is crucial for us to ask what qualities the homeowners are looking for in a remodeling contractor. Have they had any prior remodeling experiences and what were they like? In order to truly be of help, BTC also needs to know what is motivating them to do the remodel.
During this initial discussion, we ask homeowners to give us a brief description (usually their wants and needs written down on paper) of the project along with information about any obstacles that they see might arise. We believe it is key for the homeowners to do most of the talking during this exchange. Our primary job is to take accurate notes. Once all this information is in hand, it is time for us to ask, “May we ask what you know about BEST Techs contracting Design, Build, Remodel?” This is a critical opportunity for our company to build trust with the homeowners.
At this point and time, it is all about our potential clients and their home. BTC’s main focus is to share with them any qualities about our company that might alleviate the concerns that they just shared with us. For example, if they had a bad prior experience with a remodeler that left dust all over their house, we might share with them that our team uses Zip Walls, tarps, and an air filter to help minimize dust. The idea here is explore any fears homeowners might have about hiring a remodeler and explain to them how our team can help. After this brief discussion, we ask for permission to see the kitchen (or whatever) they wanted to show us.
As we sit back down at the table, the first thing we will discuss is the budget. Most of the time when we ask homeowners if they have a budget, they say “No.” But when we hint that a new kitchen could be anywhere from $60,000 - $80,000 dollars as an investment, they chime right in. This is the time that we offer that “free estimate.” We use professional experience to offer them a budget range. We may say, “We do 5 to 7 kitchens a year that would be very similar to yours and the typical budget is between $60,000 and $100,000.“ Remember the car salesperson and their price range? Is it possible for us to give you anything more accurate than that during our first introductory appointment? No. Beyond having decided that you might want to remodel your kitchen, most homeowners are not even sure what they specifically want and need at this point. If you have already received an “ESTIMATE” from another licensed contractor, was it over the phone, vaguely scribbled on 1-sheet of paper, or just a number from thin air?
By presenting a Comprehensive Project Evaluation, we are doing more than handing over a piece of paper with numbers on it. We are providing a valuable service to our potential customer. That is how we present it to them, and it is what allows us to unflinchingly ask to be compensated for the effort.
IT IS NOT AN ESTIMATE; IT IS A COMPREHENSIVE PROJECT EVALUATION
The CPE is comprised of three vital parts: Design, Job Scope, and Cost Analysis. It is our company’s belief that every homeowner needs all three of these components in order to conduct business with a licensed remodeling company. Unlicensed contractors? Maybe not. However, you do get what you pay for!
To illustrate how we go about asking to be compensated for the effort of putting this all together, let’s get back to that first meeting: At the conclusion of discussing the budget, we proceed to share our opinion on the value of these three components and the necessity for a consumer to understand and acquire them.
BEST Techs Contracting Design, Build, Remodel, Inc. has a well-thought-out process that can help you navigate through any project. At BTC, we believe there are three things that anyone in your position needs in order to safely sign a contract with a licensed contractor.
#1 Design Work – The first thing that we need to create is a Design with all the details for your project that we will be able to submit to the city for permits. Having a drawing to represent all of this information will give you a much better image of the proposed project. (There are many projects that need very little design, and if that is the case, we still engage in the CPE and deliver a Job Scope and Cost Analysis).
#2 Job Scope – The second bit of information that is vital to you is a thorough, detailed Job Scope. The idea here is to have you, as the consumer, understand everything that you are getting for your money. In addition, it is important to understand everything that is included, and everything that is not included. All tasks, materials and trade services must be spelled out and all vagueness erased. The Job Scope is the backbone to the contract and is designed to protect everyone involved.
#3 Cost Analysis – The third item that we need, is a Cost Analysis. Based on existing conditions, our new Design, and the detailed Job Scope, we will accurately assess what your investment will be for the proposed project. This is not ballpark pricing, but an accurate project cost based on specific criteria. With Guesstimates from different contractors, there seems to be a tremendous amount of gray area and price differences. We eliminate this uncertainty and any surprises that may follow.
The Design, Job Scope, and Cost Analysis are all part of a professional service, called a Comprehensive Project Evaluation (CPE), that our company offers. During this process, we will leave no stone unturned, and we will firmly put you in the driver’s seat with your project.
At this point, during our first initial consultation, we show you samples of our CPE Agreement Form and review its content. It includes phases of the project, a list of the type of drawings we will be delivering (floor plan, elevations, and the like, and it specifies that revisions are allowed), and a statement that mentions the fee for this service, which will be applied toward the cost of the project.
At this point, it is important to explain that the project investment will be presented in lump-sum fashion, rather than a detailed breakdown of costs by task, which can be confusing for homeowners. Furthermore, we explain that if we are not hired for the project, the homeowners retain the rights to all documents; however, if they choose to work with another company, then we (BTC) are relieved of any liability associated with the design and scope of work for the project.
We always have several examples of Design and Job Scopes relative to their project type on hand. If clients are looking for a new kitchen, we show them Designs of kitchens that we have done along with a detailed Job Scope. It is more than likely that you are not receiving this level of detail from other licensed contractors (probably because the others are not being paid) and you are quick to recognize the benefit of the CPE. We hope to sign this agreement at the end of our first visit and receive payment for the CPE in full at this time.
Service fee – To calculate how much to charge for the CPE, we estimate how many hours the entire process will take, largely based on experience (typical additions, kitchens, bathrooms, retrofits, and so on take multiple site visits), and multiply that by what we feel our services are worth per hour (typically, $150 per hour). If we hire an outside architect for some design services, then we add those services into the CPE also.
The CPE service fee can range from $1,500 to $2,500 for bath, to $7,500+ for an addition. It comes down to the simplicity or complexity of the project. Once you, as the client, thoroughly believe in the value of our service, it gets easier to understand why we ask to be compensated fairly.
If BTC is awarded the project, then we deduct the job scoping and estimating costs from the project. We still must include costs for outside design, and engineering, and build these into the contract.
There have been times when clients balked at paying for an estimate when they have already gotten three others for free. we tell them again that a Comprehensive Project Evaluation is very different from an estimate. Then, we will ask if we can look at their estimates, and we usually get the same response: “I am still waiting for two of them, and the other was a quote over the phone.” Generally, if a homeowner insists that we have no business charging for our time, that tells you all that you need to know about that potential client. As we say in our business, “Money changing hands means a commitment has been made.”
CPE PART 1: DESIGN
With a signed CPE agreement in hand, it’s time to get started with the design, and the first decision is who will do this work. For additions and major renovations, we complete a simple floor plan then subcontract the rest out to our professional licensed architect and engineer. For our kitchen, baths, retrofit projects, we do this service in-house. All projects we design using Chief Architect as our design presentation software.
Next, we capture digital images of the entire work area to share with our in-house design team. These images will also be used to develop the Cost Analysis.
If the project requires design assistance from our architect, then we schedule our next appointment with their Firm. Prior to this next meeting, we share some thoughts with our architect regarding the homeowners’ intentions and budget range. During this first design meeting (at the clients’ home), our role is to facilitate the discussion and make sure the architect and the homeowners are communicating effectively with each other.
At an agreed upon later date, we return to review the drawings and make any necessary changes. When this process is complete, we have the homeowner sign off on the drawings, and we start the Job Scoping phase.
With a kitchen remodel, we create an informational packet. Included in this packet are digital photos of the kitchen space and a detailed, digitally-drawn floor plan with all required measurements. We also interview the clients to learn what they like and don’t like about their existing kitchen—crucial information to pass along to our in-house designers.
Once we have finished the information packet, and reviewed it with our clients, we are ready for our clients to visit different showrooms. Again, at completion of design, we have the clients sign off before moving forward with the Job Scope.
CPE PART 2: JOB SCOPE
The Job Scope is perhaps the most critical document. It not only tells what the client will purchase, but also what they won’t. When developing this document, we like to play a “make believe” role of a lawyer — for my client as well as for BTC Design, Build, Remodel.
In order to complete the Job Scope, we may need to interview the client a time or two more. We use detailed questionnaire sheets that we have developed that are specific to each project type. Here is where it is critical to be thorough. If it’s a bath tile job, we ask questions like: What is the purchase cost of the tile? Was tax included? Are we setting the tile over Ditra? Is the tile on a straight run, or Diagonal? Are we using Grout Once sealer?
The Job Scope needs to mention how we will protect the home, clean the home, and address debris removal, permits, portable toilets, and so on. There are many items to list and each one will help create excellent communication about the job at hand. Effective job scoping prevents clients from assuming things were included that were not.
We have found that an allowance system could sometimes be helpful to expedite the process. For example, rather than picking out the medicine cabinet before signing the contract, we simply identify whether or not it is recessed or surface mount (a difference in labor) and insert a dollar-value purchase allowance for this item (specifying whether tax is included). But before setting an allowance, we have a discussion with the clients about their taste, as the price of a medicine cabinet can vary from $300 to $3,000, as some require power for outlets and lights.
We review all Job Scopes with client’s line by line. The story is crafted in chronological order to assist the clients in understanding and grasping the information. Some of this may be boring to them, but we always say, “You invested money in our company so that we can educate you and we do not want to disappoint!”
As we review the Job Scope, we look to see how well the clients understand all the details of the Job Scope. As we sort these out, we make corrections on the spot. Sometimes the homeowners want to change something. Or we may need a better look at some portion of the project, and we can do this now that we are back in your home. The key here is to make all necessary changes and get it right. Oftentimes a fully developed Scope will take two to three meetings, and several weeks to months (depending on the size of the project) before it is accurate. We always make changes in a different color font so we can focus on the changes at subsequent meetings and not drag through the whole scope of work each time.
The process of reviewing the Job Scope usually builds trust, which has tremendous value. We are sharing things with the homeowner that no other remodeling firm has shared, and we are getting paid to do so. We can afford to be focused and patient. This is not easy to do when you are not compensated, and especially when you are not sure that the people you are talking to might never even call you back.
CPE PART 3: COST ANALYSIS
BTC never calculates a Cost Analysis until the Job Scope is complete. Too many times we think we are ready to dive into our comprehensive estimating software when all of the sudden the homeowner does a 180-degree turn on the Scope. Patience is the key to a successful remodel.
It’s expensive to be in the remodeling business today. With more regulations, required employee training and certifications, and the labor shortage (we are going to have to compensate our employees more to keep them on staff), it’s certainly not going to get cheaper. We therefore have to be precise on how we approach pursuing new work in order to meet the margins we need to keep our business vital, on-going, and to stay in business. So, when we break the news to prospective clients that their new kitchen will cost $85K rather than the $50K figure they had in mind, we have to use every opportunity we can to build value with that client.
CLOSING THE DEAL
When all questions have been answered, and our clients understand what they’re buying in full detail, we unveil the projected cost for the project. By this time most of our clients are ready to move forward with their project. As they have noticed, no one else has been as thorough or nearly as professional. Truly, the CPE process is a value building machine that is beneficial to all.
Sometimes the Firm Price Quotation is scary to the client. If that is the case, then we show them a detailed report from a National trustworthy Remodeling magazine called Cost Vs. Value. The magazine compares average costs in the Greater Los Angeles area for (22) remodeling projects with the value those projects retain at resale in 150 U.S. markets.
BEST Techs Contracting Design, Build Remodel is a Home Performance General Contractor Specializing in Healthy, Environmentally Friendly Homes, Utilizing Net Zero Energy and Passive House Standards.
What does this mean for you? A home with better comfort, better indoor air quality, and a safer, more durable home which uses less energy.