Latest / Contractor Business Builder Podcast / Stop Losing Money on Estimates – Protect Your Profit Every Time

Transcript

Stop Losing Money on Estimates – Protect Your Profit Every Time · Contractor Business Builder Podcast

• 0:00
  Here's a hard truth. Most construction profit leaks
• 0:03
  happen before you even start the job.
• 0:05
  If you want to protect your bottom line, you need to master
• 0:08
  these five areas of estimating. Let's break them down step by
• 0:11
  step so you never have to work for free again.
• 0:14
  And so the first area that we're going to talk about is terms,
• 0:17
  inclusions and exclusions. So this is something
• 0:20
  specifically that's going to go on your proposal, your estimate,
• 0:22
  it's going to include, you know, what's the terms of this this
• 0:25
  estimate, what's included, what's excluded.
• 0:28
  I'm either you sneak peek behind the scenes of an actual template
• 0:31
  that we use and line items that you can plug and play right into
• 0:35
  your proposals. Let's go all right, so I can be
• 0:38
  walking you through some specific terms, inclusions,
• 0:41
  exclusions, things like that you can put in your proposals.
• 0:44
  So I like to have a little, you know, verbiage at the top,
• 0:47
  ongoing trust and thuggery, professionalism very important
• 0:50
  to us. You know, just some nice verbage
• 0:52
  there. You always want to say what what
• 0:55
  it includes. So if you have any warranties
• 0:57
  manufactured for dual materials, pretty calm weekly project
• 1:01
  updates, emails, if you've got a client portal, anything you can
• 1:05
  kind of use to differentiate yourself or things you already
• 1:08
  doing, but you want to highlight to the client, make sure that
• 1:11
  that's included. Because the more stuff again,
• 1:13
  details matter, the more more details and things that they see
• 1:17
  that they get as far as service or whatever in the in the
• 1:21
  proposal, the better. All materials labour supervision
• 1:24
  is typical. Any qualifications if you got if
• 1:27
  you have certain licenses, if you want awards, if your
• 1:30
  certifications, your, you know, liability insurance, if you have
• 1:34
  a work safe, you know, if you're registered to work safe or
• 1:37
  workers comp or whatever, put it in there exclusions.
• 1:42
  So some common ones are any environmental issues, so
• 1:45
  asbestos, mold Rd. etcetera, etcetera, structural issues
• 1:50
  from, you know, original build or previous renovations.
• 1:53
  If there's, you know, their foundation is crap.
• 1:56
  You know, it's not your not your issue, right?
• 1:59
  I mean, you'll, you'll fix it, but it's going to cost like some
• 2:02
  money. Any city service upgrade.
• 2:04
  So if they need to upgrade their sewer or water or whatever for,
• 2:08
  you know, the city because you've triggered some sort of
• 2:10
  threshold with, you know, model or if you're, you know, building
• 2:14
  new home or something like that. And those aren't included, then
• 2:18
  you want to specify that specifically as well as building
• 2:21
  permits. Typically speaking, I don't
• 2:23
  include building permits on a proposal.
• 2:26
  That's just an expense that would get either get paid by the
• 2:28
  client or forward it to the client.
• 2:30
  And you don't want your estimate, you don't want to
• 2:34
  include a whole bunch of stuff, your estimate that's not really
• 2:36
  tied to it where it's going to make the budget look larger than
• 2:42
  it needs to be. So have your exclusions in there
• 2:45
  terms and conditions, you know 30 days is typical for it being
• 2:49
  valid. If it's beyond that, obviously
• 2:52
  you may have to adjust the pricing allowances include
• 2:56
  taxes, cost over allowances will be additional.
• 2:59
  So with a rough budget you're just kind of working off a lot
• 3:02
  of allowances because you don't want to go through the whole
• 3:04
  selection process if the project is not feasible.
• 3:08
  Later when you go into a drill down and more detailed type
• 3:11
  budget that's when you will have less allowances and and have
• 3:15
  specific you know supplier costs for selections.
• 3:18
  Any changes or alterations change the scope of work, things
• 3:23
  like that. Materials purchase.
• 3:25
  So if you've ever had this with a client where you bought a
• 3:29
  bunch of materials and of course there's always extra because
• 3:31
  you're going to count for waste and things like that.
• 3:34
  And the clients asking like, can I keep those two by fours?
• 3:36
  Can I, can I keep those, you know, five extra boxes of
• 3:39
  flooring or what have you, like maybe leave one extra box of
• 3:42
  flooring on site so they can match your later, but material
• 3:46
  gets returned and it's not, you know, the clients material, it
• 3:50
  is the your, your you as the contractors, your material and
• 3:56
  same as subcontractors. So just specifying that deposit,
• 3:59
  what to expect as far as you know, what's how much deposit
• 4:03
  are you going to need before the project get started, final
• 4:07
  invoice, how that works over to accounts.
• 4:09
  Unless of course, when you actually have like your
• 4:11
  construction contract and you move into the construction
• 4:13
  stage, you're going to have like a lot more details and
• 4:18
  stipulations and all those things.
• 4:19
  But it's good to have at least the basics on a proposal so that
• 4:24
  the client knows what the terms, what the conditions are,
• 4:28
  include, exclude, all that kind of stuff, right.
• 4:29
  And then just a little thank you at the end.
• 4:31
  So that's about all there is to it for this.
• 4:33
  Of course, you can have a lot more.
• 4:34
  And what you want to do is if if you ever had an issue on a
• 4:38
  project that's come up and it's been a really big discrepancy,
• 4:42
  maybe that that shouldn't set off light bulbs, that maybe I
• 4:44
  should put something stipulated in my either the contract or
• 4:49
  the, you know, terms and conditions on the proposal so
• 4:52
  that it's more clear from the beginning.
• 4:54
  And that's how you can kind of build really robust and, and I
• 4:58
  really good proposal that's going to protect you in the long
• 5:00
  run. And just be really clear with
• 5:01
  the client as far as you know, what's all included, what's not
• 5:04
  included and the terms. Alright #2 here is details
• 5:08
  matter. If you've got two different
• 5:10
  proposals, yours and your competitors, and you have more
• 5:13
  details, even if the line items are the same, the pricing is the
• 5:16
  same, the client is going to be more inclined to go with you
• 5:18
  because details help provide trust.
• 5:21
  It makes you look professional and it also outlines and
• 5:24
  protects you of more stuff because there's less ambiguity
• 5:28
  as well as just less variance and it gives you a much more
• 5:32
  professional manner. So if you want a high level
• 5:35
  template for estimating that has, you know, a lot of detail
• 5:38
  on what what I'm talking about, check out the links in the
• 5:41
  description below. We've got free estimating
• 5:43
  template stack that you can go and download for yourself.
• 5:46
  Use, copy and modify whatever you like.
• 5:49
  So go click the links below and go get that for yourself now.
• 5:52
  So #3 to protecting your profits in an estimate is risks.
• 5:56
  You need to be very clear what are the risks and account for
• 6:00
  them. And you also want to be I put
• 6:02
  risks specifically on actual estimates or proposals so the
• 6:06
  client can see them. If you know, excavation is going
• 6:09
  to be tricky because of the area or it's a very old house, maybe
• 6:13
  there's a challenging approach to the property, whatever it
• 6:17
  could be, if, if it's something specific to their project,
• 6:20
  outline it as like risk item, you know, whatever.
• 6:24
  And this way, at least you're setting that expectation, you're
• 6:27
  letting them know it makes you look professional because you're
• 6:30
  telling them again about, you know, the risks and letting them
• 6:34
  know more details and more information than than maybe a
• 6:36
  competitor who's just trying to make everything sound like, oh,
• 6:39
  it's easy projects going to go smoothly and everything.
• 6:42
  You don't want to scare the client, but any good client is
• 6:46
  going to understand that by the by you being the professional
• 6:49
  and identifying risks for them, you are helping them and just
• 6:53
  creating a more realistic picture of what it's going to
• 6:55
  take to complete their project. Are there risks that you don't
• 6:58
  want to put on the estimate that you want to take into account is
• 7:01
  like, is this a picky client? Is this maybe a very, you know,
• 7:04
  is, is transportation to the property, like traffic gonna be
• 7:08
  an issue? Or maybe it's on, you know, the
• 7:09
  top story of a high rise building or whatever it may be,
• 7:12
  right? So always make sure that you're
• 7:14
  identifying those risks and accordingly putting that into
• 7:18
  your proposals to protect yourself, right?
• 7:21
  Area #4 is expectation. So you want to set expectations
• 7:25
  with the client early on. This is not expectations as far
• 7:29
  as necessarily like the building part of that that you'll get to
• 7:32
  more later in the preconstruction, you know, area
• 7:35
  or even as you know before you start the project.
• 7:38
  These expectations are expectations on you know,
• 7:41
  accuracy of the bid. If you're providing just a rough
• 7:43
  budget, let them know this is you know within 5 to 10%.
• 7:47
  If they are starting the project or your reconstruction, you can
• 7:50
  let them know. Hey, this is you know, going to
• 7:53
  be the cost. We suggest that you have
• 7:55
  financing available or money available for maybe an
• 7:57
  additional 5% as contingency because with any build there's
• 8:01
  things that may come up. Not that we plan to, you know,
• 8:04
  go over budget obviously, but just knowing construction,
• 8:07
  there's, there's things that can come up that's good to have, you
• 8:10
  know, some extra money for anything from, you know, the pre
• 8:13
  destruction service agreement. So if you have that in your
• 8:17
  process, let the client know this is a rough budget.
• 8:20
  The next step is to have a, a construction through pre
• 8:23
  construction service agreement signed before we move into the
• 8:26
  drill down budgeting or whatever.
• 8:28
  So just always be setting expectations and letting the
• 8:30
  client know what's coming next. And this will help protect you.
• 8:34
  All right #5 before you get started on a project, you want
• 8:37
  to verify. Verifying is very important.
• 8:40
  So things you want to verify with exploratory demo.
• 8:44
  So this could be opening up a wall, you know, just doing a
• 8:47
  small patch or whatever afterwards.
• 8:48
  But if there's some structural issues or cracks or maybe
• 8:52
  there's potential that there's been water damage and there's
• 8:55
  mold, things like that. You definitely want to do a
• 8:57
  little exploratory demo if you need to before you start the
• 9:00
  project so that you can identify those additional issues with the
• 9:04
  job and let the client know that to expect that they may have to
• 9:08
  do some remediation for mold or get some asbestos testing.
• 9:11
  You know, if, if they have, if you have to do asbestos
• 9:14
  remediation, that could be 10s of thousands of dollars
• 9:18
  additional for their project. And you want to know that before
• 9:21
  you're going in so that you can account for it before you know,
• 9:24
  it becomes an issue and you got to stop production and, and you
• 9:27
  know, get all this stuff done in the, in the in the meantime,
• 9:31
  other things could be geotechnical.
• 9:33
  So getting some geotechnical testing for maybe a, a property
• 9:39
  or if you're doing some foundation work on a remodel, a
• 9:42
  new home build, whatever it may be, but you want to verify ahead
• 9:45
  of time. So now that you know how to
• 9:46
  protect yourself on a proposal and going into a project, you're
• 9:49
  going to want to check out this next video on how to create high
• 9:53
  value, high converting proposals, What to have on your
• 9:56
  proposals so that it's easier to sell.
• 9:58
  It sets you above the competition.
• 10:00
  So go check out this next video on proposals.