I have been doing free estimates for some time now. My estimates and contracts are getting more and more complex, and I'm spending a great deal of time and effort on them (I just finished two tonight and it took almost 4 hours).
My plan is to charge a fee for my estimate. If I get the job, I will deduct the price of the estimate off the final payment of the job. Hey, the less of my money they are holding in their hands on the last day, the better.
So, what’s normal? Do I charge a flat fee or an hourly rate?
From contributor P:
Lots of people charge for estimates, but I don't. Not to say that I shouldn't, but I feel it is a courtesy to my clients. Overall, I have a very high close rate - about 85% of estimates come back as sales, but this is custom furniture, not competitive bidding. If I did charge for estimates, I would offer twice the cost of the estimate as credit on sale - just to make it seem a little sweeter for the client.
Then again, I do pay myself to do the work and my salary is in the overhead. Oh, what the heck… 7% increase in price.
Contributor M, did you develop your estimate sheet in Excel? I've been trying to come up with something like that, but get two to three pages of stuff. What do you give the client? Just the cost and a pen and ink drawing? PC printout from a CAD program? I feel my customer presentation packet needs improvement. Thanks.
Say you come over to give me an estimate on an entertainment center. Do you tell me it will be in the 3-3.5k range at our initial meeting? If I say okay, do you then offer me designs and drawings at a price? Do you get the money up front? What do you charge for the drawings? Is it a percentage of the total or a set fee?
I then ask them to describe for me what they want done in as much detail as possible. I give them a ballpark, wide-ranging estimate based on the type of work. This is to weed out the people getting many bids and looking for the lowest price.
You can at this point state your "company policy" of a free estimate, signing of contract based on the original estimate, a 10% prepaid fee for the drawings, 40% to start the fabrication and progress payments as needed, or you can wait until the face to face meeting. If the client sounds like they may be difficult, get it stated during your first phone conversation. If they feel this is unreasonable (which it is not), let them back out then rather than wasting your time later. If they agree to the range and terms, I suggest they either send me the drawings by the architect, or I will make an appointment to see them and suggest they have pictures of what they have in mind, or that they go to my web site to select a particular style.
Once they pass this pre-qualification, I figure they are serious and may be a good client. I then meet with them. Even if it is on an off time for me, I meet with all parties involved: husband and wife, parents and kids, president and purchasing manager... If you leave anyone out of the first meeting, you will be back or on the phone frequently.
During the meeting, I take measurements and discuss price ranges and cost saving methods. I never give an estimate to the client during the first meeting. At the end of the meeting, I give the client a definite date I'll get back to them by, and then get it to them a day or two early.
I take all the information with me and go back to the shop and use my Excel spreadsheet to calculate all the real and variable costs. In my estimate, I describe what is to be done in sufficient detail using a list of each component: materials, style and hardware if necessary. For example, drawers are a dovetail style made from solid maple with a clear finish. Sides are 5/8" thick, bottoms 1/2" thick. Drawers are to utilize full extension undermount hardware as manufactured by company x...
I then supply the client with a price for the whole job. I do not break it down by task or product unless requested. Frequently I will break it down by room if needed. Contained in this "quote" will be all the terms of payment, exclusion, and disclaimer... The only real difference between my quote and the final proposal is some extra wording in the beginning, and the signature at the end. Once the client gets the quote and agrees, I will then change it to a contract and get the 10% fee for the drawings and get started. No contract, no drawings. No check, no drawings.
There is a certain matter of fact and friendly way that all of this can be presented to the clients so they feel you are helping them through this process (which you are) and not make them feel overwhelmed, or like you are taking advantage of them (which you are not).
Again, tell them when you will have the drawings to them (have them ready early), make a cover letter to enclose with the drawings stating any nuance or added feature you included as well as further options they may want. Make a set of drawings of the product that can be built for the original price stated in the contract. A second modified set can show additions or changes. At this time in the cover letter, have additions or subtractions to the original contract based on the new drawings. Get them to sign and date the final approved set of drawings. You may need a revision or two. I usually include one revision in my price. Modify the original contract and go from there.
Whatever you do, try to set up company policies that work for you and present them to the client as “company policy.”
If they aren't scared off yet, I explain my process to them. They will supply me with some sort of plan or sketch with dimensions showing what they want. I will then produce an estimate from that information, and email it to them. It will state exactly what is included, and that it is based on the info they gave me. It has a place to sign and return, along with a 5% design fee. Once I have received the design fee, I will draw the plans for them using KCDw. They now own that set of drawings. If they like what I have drawn, I will take an additional 45% deposit, which means I now have 50%. Then I will field measure and adjust the plans accordingly. If the field dimensions match their original dimensions, we proceed; if the measurements are dramatically different, the price will go up or down accordingly. Then the project is started, another 40% is due upon delivery of the cabinets, and the final 10% upon completion of installation. If the job is very large, progress payments will be included.
I use the True32 Business Partner to do all my estimating. They have standard forms for the estimate and proposal that can be edited to your own tastes. I can produce the estimate quickly, before I even start any design work.
If a project is over 40K, we ask for a letter from their bank or money market to prove that they have the funds available for their project. This does not guarantee us payment, but we know that they are not waiting for a bounce or something in that nature to finish their project. We never tell a client that we are charging them for their estimate - we just work it into our overhead. Come to think of it, I have never been asked if we do charge for one.
Comment from contributor S:
Imagine walking into WalMart/Sears/Home Depot and having to pay a cover charge. We should be able to walk in the store, browse around and walk out free of charge if we don't see anything we like.
Your customers are browsing your estimates just like you browse WalMart's aisles. Damn few stores would survive for very long if they tried charging an entrance fee. What makes you think you'd survive longer than them?