Bob Connelly, CR, CGR
R.L. Connelly & Company
Big 50 1999
Several years ago, I gave a complete breakdown of everything that went into our pricing with every proposal. But it became a little laborious, and it seemed I was providing more information than my clients really needed or wanted.
Don't give them what they don't want
Most people didn't bother looking at our breakdown, and those who did would tend to overanalyze what was there. No matter how sophisticated clients are, unless they own their own business, they have little concept of what overhead really is. Many consumers don't understand the difference between gross profit margin and markup, but they do understand the annual reports they receive from their investments showing gross profit, not percent of markup. The education process can be difficult.
Deliver an exemplary product
We believe you don't need to provide a complete price breakdown to be professional. We provide an itemized scope of work that shows clients they are dealing with someone who understands the details of their project. We examined other products and services that consumers purchase and realized they did not give a breakdown justification of how they arrived at the cost of their products or services. So we questioned why we as remodelers should do that. Our clients are buying a premium product and exemplary service delivered in a professional manner. They do not have the time or the desire to scrutinize our costs as long as the perceived value is there. Our policy of not providing a breakdown is not an attempt to hide anything from our client. It's just our way of doing business.
Weidmann & Associates
Big 50 1998
Back in 1989, the remodeling market was growing and the industry was becoming more professional. To elevate our own level of professionalism, we began sharing a complete price breakdown with clients. We've done it ever since.
The main reason is it helps dispel the mistrust that clients tend to feel for contractors. They think we're making much more money than we really are. When they see the price of a product at a big box and then see a contractor's price with a markup, it just perpetuates that mistrust. By breaking down the price and showing exactly where each part comes from, you get past that first hurdle with clients. They're still shocked at the cost. That hasn't changed, but now they have the chance to examine where the cost comes from and either accept it or value-engineer the proposal to get it back within their budget. Clients are much more sophisticated today, and this method shows we respect their sophistication and lets them know they're dealing with an honest businessperson.
Bolster your business
If more remodelers had this policy, we'd have a lot less attrition in the industry. It would require remodelers to be highly organized, understand their numbers, and have their costs in control. That would make them better businesspeople. Someone who estimates based on the cost of past projects rather than on a line-item analysis would never be able to use this method. When clients see the breakdown, they question every item, and you have to be prepared to answer.