Latest / Contractor Business Builder Podcast / Stop Estimating Projects Like It’s 2005

Transcript

Stop Estimating Projects Like It’s 2005 · Contractor Business Builder Podcast

0:00
The real reason you're not making the money you should,
0:03
it's not the clients, it's not the economy, it is your
0:06
estimating system and it's costing you big time.
0:09
Stick with me because I'm about to walk you through a system
0:11
that's helped GC's across the country turn bids into bank.
0:15
Alright, so today we're going to be walking through the exact
0:19
process to a complete estimating system that's going to increase
0:23
your profits, help have a repeatable system that you can
0:26
delegate, and I'm going to be going through what all the
0:29
different components are. So there's three types of
0:31
estimates and then there's a number of different ways to
0:34
incorporate all of these into a streamlined system.
0:37
So the three types of estimates are 1 is a ballpark estimate and
0:40
we're diving into these in more detail about later.
0:43
But essentially a ballpark is just a figure of scale of
0:46
business projects going to cost 100,000 a million or 10 million,
0:50
right? Like what you know, what's the,
0:51
the ballpark that we're working with here.
0:53
Then there's a rough budget. Rough budget is something where
0:56
you've got line items you've working from just your standard
1:00
based pricing, but it's thought quote it's it's you've done your
1:04
takeoffs and it's a it's a pretty solid estimate, but it's
1:08
not 100% drill down. And then finally we've got the
1:11
detailed type of estimate that the, the detailed estimate is
1:14
going to be 1 where you you've tendered the bids, you've gone
1:17
through two suppliers that clients have gone through
1:19
selections. It is very accurate and fined
1:22
tuned estimate. Now if you're providing free
1:25
estimates, you're going to want to know the difference between
1:27
these three because if you are providing A detailed estimate
1:30
for free, you are spending a lot of time and probably getting a
1:34
lot of frustration going through all this work only to that have
1:37
the client say no, it's too much or no, we're gonna go with
1:40
someone else. So I'll be sharing with you the
1:41
process of how we make sure that we use this 3 tiered estimating
1:45
process to guide the client from one step to the next.
1:49
Always be clear of where things are at with that client and help
1:52
them kind of guide them into the sale and build that relationship
1:55
over time. So that when it comes down to
1:57
the representing the construction contract or
1:59
proposal in front of them is really a no brainer option for
2:04
them to move forward with you and your company.
2:06
Now the whole estimating process, it really starts with
2:09
the first consultation that you have with the client.
2:12
This could be a consultation in their home.
2:14
This is typically if you're doing large projects as a GC
2:17
home builds, large remodels, whatever it may be, you're
2:20
probably going to meet the client at their home so they can
2:22
show you A, what their home is like right now and how they want
2:25
to change it or B, go through the plans or the, the design of
2:31
their their new project. So there is a whole process, the
2:34
science behind this in order to get good information and set
2:38
yourself up for success. So before getting to this home
2:41
site meeting, you should have pre like qualifying questions so
2:45
that you're not going to these home meetings and realizing
2:48
later that this is not going to be a project that's going to
2:51
work because the the client is not qualified.
2:54
So just as a side note, they must be qualified before, you
2:58
know, putting in the work. You always want to make sure
3:00
that whatever stage of the process, there's a high chance
3:02
that they're going to move forward with the next stage and
3:04
and you guide them through that. So the first thing that you're
3:07
going to do typically is a walk through.
3:09
This could be a home walk through as far as you're going
3:12
to walk around. They want their basement
3:13
remodeled. They want their home remodeled.
3:16
Let's see your house. Let's see what your plans are,
3:18
whatever needs to get done. If you are a home builder,
3:22
you're going to do like a walk through of their design plans if
3:25
they have designs in place. If not, then you'll probably
3:28
send them a questionnaire of what you know, what kind of
3:32
house you looking for, two-story bungalow, whatever it may be,
3:35
right? So you're going to do some sort
3:38
of walk through and kind of clarify what they're looking for
3:42
and how things are set up. Like I mentioned, you're going
3:45
to have a discovery questionnaire.
3:46
So a questionnaire is a really professional way to get a lot of
3:49
information from a client. And you could go through this
3:51
with them depending on the scale of the business or there's
3:55
something that you could send them for them to do on their own
3:57
time beforehand before the site meeting so that when you get to
4:01
the meeting, you can kind of review it from them.
4:03
OK, you're looking for 2500 square foot home and you, you
4:06
want it facing this way and you want this many bedrooms and, and
4:09
you know, you kind of walk through and just clarify and,
4:11
and Give your opinion on everything from there.
4:14
You're going to want to have some sort of like marketing
4:16
material. It shouldn't be like we're
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sitting down to watch the family vacation pictures and you know,
4:23
they're going to yawn their, their head off as they just
4:25
don't care. But something quick, easy
4:28
brochure or maybe a presentation on on your laptop or tablet or
4:32
what have you, just a quick run through.
4:34
This is our business. These are type of clients who
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work with, here's some of the completed projects that we've
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done before. This is, you know, our, our
4:40
overall process of, of the estimating and the building and
4:44
and whatever. Just to give them a big overview
4:46
and kind of position your company as as professional as
4:49
you've got to process as they're similar to all the other clients
4:53
that you've worked with. And you work with clients like
4:55
theirs and their location building this type of house or
4:58
whatever it may be. So you want to be utilizing
5:01
something like that. You always want to be
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positioning yourself as the expert in the conversation as
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well. So this isn't just menu type
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thing where you go to restaurants like I'll have the,
5:10
you know, double pound beef burger or steak with side of
5:14
potatoes and salad or whatever, right?
5:16
You're not, this isn't like a list of OK, you want this check,
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you want this check. You need to be giving your
5:21
advice of, well, you know, you're, you're looking for this
5:24
size of the house. Maybe have you considered, you
5:27
know, this or instead of having a basement suite, my granny
5:30
suite, maybe 1 detached, you know, secondary dwelling unit or
5:34
something like that, right? So Give your opinion if they're
5:37
getting a kitchen remodel, but you know, what's your opinion as
5:40
far as the best type of countertops or how to knock out
5:43
a wall or or whatever, right? So you want to be positioning
5:47
yourself as the expert in the conversation, not just taking
5:50
down an order of things that they might want from here.
5:53
This is where you will go into a ballpark budget.
5:56
If you're not able to do this on the spot, you need to create,
6:00
you should be able to create a some sort of spreadsheet very
6:02
easily or use your project management software to create a,
6:05
a very quick ballpark budget range for the client.
6:08
So they really early on you can have that budget conversation
6:11
with the qualifying questionnaire that you've had
6:14
with the client. You should already have some
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sort of an indication of like if they are in the right, you know,
6:20
area as far as like ballpark. So you know, what is their
6:25
budget? Is it usually a range of
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whatever may be, so if they're looking for a new home and
6:30
looking for one around 500 to 700,000 or they looking for one
6:33
from like 1 to one and a half million.
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So in the qualifying questionnaire, you will have
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like these big kind of brackets and categories.
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And then the ballpark budget is something a little bit more
6:43
refined, typically working off square foot square footage of
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pricing. So if you're looking to get a
6:50
new home and you know that they want something a little bit
6:53
higher end on the luxury, you could, you could let them know,
6:56
hey, based off of the square footage you, you said and the
6:59
location, you're probably looking at somewhere between 800
7:02
to, to $1,000,000 or you know, 1.2 to $1.4 million for this,
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this new home build they're, they're looking at.
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So you should be able to get that out very early.
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And if they're like, wow, that's like way over our budget.
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We were looking for something around 600,000.
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Then it's kind of like back to the drawing board a little bit.
7:19
OK, you said you want 2500 square feet.
7:22
Are you comfortable with going down to maybe 2000 square feet
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or maybe having, you know, unfinished garage or basement
7:30
or, or not doing, you know, so much like very minimal
7:32
landscaping or, you know, cutting back on certain things
7:35
now so you can still get the home that you want, but maybe
7:39
have room for upgrading later on or or whatever, right.
7:42
So getting that out of the way early on, of course, because as
7:46
much as you want to keep this sale alive, you don't want to
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walk into and doing a bunch of estimating or designing for
7:53
something that's just not feasible.
7:55
And you know that you're not even in ballpark range.
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It's just a bad experience for you because you're going to be
8:00
doing this work for them, bad experience for them because you
8:04
don't want that huge sticker shock when you come back and,
8:07
and, and they're not even close to, to what their budget is.
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So that that's how you use the ballpark budget.
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It's quick numbers back to the napkin kind of stuff.
8:14
You can create a spreadsheet very easily to kind of highlight
8:18
the the big points in a project or create like a ballpark
8:20
template for whatever typical type of projects you do.
8:24
From there for this process, you're going to collect this
8:27
information from them. Your admin person or whoever is
8:31
kind of in the back, back into your business.
8:33
There is going to create a client folder for this this
8:37
client and they're going to present a preconstruction
8:40
service agreement and this home site visit.
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Your whole kind of purpose of it is to guide the client into a
8:48
PCs agreement. So pre construction service
8:51
agreement, you've kind of gone over what they they want, you've
8:55
presented your company, you've you've put yourself as the
8:57
expert. Now you have to let them know,
8:59
OK, next step for us, we can do a more detailed budget for you.
9:04
We can get you into a design with our designer.
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If you don't have a designer, you know, you can just partner
9:10
with the designer or what have you.
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But you need to be looking, even if you're not like a design
9:13
build company, you need to be partnered with design so that
9:17
you can integrate that and solve that problem.
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The first problem for the client is they don't know how much it's
9:22
going to cost. They don't know what you know
9:26
how to do construction, they don't know anything about
9:28
design. They're kind of lost.
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So you need to present the whole package of we're not just the
9:33
builder to contact after you've got everything designed, we're
9:36
going to help you with this design process.
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Part of that is getting PCs assigned.
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So that's the kind of first sale.
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If you want a guide on how to get a PC SA in place and how to
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present that, check out the links in the description below.
9:51
In the description, I've got a link you can get our free
9:54
planner. It's, it's a guide for CSA of
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how to put one together, how to structure it, how to create that
9:59
offer and, and what it, what it will look like essentially.
10:04
So go pick up that resource, click the link in the
10:06
description below. All right, So what is in a PCs a
10:10
package, you are going to include these typical things,
10:13
architecture and interior design.
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So whether they have architectural, you know,
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wherever they're at in the design process.
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If they if they don't have anything in place, then you need
10:22
to get them in touch with your architect, your interior
10:25
designer, But you'll only do that after the design of PCs a,
10:29
because you want to make sure that you are their builder of
10:31
choice, that they're going with you for the PCs A, you know,
10:35
preconstruction and everything like that.
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So architectural interior design is going to be included.
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They're going to include a budget, you're going to include
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scheduling, you're going to reserve them a spot in your
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pipeline. So you have to build this value
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to them where it's like, wow, this builder is super put
10:49
together. This PC SA makes total sense and
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we need to do this right away. Create some urgency and you do
10:56
that with the reserved pipeline spot.
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So with the with that it's like, you know if without this PSA, we
11:04
can't get in your pipeline, we're scheduling projects out
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and we want to make sure that we can get to your project, you
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know on time and that we can flow everything very nicely with
11:13
the scheduling. So with this CSA, we will
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reserve your spot and our production pipeline.
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You need to be able to sell this at the end of the day, and this
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is an easier sale than the full proposal.
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This may seem new to you if you haven't done this before and it
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may seem like, oh, that's gonna be hard to kind of get them to
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into an agreement when we're not even like ready to build yet or
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what have you. The truth is getting them into a
11:36
CSA that is maybe a couple $1000 to maybe ten $20,000 sale,
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right? So it's a lot easier to sell
11:43
them on. Hey, all you've got to be, you
11:46
know, putting into this is we're going to do value add design.
11:50
You're going to know all this stuff, how much it's going to
11:53
cost. We're going to put you in touch
11:54
with our expert designers who we've worked with many times and
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all we need from you is a retainer, you know, 2005, $1000,
12:03
whatever it may be. So you're only selling maybe a
12:05
5000 or $10,000 product. Maybe the full PCs, if you're
12:09
doing like a home build, maybe that's going to cost them 1520
12:12
grand and you'll let them know that ahead of time.
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But you're only going to be charging for services rendered.
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Typically speaking, if you wanted to have more of a
12:20
package, if you do like a certain level of remodels and
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it's like $2500, we give you plans, we give you, you know, we
12:26
do the permits, whatever else, it's you know, you, you
12:30
structure this how it makes sense for your business, but
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you're presenting this as a package for them to purchase.
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It's kind of low level as far as like they're not agreeing to go
12:39
ahead with $800,000 of of home build.
12:42
They're only agreeing to go ahead with like ten $20,000.
12:46
And during this design process, if the feasibility is not
12:49
correct or something out of line, they can walk away at any
12:51
time. They're not held too long term
12:53
contract. They're not, they're not held to
12:55
doing the construction with you. You're simply going through this
12:58
whole design process. So they have everything in place
13:00
and then they can make a decision as far as which builder
13:03
they want to go ahead with. Of course, after working with
13:06
you, if you've done everything correctly and you've kind of
13:09
built that budget for them, there should be no opposition
13:11
for you to then just move into the construction contract and,
13:14
and either builder of choice. So like I mentioned, you can do
13:17
a retainer or flat fee, you know, cost plus pricing, however
13:20
you want to structure that, right?
13:22
So now we're going to get into the actual estimating.
13:24
And can you see how like a lot of builders or remodelers, they
13:27
skip kind of those first two steps of nailing down the
13:31
process of like the walkthrough as well as the PCs.
13:35
A without those two components, it makes all the rest of this,
13:39
you're just a commodity at that point.
13:40
If you're just providing a free budget or estimate for them and
13:44
then hoping they go ahead the project, you are just in line
13:48
with every other builder out there or anybody else that they
13:51
can get ahold of and call for free estimate and they're going
13:53
to be shopping around. They still may do that to some
13:55
degree, but it's less likely. And you're also positioning
13:58
yourself as an in demand builder with a process who solves a
14:02
bigger problem than the other guys who are just doing the
14:04
building part of it. You're also solving the design.
14:07
Even though you are not a design company, You're going to pass it
14:10
off to one of the your your partners in another company that
14:13
does design, but you are structured that way to be able
14:16
to help my client from, you know, the first step to the last
14:19
step. So the next phase of the
14:22
estimating process is the rough budgeting.
14:24
Now, depending on how many leads come in and how your process
14:29
works and how well you are kind of at the sale of the pre
14:32
construction agreement, you may provide a free rough budget to
14:36
them. And this is going to be worked
14:37
from a template. It's going to have a lot of
14:40
standard kind of base level pricing that you can offer as a
14:43
free budget to them or or you could work it into your yes.
14:47
It's totally up to you how you structure that.
14:50
If you are providing the rough budget for three, you've kind of
14:52
go above and beyond. Again, if you're trying to
14:54
compete with other contractors or things like that, then that
14:58
may be an option by kind of giving more incentive up front
15:02
to to continue to work with you or providing more value from the
15:06
clients perspective before you're asking for that PCs A now
15:10
for rough budgeting, you're going to need a project
15:12
management and take off software.
15:13
The three that I like to use is job tread build, exact contract
15:19
form and those are my top 3/4 residential general contractors.
15:24
If you are a commercial contractor, then things like
15:27
Procore is the big, big name and the popular one out there.
15:30
There are other ones as well. Jeff Build I believe is another
15:33
good one and but you'll need a good solid project management
15:38
software that has the takeoff software either built into it or
15:41
a separate software for takeoff software.
15:44
There is Bluebeam was probably my top pick and then there's
15:47
also Square, which is pretty straightforward plan.
15:50
Swift, another great one plans looked really solid as well.
15:53
So you need to get your proper software stack in place.
15:56
You want to then set up a big estimating template.
16:00
So your template should be pretty much as big as you can
16:03
make it because it's a lot easier deleting things out of an
16:05
estimate than it is to to add them in.
16:08
So if you are a home builder, you want to have a, a pretty
16:11
robust home build estimate and then you can just take things
16:14
out like, you know, if they're not having a swimming pool or if
16:17
they're not having a detached garage or, or whatever, you can
16:20
just delete those those sections out of there fairly easily.
16:23
Of course, you could have different, you know, like have a
16:26
really big template and then have like maybe some paired down
16:29
templates for like more basic type builder and stuff like
16:32
that. But at the very least I have one
16:34
big good estimating template to work from.
16:37
And then ideally have additional ones as you build all your
16:41
systems cost codes and price database.
16:43
This is sort of the next step to get cost codes in place.
16:46
So you can do job costing very important as well as just keep
16:49
things categorized and, and, and more organized.
16:52
The price database, there's a lot of resources and a lot of
16:56
these project management softwares have that like live
16:59
pricing built in either from suppliers or from like an Rs
17:02
means or one bill, I believe is is another one through some of
17:06
these other databases. So those are good for materials
17:10
typically, but not so good necessarily for labour costing
17:14
and and specifics like pricing that for you and your business
17:18
in your area. So you're going to want to build
17:19
out your your database and you may be really experienced and
17:23
kind of know the pricing and know the whatever codes and
17:25
stuff like this. But the reason you want to build
17:27
all this out in a systemized way is because the whole purpose of
17:31
this is that you're going to pass this off to somebody else
17:33
eventually in your business. If you're still doing all the
17:35
estimating, you're going to want to hire an estimator or have a
17:38
project manager who can take estimating system and run with
17:40
it and, and get this off your plate, you know, as soon as
17:44
possible and, and focus on more high level stuff besides just
17:48
estimating, which is probably, you know, fresh air for for you.
17:51
But that's why you want to take the time to make this estimating
17:55
process really good. For rough budgeting, you're just
17:57
going to use allowances. So $10 per square foot for tile
18:01
or 5 or 15 or whatever 8. But with the rough budgeting,
18:05
you want to keep the pricing very minimal because this first
18:09
kind of budget you're going to provide for the clients, you've
18:12
done a ballpark, but that's really just a range to sort of
18:14
see if they're in ballpark. The rough budget, you wanna keep
18:18
it low because you don't want to scare off the client.
18:20
You don't wanna come in super high, especially if they're
18:22
gonna get competing bids where it's like, well, your, you said
18:26
1.2 and this other contractor saying they can do it for
18:29
1,000,000. So we're kind of leading towards
18:31
them and we're not sure if we can move forward.
18:33
If if you're saying it's 1.2, even knowing very well that that
18:37
other builder that's quoting 1,000,000 is probably out to
18:40
lunch and it's probably gonna end up costing 1.2 or more.
18:43
And the end, even though you're more correct, you still want to,
18:47
you know, you want to be reasonable, but you want to let
18:49
them know like this is kind of base materials.
18:51
This is what we can build this house for.
18:54
You know, we can come in at 1.1 million or million, but this is
18:58
sort of your baseline. If if you have, you know, want
19:01
more high end finishes or you make changes to this or you
19:05
know, we want more expensive kind of fixtures and stuff like
19:08
that, this price will can potentially go up overtime as we
19:12
finalize the design and the selections, we want to start
19:15
kind of lower. And then you can always add to
19:17
that price. If they're like, you know, we're
19:19
OK with 1,000,000 and then they can see how their decisions are
19:22
driving that price. You will probably end up at 1.2
19:25
by the time you get down to the detailed design, but at least
19:28
the client understands that it's their decisions that have
19:31
influenced the price. And if they want to lower price,
19:33
they have to, you know, accommodate with lower
19:37
selections or different designer or what have you.
19:39
So you and you want to be very clear in your estimate.
19:42
This isn't allowance. One thing that a lot of builders
19:46
and especially newer ones forget is you want to make sure you
19:49
have project management time in your estimate and it should be
19:53
very clear. I like to have it right in there
19:56
so the client can see it. Some people are like, I don't
19:58
want to have management time because other builders don't and
20:00
their clients going to wonder why they're getting charged for
20:03
this. Your markup or your margin,
20:06
however you want to call it there, there is a difference.
20:08
But that markup that you put on top of everything should not
20:11
cover the project management, even if you don't have a project
20:14
manager, because. One day, hopefully soon, you're
20:17
going to hire a project manager and you're going to need to pay
20:19
them whatever it is for to run the project.
20:21
You know, that could be 20304050 more $1000 to manage a project
20:27
for you. You need to have that in your
20:30
estimate. And the way to do this is how
20:31
many hours per day does it take you to manage the project?
20:33
Talking with the client, calling the trades, doing site meetings,
20:37
meeting inspectors, doing your own quality checks, all this
20:40
kind of stuff, right? So is that a one hour, 2 hours,
20:43
3 hours a day to manage a project?
20:45
Make sure you build that into your estimate and then your
20:49
margins as far as your overhead. So things like your your
20:54
overhead should be built into your project too.
20:56
Because if your markup is 15% and you have a 12% overhead for
21:01
your company, you are going to be barely, you're going to be
21:05
losing money essentially because the overhead is a margin,
21:10
whereas the markup is on top of the price and there there's a
21:12
difference. So if you're, if you have let's
21:15
say you're running at 15% overhead, that is considerable
21:19
to a 50% margin. If you mark up your estimate
21:22
15%, your margin is more like I believe 12% or something like
21:27
that. So there, there's a difference
21:29
between those numbers and you, you probably need to be in the
21:32
20% markup range to hit a margin of 15%.
21:36
So really you should be marking up like 25% because you need
21:39
some contingency in there as well as some profit at the end
21:42
of the day. So make sure you're you're
21:44
accounting for that and you've got some contingency or
21:46
miscellaneous. I like to put a little bit of
21:47
miscellaneous neighbor, miscellaneous materials, things
21:50
like that, because as you know, there's always things that go
21:53
unaccounted for, little things that pop up in in a build and
21:58
you don't want to be out of out of pocket for that stuff.
22:01
Also, you want to be able to smooth it out if maybe something
22:05
comes up. That's a little bit of a Gray
22:06
area that technically you could do a change order for the
22:08
client, but it's only like 1000 bucks a year or a couple 100
22:11
bucks here. And it's like you've got that
22:13
missed budget to take care of it without, you know, doing a whole
22:17
bunch of different change orders for the client.
22:18
So after you completed that, the rough budget and provide that to
22:21
the client, now they have a good idea and you've got past any
22:24
sticker shock, any, you know, changes or things they may be
22:27
asking for, you'll now move into the detailed budgeting.
22:30
By the time you get to the detailed budgeting, this is
22:32
where you're definitely need a pre construction service
22:34
agreement in place so that you're getting paid for your
22:36
time being put it in. It'll take you hours to go
22:39
through selections, changes, whatever else that may go into
22:44
the detailed budgeting process. So first thing will be tendering
22:48
bid requests. So you're going to be sending
22:49
out the request to your subcontractors and they should
22:54
be templated. Should either template or
22:56
documents or using your project management software have
22:58
templated wording that gets sent out so that every subtrade is
23:03
knowing is getting the same information.
23:05
But also that you have standards of practice so that when you
23:09
send it to maybe somebody new, they know this is the level of
23:12
quality that you want. This is the way that they should
23:15
be doing their project. Are they including materials or
23:17
not including the materials, All those kind of things.
23:20
So everyone is giving you bids on the same information and
23:25
you're not getting all this, you know, stuff all over the place.
23:28
As as far as selecting bids with subcontractors, if you get the
23:33
standard sort of like 3 bids, you definitely want to be going
23:38
kind of mid range. The reason you don't want to go
23:40
with really low bids is that if that contractor for some reason
23:44
can't do the project or something happens with that
23:47
contractor, you've now submitted a price to your client that
23:51
includes that low bid. But now you need to maybe hire
23:54
someone else. It's gonna cost more and now all
23:56
your margins are gone essentially.
23:58
Or possibly you're losing money depending on how much of AA
24:01
range of pricing that there is. So you typically want to choose
24:07
somewhere around the middle bit or at least not have the bottom
24:10
pricing. Even if you plan to go with the,
24:13
the cheaper, you know, bid that you get, you want to make sure
24:16
that you've you've added additional markup or on top of
24:20
that so that if you do go with a different contractor, you have
24:23
that room and not just having to go with that, that, you know,
24:26
bottom price, then you're going to get supplier pricing.
24:29
This is going to be based off selection.
24:32
So the clients are going to go through the design process.
24:34
They're going to say you know we want this kind of siding, we
24:37
want this type of decking, we want this type of flooring,
24:40
whatever it is, and you're going to need to get pricing from your
24:43
supplier so you can build that into your estimate and get very
24:45
specific with the costs of of the project selections as well.
24:50
This is typically going to go through the designer by you will
24:54
probably have some involvement with selections from pricing
24:59
standpoint as well as as well as like reaching out to suppliers.
25:02
Like like I mentioned earlier, upgrades are always great.
25:04
So I like to have sort of a checklist that you provide to
25:08
clients of upgrades that they make.
25:09
Consider this could be things like soundproofing walls, maybe
25:13
in floor heating, astronomical timers where lighting outside,
25:17
maybe it's like landscape stuff. So whatever may be have a list
25:21
of things because this this can greatly increase the the
25:25
satisfaction or the experience of the completed project when
25:29
clients do get these upgrades. But it's something that they may
25:32
not have thought about or they may not, you know, initially
25:35
want, because it's like they're not sure about pricing, but come
25:38
later on when they're, you know, getting this and that and this,
25:40
they may want to upgrade stuff in their project, which is good
25:42
for everybody. Site testing and permitting.
25:44
So during this detailed budgeting stage, you, the design
25:48
should be at a place where you can send it out for permitting.
25:51
And then also you want to do any site testing.
25:53
So if it's, you know, like if you need to do any testing for
25:56
geological or maybe asbestos or whatever may be, you want to get
26:01
that done during this phase so that you know what it's going to
26:04
cost if, if there are issues that come up.
26:06
And then also, you always want to double check your accuracy.
26:09
So ideally you're going to have somebody else look at your
26:13
budget for you. So you'll have gone through the
26:15
estimate. You know everything.
26:16
It's always good to get a second set of eyes.
26:18
This could be a project manager, could be senior person or
26:21
estimator, your company or whatever it may be.
26:24
Get a second set of eyes on the estimate because there's
26:27
probably things that they forgot or you forgot or whoever put it
26:30
together. It's very common that you just
26:33
don't see it because you, you're in the, you're in the weeds, if
26:35
you will. Someone new and fresh would be
26:37
like, Hey, we should word this differently.
26:38
Are you sure about this? That number looks out of place
26:41
and what have you to double check the accuracy.
26:43
Now we're going to move on to the proposal.
26:45
So you've, you've done all the, the legwork, the design is done,
26:49
the final detailed budget is, is done.
26:52
Now you need to be able to propose and sell the actual
26:55
construction contract and move it into the, the real, you know,
26:59
nuts and bolts of, of what, what we do as builders to, to
27:02
actually build the project. So some things you want to keep
27:05
in mind for your proposal and the process is you definitely
27:08
want to have some sort of cover letter that showcases your
27:11
company shouldn't just be, you know, a list of of your your
27:15
estimate that you send to the client.
27:16
Have something more for the cover letter letter.
27:19
As far as you know, a little bit of marketing stuff, a little bit
27:23
of, you know, thanks for asking us to bid on the project.
27:26
This is the final, you know, budget that we've come up with,
27:29
whatever it may be, but it should be more give it that
27:32
Polish professional look. You always want to be doing the
27:34
proposal in a live meeting. Do not just e-mail an estimate
27:38
over to a client and then hopefully hear back from them
27:41
because that's a good way for them to ghost you or for them
27:43
just to take forever to get back to you, right?
27:46
As well As for them to say like, oh, we're not going to move
27:49
ahead of it. We're going to go with someone
27:50
else or this is a bad time or whatever, right?
27:53
Getting an e-mail like that, you have no idea what's happening or
27:56
why they chose not to move forward with the project,
27:58
typically speaking. So live meeting you're much
28:01
better off to be able to walk through your estimate of like
28:04
these are all the line items. This is the cost of this and
28:07
that. If you know, if you have
28:08
detailed costing in there and you can get their live feedback
28:12
of, you know, if they say it's all this is, you know, too high
28:15
of a price or we're not sure about this or that, you can walk
28:19
through it, you can talk with them, you can get, get some
28:22
feedback from them on the estimate and, and which way
28:25
they're going. And you're in a much better
28:27
position to then sell the construction contract and move
28:29
forward with them. If you can do it in a live
28:31
meeting. Multiline pricing.
28:33
I know there's this boat, two sides of the coin as far as like
28:36
we just give one final price. Your project is going to cost,
28:40
you know, 2200 thousand dollars or $500,000.
28:44
Or do we do line item by line item with, you know, all the
28:47
costs in there? It's kind of up to you.
28:50
For me, I, I prefer more open book style of pricing and I find
28:54
that the customer is going to appreciate that more and have
28:57
more trust. Of course, this does open the
29:00
book for them to kind of dive into things and, and start
29:03
asking about specific pricing. But if you've done your due
29:05
diligence, you have like present yourself in a professional
29:08
manner, I find you'll attract clients and you'll be able to
29:11
work with clients who are less concerned about individual small
29:14
pricing and more about the project and the experience.
29:17
And yeah, they may still have pricing concerns, but they're
29:20
not going to want to dive into every little thing, right?
29:22
But it does build a lot of trust when you can at least have the
29:25
big sections of your estimate priced out individually instead
29:29
of just one solid price at the bottom.
29:32
You always want to include the plans and the schedules with
29:34
your budget. So you shouldn't just have an
29:37
estimate by itself and send that off or just show that, right?
29:40
You want to have the plans and the schedule so that they
29:43
realize that this is a full project.
29:45
This isn't just a numbers thing. There's a schedule, there's
29:48
there's plans to design. It all comes together and you as
29:51
the builder are there and the one stop shop facilitator that
29:55
can see the the entire picture and help guide them to that
29:58
final product of the beautiful home or office space or remodel,
30:03
whatever is is that you know they're looking to get done on
30:07
your proposal. Make sure you include your
30:08
qualifications and any warranty. So are, you know, your builders
30:12
license if you're part of any Chambers of Commerce, if you've
30:15
won any awards or whatever it may be warranty.
30:19
Not all the nitty gritty, but like you have a one year
30:21
warranty on workmanship, five years on on foundation or
30:25
roofing or or whatever, right? So just a couple of line items
30:29
that you include a warranty. This is how long.
30:31
These are the kind of the big individual things that that do
30:34
get a warranty to give them more trust and and just make the
30:39
decision easier for them. And then finally, you're going
30:41
to want to have inclusions and exclusions.
30:44
So what is included is permanent costs included is whatever it
30:49
may be. You want to be very clear, like
30:51
you know, all materials, what is not a what, what is not included
30:55
in this, What is excluded, You know, that could be city
30:58
upgrades if they need new sewer or water or electrical, you
31:02
know, any kind of stuff from the city, whatever it may be.
31:05
We've got, of course, all this stuff templated and built out.
31:09
If you're interested in in getting like this high level
31:13
systems and everything all documented and build out for
31:16
you, reach out to us is what we do.
31:18
We help contractors get really polished, really refined with
31:21
all their systems that have a great process that's high
31:24
converting and brings in the right type of clients.
31:27
But this is what you're going to want to include on your
31:30
proposal. All right, So at this stage,
31:32
you've essentially moved from getting a new lead to the whole
31:36
process of going through the budgeting from rough to to
31:41
detail to PCs agreement to moving them into construction.
31:44
Now I'm going to be sharing with you big mistakes you want to
31:46
void to make sure that you're not getting hung up or losing
31:50
money on a project as you go through that whole process that
31:53
I just showed you. So one thing which I mentioned
31:56
kind of earlier is overestimating the rough budget.
31:58
So you don't wanna go over estimating on a rough budget and
32:01
you will tell the client this is a rough budget.
32:03
This is our best kind of scenario at this point as we go
32:07
through this elections, the design, the, you know, getting
32:11
suppliers quotes and getting quotes from our sub trades and
32:13
everything. The, the budget will fluctuate
32:17
up and down and could, you know, change 510% possibly,
32:21
potentially even more depending on on how things go and, and
32:24
choices you make and all this kind of stuff.
32:26
So we want to make sure that that initial rough budget is
32:29
fairly low, very basic, and you want to communicate that as far
32:32
as expectations go, like this is our basic budget.
32:35
This is the price as of now. It'll, you know, can fluctuate
32:38
up and down, but overtime, typically as we get more prices,
32:42
this, this could potentially go up.
32:44
So we want to do that because you can scare people off very
32:46
easily and then it puts you back in that competition of like
32:50
pricing, pricing wars instead of being, you know, getting the CSA
32:53
and being their preferred builder to design and and budget
32:56
their project with waiting to system, systemize and delegate.
33:01
So this is a huge mistake. You need to build a system
33:04
around this right now, today, tomorrow, this week, as soon as
33:08
possible. Again, if you need help with it,
33:09
reach out to us. You need to build a system so
33:11
you can delegate it because you will hit the ceiling.
33:14
You can't manage projects, do estimating, do marketing,
33:18
budgeting, talking with clients, checking financials, all this
33:21
stuff. As a business owner, you will
33:23
never grow. Maybe you can build 123 homes a
33:26
year or do a few larger projects or what have you.
33:28
But you need to build a system around this first, to help
33:31
yourself to to be able to do your job better if if you're
33:34
still feeling all these roles in your business.
33:37
But second, so you think you can start to delegate it.
33:39
And the sooner you get a system in place, the sooner you can
33:42
start to improve it to a point where you can easily hand this
33:44
off to somebody else and delegate it to implement on your
33:47
behalf. Winging labour, another quick
33:49
way to lose money. You may be really good at like
33:53
knowing like, OK, this kitchen remodel is gonna take, you know,
33:56
the carpenters, whatever, 20 hours to install cabinets or 10
34:01
hours to, to, to whatever. Do the, the demo or whatever may
34:06
be. Really think it through because
34:07
it's very easy to wing labour and then often go over because
34:11
you forgot something or didn't think it through.
34:13
I like to do a mental picture in my head of like, OK, guys got to
34:16
show up with site. They've got to unpack all their
34:19
stuff. They've got to, you know, figure
34:20
out the plans, they've got to start getting into stuff.
34:23
They gotta put up their their site protection, whatever it may
34:26
be, right? So you're going to lose a few
34:28
hours there. Then it's like they've got to,
34:29
you know, pull out the cabinets, take the packaging off, set it
34:33
up, check the walls, level, whatever, right.
34:35
So just kind of walk through and figure out how, how long is this
34:39
going to take? And if you need to ask someone
34:42
who's there and doing the job. If you've got carpenters or
34:45
foreman or project manager, they may be better suited to know how
34:49
long something's gonna take because they're not as invested
34:52
in the business and they don't have your mindset of like, get
34:56
shit done as soon as and quick as possible.
34:58
And how you maybe did it 10 years ago or 20 years ago when
35:01
when guys could fly through it. It's a different world now.
35:04
You have different employees. Stuff happens at a different
35:07
pace, right? So getting someone who's closer
35:09
to the front lines to just get a double check on, on labour time
35:13
or cost may be very helpful and will keep you from winging it
35:17
and losing money. So no small project pricing.
35:20
You should have kind of tiers of projects and a small project to
35:24
you is, you know, could vary by the company.
35:27
It could be 20,000, it could be 200,000, it could be 2 million,
35:30
whatever that small project kind of folded, you need to be
35:34
charging more for the project based off that threshold.
35:38
So if you are a home builder and your typical home build is
35:41
$1,000,000, if you get a project or build that's less than let's
35:45
say $700,000, maybe that's a small project and you need to
35:49
increase your, your markup by potentially, you know, 5% or or
35:54
whatever it may be. Because small projects still
35:57
have a certain amount of overhead and just management no
36:00
matter what size of the project. And you also want to be more
36:04
competitive on the larger typical projects than you do on
36:07
the smaller projects just to kind of help you stay clear of
36:13
having being that small project builder, builder take it on too
36:16
many small projects, being busy with that and not being able to
36:19
have room for larger projects that that come along.
36:22
So definitely adjust your markup pricing based off the size of
36:26
the project. If it's a really big project
36:28
they really want to get, maybe you can thin your margins a
36:30
little bit, but don't go overboard.
36:32
You should have kind of your base pricing that you're
36:34
profitable at. And then if you have like a
36:36
small project threshold, anything below that at an extra
36:39
5%, we didn't percent to the markup.
36:42
No secondary review. So I mentioned that as far as
36:44
double checking it, you should be double checking yourself, but
36:47
also make sure you have someone else in the company or that you
36:51
trust to double check and review the estimate together.
36:54
Quick 10 minutes review is all you really need for someone else
36:57
just to get a second set of eyes on it.
36:58
Make sure nothing's forgot or your pricing is an outlook.
37:01
No risk assessment, very poor. I'm a, I'm a culprit of this.
37:05
I, I like, I'm an optimist. I like to think that things will
37:08
go well and everything's great. But when in reality, shit comes
37:11
up and then things hit the fan and you definitely need to be
37:15
thinking forward of what are the risks on this project?
37:19
You know, is it the clients? Is it the location?
37:22
Is it that maybe we haven't done this type of build before?
37:25
Maybe we haven't used this material before?
37:28
Whatever it could be, right? So if if you identify a risks
37:31
like excavation is always risky, you never know what you're going
37:34
to find under under the soil and things like that.
37:37
So what are the big risks here? And have you mitigated that in
37:40
your estimate If something comes up either with an exclusion
37:44
signifying, I like to put it right in the line item allowance
37:48
or risk, like just in full capitals risk, whatever it may
37:54
be. And you don't want to overuse
37:56
this where you scare off the client.
37:57
But at the same time, if you can identify risks in the, in the
38:00
client's project and no other builder, if they aren't getting
38:03
competing bids has brought up that risk, You look like the
38:07
expert and the you, they'll feel more comfortable going ahead
38:10
with you because you've identified it and you brought it
38:12
to their attention that, hey, professional opinion, this is a
38:15
potential risk on your project. And you know, instead of having
38:18
that conversation later when it comes up, we've identified it
38:21
now. And then finally, outdated
38:23
pricing, especially on larger projects or home builds, if
38:27
you've got a lengthy process of design and then planning and
38:31
permitting, and they may not be able to start right away.
38:34
The pricing that you give them now will be different from a
38:39
year from now when maybe they're ready to move ahead with the
38:42
project or six months or what have you.
38:44
And if you're basing your pricing on the project you last
38:46
year and now you're, you're, you're, you're projecting ahead,
38:49
the pricing, you know, in six months or one year from now when
38:52
they start to build, that's going to be vastly different.
38:56
And you could be out 1015% depending on fluctuations and
38:59
price. So you have to be able to be
39:01
aware of that and not be a using outdated pricing, but also be
39:06
thinking of the future of like is there potential in the
39:09
pricing could rise? What is typical?
39:12
How much do I expected to rise because I can quickly eat into
39:14
your profits if you are pricing on outdated pricing.
39:19
So now you've got a complete estimating system.
39:21
As mentioned before, check out the links in the description
39:24
below. There is a free piece PCs a
39:28
preconstruction agreement guide to help you build out a
39:31
preconstruction agreement offer for your company, as well as
39:34
some free estimating templates to do with the the home
39:37
walkthroughs and and just building out your your line item
39:40
estimating templates. So tons of value there.
39:42
Go click through the links and get those for yourself.
39:44
I'll see you on the next video.