Contractors. Architects & Engineers - Articles & Advice. Residential Architect - home architect, hiring, costs, & fees. General Contractors, Remodelers, Specialty Contractors Business Help. Estimating Training for Construction. An accurate estimate is the first step in selling and building a profitable job. When you know how to estimate a job properly, nothing is forgotten. In these construction estimating training classes taught by Michael Stone, you'll start with a small job (under $12,000) and build skills as the jobs become more complex ($1.2 million remodel). Michael has taught estimating to contractors in 44 different states and Canada. The Profitable Estimating class is 12 hours of training, but it isn't just videos. The ability to estimate a construction job is a skill developed with practice.
The Profitable Estimating training classes are available in DVD format for viewing on your computer and are also available as an online estimating class. If you prefer the DVD, you can receive a username and password to access the online classes while you wait for the DVD package in the mail by sending us a note after purchase. The DVD and the online class are identical. Labor is so difficult to estimate.
FAQ's. Applying Markup to Material Costs. I'd like to share a letter from a contractor trying to put the pieces together and make his business work. You talk about the importance of having a consistent markup. Let's say I have a small paint job that requires two gallons of paint. The paint costs $30 per gallon and my markup is 1.4. That would be $24 markup. It takes me five minutes to order the paint on the phone, and five minutes to pick up the paint. I can justify the markup for the time involved. If I have a job that needs 15 gallons of paint, then that's $450 for paint and a markup of $180.
If the customer purchased their own paint to save money, yes, you should turn down the job. Remember, you're in business to provide a service and make a profit doing it. I only give advice, you're in charge of your own business, but I do believe it's important to use a consistent markup. If your markup is 1.4, add up the total labor and material cost including paint and multiply it by 1.4. Watching Your Client's Budget. A reader sent a note last spring explaining a situation with a potential client. I'm sharing this because it's a fairly common occurrence and it isn't always this obvious. "Our company has many of your products and they have all helped grow our remodeling business.
Over the last 10 years in business I have been fortunate that I have not dealt with Construction Loans and 203K Loans very often. Most of our customers were able to pay cash or get a home equity loan which does not link our company to the bank. Currently I have a job I have quoted originally at $118,000 after establishing the clients 'budget'. This client could not receive financing for this amount, but can receive $75,000. Everything sounds great right? To end this long message, we have plenty of work we are comfortable doing at this time. It's a good thing he had plenty of work, because this is a high-risk project. Always remember that your contract isn't with the bank or lender; it's with the building owner. Hiring A Contractor - What You Need To Know. Last weekend our friend Bob Youngs showed us an article published in the June 2016 issue of Consumer Reports. Portions of the article are available online, although the printed version is more detailed.
The article is written as advice before hiring a contractor, and some of the advice is spot-on: Bring your contractor into the project during the design phase (if working with an architect). "An experienced GC will help you head off things you can't afford before you pay for finished drawings. "Get everything in writing.Changing your mind after the work is underway is the biggest mistake homeowners make, and it can be the costliest, too.Deal with your general contractor, not your subcontractors. "Engaging the subcontractors directly often creates conflict. " Unfortunately, there's a fair amount of advice that's just plain wrong. Wrong Advice: Always Negotiate A contractor who knows how to price their work properly won't have room to negotiate. Estimates Pricing. Markup Isn't Profit, or How Much Should a Contractor Charge? We realize that many of our website visitors aren't contractors, they are the clients of a contractor.
They are generally either looking for help with their Cost Plus project that's gone wrong, or they're trying to figure out if the price they were quoted (or charged) is reasonable. They frequently confuse Markup with Profit, and we want to set the record straight. Markup isn't profit. Markup is a general term that applies to the overhead and profit that any business needs to realize if the business wants to stay in business. If your contractor has a 1.50 markup (which is reasonable for a remodeling contractor), that means that if the estimated cost for a job is $10,000, they'll multiply the $10,000 x 1.50 and arrive at a $15,000 sales price. Now many people who know little about business and even less about the costs of running a business will say, "Oh, look at that crook. Your contractor gets $5,000 to pay their overhead expenses (which includes salary) and make a reasonable profit.
Construction Insurance Repair Work. A coaching client shared two recent experiences while doing insurance repair projects. The first experience shows that sometimes it can go well: A friend/client of ours recently had two disasters in her two properties: water damage in one and fire in another. She called her insurance company first and they drafted an estimate and issued her a check pretty quickly.
They then told her to find a contractor so she called us. We looked at the numbers from the insurance company and immediately knew that they were drastically low so we explained to her that we would price the project and she would have to take our estimate back to the insurance company to see if they would cover what it would actually cost to make the necessary (extensive) repairs. She was really nervous about this, believing that they had already determined how much they would cover but we assured her that they should be responsible for the full costs.
They issued her a check for the difference on the same day! Construction Contract Allowances. A recent note: "I have both of your books but haven't seen a good plan or section on how best to work allowances with a client. Currently we show our cost as the allowance on our contracts, estimates and design agreements. What happens when they go over the allowance, or under the allowance? If they go under should we refund them cost + markup? If they go over should we apply full markup to the overage? I have ran across this problem on every project we have done and I'm still without a good solution or verbiage to include in my contracts, help would be appreciated. " There isn't one right way to handle allowance items that works for all contractors and all clients. Allowances are a dollar amount that you include in a construction contract for a particular item. Allowances need to be clearly defined in your contract, and that includes how you'll handle any overage or underage on the allowance amount.
Here is some possible verbiage that defines allowances: We Want to Get Three Bids. Our family went through a time when we did a lot of business with a local auto body shop. That's when we discovered that we didn't need to get three bids; we could choose the shop we trusted. It was perfect; we knew them and they knew our cars. Too many homeowners believe they need three bids for their project. They consider it due diligence. They've been told to get three bids by their architect, their banker, or their Facebook friends. The intent, of course, is to compare proposals so they can make the best decision.
Comparing three bids assumes they're capable of reviewing multiple quotes for their job and picking the one that is the best deal. All contractors are not the same, and no two contractors will build the same job. There is no uniformity in the construction business other than maybe 2" x 4" boards and even they differ from one manufacturer to the next. It makes sense for any owner to continue meeting with contractors until they find one they are comfortable with. Construction Pricing and Sales. When it comes to pricing your jobs, you need to keep it simple, especially if you want to make the sale. This contractor didn't keep it simple: "I met with a contractor today and have questions as to whether or not I should hire them. This contractor has multiple fees.
Is this normal charging? This contractor wants to do time and materials and mark it up 20%. This contractor also has a separate fee for project supervision, a separate fee for office administrator, plus a separate fee for Msc labor, and a separate fee for carpentry work. And an hour fee for his supervisor. Also, I asked if I found a subcontractor with a less expensive bid, how would they approach it. He also could not give me a job completion time and end date. Please let me know what you think and, If possible, offer advice. " My advice was to find another contractor. I wonder how much time it takes to create the invoices for a pricing structure like this? Give them that confidence. Client Wants the Lowest Price. Some clients want the lowest bid for their project, and nothing else matters.
Forgive me while I paraphrase John Wayne, "They are just ignorant, they don't know any better. " It's your job to try to educate them Your first response upon discovering that they only want the lowest price should be to find out why. They might tell you, "I just want the cheapest price I can get. This job will get done the same no matter who does it, so I'm keeping my costs down. " They believe all contractors will build the same job, the same way. Another response you might hear is: "I am selling this place as soon as the repairs are done and I don't want to put any more money in it than I have to. " There are all kinds of scenarios that follow this path. Remember not to get emotional or upset; you need to keep your blood pressure and temper under control. Chapter 16 of our book Profitable Sales; A Contractor's Guide lists over two hundred possible sales issues (optimistically called "opportunities").
Cleaning Up After a Low Bid Contractor. I got a note from a good friend the other day, he wanted me to review a request he had received from a potential client. This potential client had a house built using the "lowest bid" contractor. The builder cut corners, leaving out little details like collar ties on the roof rafters. Yeah, just little details. Of course, the walls are now pushing out and leaks have occurred. You get what you pay for. So, this potential client is looking for bids on what needs to be done to fix the problems. I wanted to get 2 bids on my project. The other contractor has not requested payment for his bid. The issue for me is ethical. What would you do in a situation like this? This potential client is covered in red flags. If the other contractor is willing to work for free, that's his choice.
Government Advice On Hiring a Contractor. A recent online article from Louisiana gives advice to homeowners on how to protect themselves from contractor scams. The article was triggered by complaints about contractors receiving payment but not completing the work. Most of the advice comes from the state attorney general and the Louisiana contractors licensing board. We've seen similar articles from other states. In my opinion, these bureaucrats are dealing with the effects of a problem rather than the cause. It's easy for them to offer up advice to consumers and it makes them look good, but they aren't fixing the problem.
The problem is that flaky, uneducated and just plain dishonest contractors are allowed to be in business. States should also be requiring bonds, and having the bond level match the size of jobs they perform. I've testified before both the Washington and Oregon legislatures on this subject. I'll address the advice from Louisiana in order: Get at least three bids. Know the contractor. This is just plain stupid. Make it Up with Change Work Orders. I'm hearing far too often from both contractors and clients about contractors deliberately underpricing jobs so they can come back later and write change work orders at inflated prices. They do this so they can sell the job by having the lowest price, and use the change work orders to recoup some of the money left on the table by their original bid. This practice isn't new. My grandfather related to me many times that this practice was prevelant when he owned a contracting business years ago.
Same song, different verse. Same unethical and dishonest approach to business that has been going on for ages. Can you change this practice by trying to change the flakes (that's what the right word) who use this method of contracting? When you are working on an estimate, with a little thought you can often predict where the shaving or low-balling will occur. Another thing that the flakes will often tell potential clients needs to be pointed out as well. Construction Contract Advice on Prices, Quoting. Just a quick reminder. Be sure to put a limit on the length of time your proposals are valid. That time should be a maximum of 3 working days, no more. Prices continue to zip up and down and if you don't put a time limit on your price, your customer might call months later and expect you to build their castle at less than your cost.
That's not a game you want to play. Also, keep in mind that quotes should be verbal until you know the customer has made a commitment to a contract. I'll talk more later about how to get paid for written quotes. Storm Damage can be Opportunity to Reconnect with Previous Clients. A national construction-industry magazine posted a note that said about half of their subscribers were in the path of Hurricane Sandy these past few days.
Which leads me to a question: How many of those contractors are taking advantage of the potential new business? Let me share some thoughts. Storm damage may or may not be the kind of work you like to do, but it is work. I've said many times that the smart contractors, the ones who make good money, focus on their most profitable work, whether or not it's the work they like to do. Doing what you like is a hobby. Doing what makes money is a business. If you were in the path of Sandy, this is a great opportunity to reconnect with all your previous clients, as well as potential new clients, friends, neighbors and just about anyone else you have the ability to reach. Warn clients about the hazards they might face if they get involved with a storm chaser company. In repair work like this, you'll probably be involved with insurance claims.
Insurance Restoration Contracting: Startup to Success Book + eBook (PDF) - Construction Manuals - Books and Software - Craftsman Book Company. Free Estimates. Construction Cost Plus Contracts, T&M, Time and Material. Why Itemizing Estimates for Construction Projects are a Bad Idea. Adjusting Your Markup For One Construction Job. Recommended Reading for Construction Business Owners. Transparency is More than Itemized Estimates. Should Contractor Add Markup to Customer Furnished Materials? Cost Plus Contracts Video Clip. The Vendor Client Relationship.
Generic CUSTOM KITCHEN CABINET AGREEMENT.docx. The Remodeling Market has Changed. Construction Contract Allowances. Payment Schedule for a Construction Contract. The Finer Points of Change Work Orders. When Clients Want Cost Plus. Should You Markup Subcontractor Quotes? Lovette Construction | Birmingham, AL | Home Improvements and Remodels.
Lovette Construction's Projects. NARI - National Association of The Remodeling Industry. 10 Things Every Remodeling Contract Should Include. What is essential to include in remodel contracts? Generic CUSTOM KITCHEN CABINET AGREEMENT.docx. 40 keepitup. The Construction Process | Homeowner Guide | Design/Build Additions & Home Remodeling in Lincoln, Nebraska. 40 keepitup. Contractor Fees, Demystified. Material Cost Calculators - Homewyse.com. Contractor Talk. Building Construction Specialties. Construction Contracts: What to Know About Estimates vs. Bids. Bathroom Workbook: How Much Does a Bathroom Remodel Cost? Learn the Lingo of Construction Project Costs. How Much Does a Remodel Cost, and How Long Does It Take?
Learn the Lingo of Construction Project Costs. 10 Questions to Ask Potential Contractors.