Charging for estimates
That's right. Don't go out on every call you get - make an evaluation over the phone as to whether or not it's worth the time to go out (this is called qualifying the lead). And if you do go out, don't spend a lot of time on the appointment unless you feel it's your type of customer. And don't spend a lot of time designing something unless they either pay for the design or sign up for the job.
We do not charge for estimates. Never have and never will. A quotation? That's something else. Estimate is a well-informed guess. Quotation is a firm contractual price. We have charged for quotations, but only if the client wants copies of everything. For free all they get is the bottom line, verbally.
I charge $45 for my initial visit to the site, but I will talk to almost everybody who calls and makes an appointment to visit my shop. I will not bother with geographically undesirable (too distant) or apartment building dweller prospects, and I can tell that by asking for their address on the phone. I ask them to come with approximate dimensions, show them my portfolio, or preferably my web-site (no time on my part involved), during business hours. I tell them about the $45 at the initial conversation, and that it's rolled into the price once I get the job, but payment is expected at my visit. I do give approximate prices (verbally), at my shop, based on pictures in my portfolio or pieces in the showroom or work in progress.
I believe that giving free estimates means giving away your expertise. Now if you add travel expenses and time away from production work, you're losing money that will not be recovered. Also, clients will never respect your time, once it's given away. Most of my clientele are professionals, who understand the value of time. If our industry would understand this, we all would make a better living, both financially and in terms of professional respect. Make a list of people with professional expertise who will come to your house, after hours, with no hope to get paid, spend time with you and leave without a penny.
Since your advisor counseled you to "charge for your time" in estimating, I'm wondering if maybe he was implying that you be sure the time for such work is *covered* as part of your pricing formula?
That's how I handle it. I look at my history and put a value on the amount of the time I spend in the average year visiting prospects and pricing jobs that I don't get. I then add that value into my overhead costs.
I also keep a running track of such time on each potential job, and when I do get the job, I add those hours into the client's price directly.
They say there's more than one way to skin a cat. There are also ways to make sure you get paid for your time beyond handing out invoices. A free estimate? It's a myth.
Anthony Noel, forum technical advisor
It would be nice to charge directly for estimates and we sometimes do if we are asked to be part of a team for developing a project. Most often we don't charge for estimates, but they do cost money and the money has to be recovered and profit has to made on it. Estimating is a line item in calculating our overhead, and every job we get pays for the bids we didn't get. We bill for estimating in our first progress payment. And remember, estimating is the cost of construction in heaven.
I believe the psychology term is number anchoring. What this means to me is; the FIRST number a client receives from you is THE number anchored in their memory. Any deviation from this first number will have to be explained and/or defended.
I will give out a quick number over the phone for small items like planing some boards, wide belt sanding, etc. I will only do this if I am absolutely sure to make good money at it. Anything on a larger scale I would need to evaluate for the price.
This is what I tell clients and they seem to accept it just fine. In fact they seem to appreciate that you want to be careful and thorough in evaluating their project. Word has gotten around over the years that this is how I run my business and that helps to pre-qualify clients.
I always keep in mind that number anchoring is the valid reason why that new SUV's price is $29,987 instead of $30,000.
We had a slightly different approach than most mentioned here. We built high-end custom kitchens and we got our jobs from customer referrals. Of course that meant that in most cases the prospect had seen our work or at least had gotten a recommendation from a trusted source.
When a prospective customer called they were invited to our shop. Our shop was well kept, efficient and our employees upbeat. I felt the shop itself distinguished us from our competition. The customer visit usually lasted about an hour. They got a tour of the shop, we discussed their job and I informed them of our policy regarding plans, estimates and bids.
I explained that it was impossible to generate a firm bid without first developing plans and specifications and that if done well, this was a time consuming operation. They would pay us a fixed fee (usually $500.00 - $1000.00 depending on scope) to develop plans, specs and bid; that fee would be applied to the job if we were selected to do the work. If they abandoned the project altogether or decided on another contractor, we kept the money, they kept the plans, specifications and bid.
The system worked well. Our policy seemed to make them comfortable that the planning and bidding was undertaken with care. They received good value while we had the opportunity to develop a closer relationship with them. In all my years of business, no one ever objected to paying us for what was obviously a time-consuming part of the project.
I realize this approach won't work for everyone, but I believe it can be effective in the custom market.
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