The following sentences precede all our estimates: "This estimate has been itemized for easier comparison. Only those items listed have been included. Any additionally requested or necessary items will be submitted via written change order or supplemental estimate."
At our company, a computerized estimate for an average 5-by-8-foot bathroom remodel is about nine pages long. The project costs around $10,800. The estimate takes 15 minutes to produce.
Our close ratio on this bathroom is 23%. By showing the customer every stick and brick, angle stop, and floor tile that's included in the estimate, the value perception of those nine pages has risen above that of our competitors.
Plus, the average closeout price of this type of bathroom is over $14,000, and it's not uncommon to approach $20,000 with additional work.
Cover Your Bases
Most remodelers will agree that the average homeowner has no idea what he or she wants in a finished project. They may have a few ideas or some magazine clippings, but in reality they have too little or too much information to make an informed decision. By itemizing and providing allowances, we steer them toward making the right decisions in accordance with their desires, needs, and budget.
Notice that I list budget last. Your customers may or may not have one. If they do, our allowance cost estimates help them stay within that budget. If the homeowners don't know which cabinet, tile, or fixtures they want, we include allowance costs for those materials. If they know what items they want, we will either use those exact costs, with our markup added, or include an allowance that's very close to the real price.
Remember that it's important to break out labor and material costs separately when itemizing. Failure to do so may result in a homeowner assuming the entire value of that line item is theirs to spend on materials. This is a lesson we had to learn the hard way.
Allowance costs are not meant to limit a customer's selection. They are there to provide a starting point and allow us to explain that this first estimate provides all labor and materials for those line items listed. We further explain that costs may require amendment once the customer finalizes their selections.
Once the selections are made, they are always finalized in writing via our change order form.
Be sure to disclose the material costs associated with each product selection. Failure to separately itemize each cost can lead your homeowner into believing the price he saw in the big box store is all he's paying. If he's dead set on spending 99 cents per square foot for his tile, we simply credit the material cost included in the estimate for that particular item and place the burden of purchase and delivery on the customer.
Stick to the Recipe
Another benefit of itemizing estimates is that it provides our employees and subcontractors with a recipe. If I don't want them having prices on hand, I simply print out a "Scope" without prices. None of my employees have the authority to give company money away by doing free work, so providing them with an itemized scope prevents them from assuming any extra work was included. There's no excuse I will accept for not reading and following a printed scope or estimate.
The most common comment I hear from customers is, "Your bid wasn't the cheapest, but we really liked the way your estimate explained everything and showed all that's included."
It's not that we're necessarily delivering more service than the other guy; it's simply the customers' perception that they're getting more. —David Haskit is the owner of Haskit Construction, in San Diego.