Message Thread:
Estimating Question
9/30/15
Website: http://www.grahamlindsay.com
I am producing a price list for quick estimating.
I have 14 different cabinets pre-designed in a traditional style and contemporary style. They are designed to be used to create alcove bookcases, home library's and study's, as a standard product.
For example: a free standing tall open shelf bookcase costs £906.00 inc Vat & an installation price is £156.00 inc Vat plus delivery charged on a job by job basis. The additional installation price means it will be a fitted cabinet instead of a free standing cabinet.
I have started to populate my cabinet list with single unit prices.
My prices are worked out upon actuals, I know when I add an extra cabinet into a number of like units within a production cycle the increase in cost can be minimal.
My problem is when I start to price multiples for example, if I'm fitting out two alcoves, I can justify 2 x standard tall open bookcases and 2 x installation charges totaling at £2124.00, this keeps me in the ball park.
If I'm fitting out a long wall, I can justify 3 x standard tall open bookcases and 3 x installation charges totaling at £3186.00, this keeps me in the ball park.
If I get up to 4no. like cabinets in a row, I could do the fourth cabinet for half price and waiver the installation price.
I guess 4no. cabinet situation I could charge the full standard price for the four cabinets along with 4 standard installation prices, wait for a gasp from my prospect and then decide to offer 3% discount if they sign my retainer agreement today or better still pay a deposit!
I'm interested in how anyone else approaches this situation?
9/30/15 #2: Estimating Question ...
Website: subercustomshutters.com
To be clear, are you actually hearing the gasp from customers, or are you just anticipating this will be the case? There are certain situations that do allow for us to see at times, that our square foot prices seem high when quoting large jobs. I am talking shutters here, not cabinets, but still the same concept. Truthfully I find that since I am doing more work, at a fair rate based on single units, that I should welcome the opportunity to make some extra profit. I personally choose to stay with the higher prices. I lose a few, but I get the majority of them. If I feel it is a competitive situation, or there is some other reason I really do want the job, I do offer a small percentage discount. No formula for it, usually just some token discount I can live with, and still be happy with getting the order. Even then, I never use a conditional quick close comment to get an immediate commitment, preferring to allow the customer to decide in their own time frame.
10/1/15 #3: Estimating Question ...
Website: http://www.grahamlindsay.com
Thankyou Mitch,
I agree, I used to stress over why clients went off the boil after all the work I put into producing formal proposals (quote and drawings) I've learned to let them take there own time. They will respond in there own time.
However my latest effort is to completely change my old system, by going in on my first consultation with a quick estimate, and good examples of work and rendered layouts combined with professionally taken photos all of which I have. This will in my mind save me doing the 5/10 hours it takes to do a proposal with drawings and only to here a no.
I'm afraid my difficulty is I have a lot of enquires to deal with befor I make a sale. Ratio is about 2 sales made in five, I produce a high quality job. I am adjusting processes to speed up the process at low cost to standardise the two ranges of bookcase all made from like parts to be able to offer the same quality at a lower price and still have the option for the bespoke work. The key thing is to have a fast and accurate estimating stage.
10/1/15 #5: Estimating Question ...
Website: subercustomshutters.com
Graham, I see your situation in the same way a lot of us approach quoting. How to minimize time up front during estimating and quoting, trying to get enough information to be accurate, but without giving a potential customer the feeling that we won't give them the time they deserve as a paying customer. I actually don't give estimates in window treatments, but I do occasionaly give estimates with closet systems. After going back and forth on the amount time I spend on drawings and pricing, showing accessories and answering questions, making those extra free trips, I finally just decided to do all these things, whatever time it takes. (All for no charge, long distances with travel are another matter.) And then by doing this, I am content with giving my higher prices to the client. I think many of my customers recognize my extra effort during this quoting phase, and weighs this into their consideration that my attention to detail will carry over into the actual making and delivery of product. Now many of my customers are prequalified and most are referrals, which means I am in a better position to do this than with a cold client. I still lose few, but when I give my quotes my best effort, somehow I can easily accept that this particular person was never going to be my customer anyway. Plus I think in the long run, I did myself a favor by helping that customer come to the conclusion they wouldn't be using our services any further. Off subject to get to this point, but when my prices seem high, even to me, the reality is after the job, those prices and earned profits were well deserved. I think the idea of a quick estimate as a time saver is great, as long as the quickness doesn't undermine your final quote. I have avoided estimating for the most part, as I tend to low ball an estimate to keep a customer interested, more a personality issue than a business decision. Then I eventually have to over come and justify any pricing that is higher as the project enters a final quote. Too many customers have an excellent ability to retain low numbers once they are presented, even after being given a more accurate and higher price later on.
10/3/15 #6: Estimating Question ...
Website: http://www.grahamlindsay.com
Hi Mitch, I agree with what you say and indeed I produce a proposal which is a nice piece of work including high rendered images and detailed specification the client is in no doubt as to what they are getting, no fudges. I strongly believe I have been one off the most innovative business in my part of the world when it comes to delivering a proposal, and yes it does win jobs. The software I use not only does some of the highest renders in the industry, but makes it easy to draw and present, but within half a dozen clicks I have an optimised job ready for the saw, this used to take a lot of reworking in the past. This basically means if the client agrees I can hit the button and the job is ready for the shop floor.
My quick estimates are based on accurate actualls (jobs which I have timed and quantified)
I've only recently started doing this and the effect has been a bit of a game changer. All I have ever done in the past is proposals and less and less bench time.
My business finances are a balance of available build hours around the year running jobs back to back, including me doing 25 hours bench time, this quickly became unrealistic as soon as I became an employer and took on an apprentice and 1 skilled man. What I did to balance my hours was charge my ours out to pre production which is mainly proposal work (not for free) My decision was I to reduce proposal work time and try to increase my bench hours as much as I like the design and sales end I love hands on machining. It took some investment and a lot of work, but I feel I'm getting there with it more and more.
Last week, I picked up a deposit for a 3k job within 30minute consultation and did the contract, invoice and design by email. The estimate was accurate during that consultation so was the image and design which I already had prepared other than that the bookcases needed to be a slightly different size.
I was back on the bench this week for 14 hours (a first in a long time) and not worried about letting sales slide. I had passed on two enquires using this system in the same week. As I no I'm not wasting as much time with the tyre kickers, even my stress levels have come down :-)
My final effort would be to get handy with a portable printer to hand over the contract and invoice within the first hour of consultation.
If I have deviated of my post question, to more of a statement, I guess I've been more curious to see if other people approach the situation of estimating in a similar way adding value to there hours. I feel I'm getting back to why I got into this in the first place and not wasting my time with enquiries who have miss read my business... This brings me to another question for a new post!
10/4/15 #7: Estimating Question ...
Just to be clear about what you and your customer are understanding: A Quote is a fixed price that you will do the specified work for. An Estimate is a SWAG based on a loose set of information about what is wanted. The customer must understand the difference! When a customer insists on an estimate we always give a range and try to explain why there is a range. Lamborghini or Miada both nice cars but slightly different prices.
10/5/15 #9: Estimating Question ...
Website: http://www.grahamlindsay.com
Hi Larry, thanks for your post.
At the start of the year I sat down with a retired bank manager and we designed a quoting, sales pipeline and project Managment system using Microsoft Access. We decided to stop estimating all together to save on an extra step in the sales process and the plan was to qualify the enquirer through the quote, I was afraid I was going to miss that easy estimating step, within no time I found the new system to work more efficiently, the main reason being it created a standard and discipline, quoting is one step the next is to invoice from a statement invoice of which you don't do unless the job is agreed of the quote and subsequently goes live.
However I am back to estimating purely with my standard range prices which are accurate, less range of price ambiguity. Personally I find what I do encourages prospects to say what they mean, an estate agent said to me one day 'buyers are liars' maybe that quote is a bit harsh but I believe open conversation can be like dropping your defence to some people. I'm an plane open speaking and easily approachable person, I just find open clear conversation to be more productive in meeting everybody's needs, using inaccurate estimates to me doesn't achieve this.
The other plus for being accurate never mind the extra efficiency in process, is the prospect expects us as a professional to no our prices, and I'm guessing that's why they missuderstand the meaning of an estimate and have a great ability to remember inaccurate low estimated prices.
|