Could use some help from some more experienced folks on the board:
A potential client came through Houzz with 3 projects. All three projects are no where near the stage where a contractor should be involved and I told them that. I offered to manage the projects as a construction manager for a fee but they continued to push for (free) estimates and bids.
So, I put together a rough estimate for the project that would not require an architect or engineer. Potential client agreed to the rough estimate and I went out to the project site for my 2nd consultation. I also pulled in some of my subs so I could start getting hard numbers on trades.
We talked through the project in more detail and I agreed to provide a fixed bid for the first phase of what is going to be a 3 phase project. 1. Permitting, Demo and Framing 2. Trades 3. Finish work and Close Out.
Thinking everything was okay. I drafted construction documents in AutoCad (a day of time) put together a takeoff (another day of time) and drafted a contract (1/2 day of time) which I submitted today. So at this point including research, travel and bid documents I have about 3-4 days of time into the client.
Today I sent out the contract with terms and a fixed bid and they responded asking me to break down my bid by component (Demo, walls, floors, doors etc etc). And they also asked me to breakdown the cost of all the components for phase 2 and 3. I am starting to get the sense that:
1. they have not read any of the things I have sent them.
2. They are going to be a huge pain in the ***.
3. I am going to continue investing time in this client only to have them take my breakdown, drawings and building plans and then bid out to a trillion other folks.
Just wondering what some of you more experienced folks would recommend? My gut tells me to tell these folks that I have submitted what I am going to submit and that is it.
Thanks in advance.
I'm regards to the itemized proposal, I would agree. We always itemize so adjustments can be easier made and for the sake of transparency. But in regards to the drawings and other paperwork, I would not work on that or provide it before a signed contract. It takes way too much time and there is some truth to the concept of taking your paperwork to get more bids.
I'd say go with your gut. Some jobs are better turned down. Good luck!
Welcome to contracting. You're meeting the learning curve of client management.
0 Hour mistake: Going against your gut and getting involved in a project that isn't at the phase where contractor involvement makes sense. This person was really just looking for someone they could tar baby into doing plans instead of hiring an architect.
First mistake: When the client agreed to a rough budget, take a retainer fee to continue to work on the project. Not a deposit - a retainer fee. I have a pretty solid rule that I will spend no more than 2 or 3 (or so) man hours on a lead prior to getting paid. EVERY TIME I break this rule, it ends up being a mistake.
2nd mistake: Delivering construction documents for no pay. Rookie mistake.
3rd mistake: Agreeing to do a full project in phases. It's too many exit ramps for the client and shows a lack of their commitment to you.
4th mistake: Bids need to be fairly detailed out anyway. I'm not saying enumerate how many studs you're using, but I am saying that you need a line for framing, a line for drywall, paint, etc.
If a client is asking for component costs (lumber, nails, etc.)... walk. Asking for fixture costs is OK, asking for building component costs is not. That person will be a never-ending pain in your butt.
@Jeffrey Stasz I agree again with @Aaron McGinnis as always. However I do have more tolerance on a client (commercial and government), I spend 8 hours max per opportunity, but mostly are 2 hrs site visit and the rest estimate. From my point of view, you’re still too green in the world of contracting. Here’s what I suggest:
1. Chase opportunity and give rough estimate for free and see if it’s within their budget.
2. Draft a contract for a fee, consultancy or retainer, for $ to do contract documents and drawings. Add OPTION for Approved Permits.
3. Draft a construction contract for trade specific line item (yeah, you need to start this vs lumpsum bids). If you can attach a list of material sheet on what you will be installing, that will come handy. IE I put mine as “Tile not to exceed $3/sf shelf price.”
The key is, you get your efforts paid, so even if they shop around your drawings, you made your day’s worth. I once adviced a drafter that used to simply “satisfy” the client, he was doing 10 revisions per phase per project, I told him you need to put max 2 or 3 revisions per phase of the drawings, then charge per revision after that. Since then his prices were rock bottom and was able to obtain more calls.
Good luck and welcome to construction.
thank you all for your reply.
Yes. This engagement has been full of rookie mistakes. I usually only work on my own projects that are full builds and then sold on spec so this client management thing is new to me.
I love the idea of going for a retainer...it's actually what I tried to do in my first response and they ignored it. I should have asked for a retainer right there!
Also. My bid is super detailed in that my SOW is EXTREMELY specific right down to the materials used etc. It is also only for demo and framing so I have really just put together a single line item and they are asking for additional breakdown (like my internal number) which I am not going to provide.
Thanks for the warm welcome to business!
Never give someone your internal numbers or break things down to the nth degree. I know it's more common in commercial to show an "Overhead and profit" line item, but in residential it's just an invitation to never-ending negotiating, bitterness, and anger that a contractor dares to make a profit that's "SO MUCH MONEY!!"
It is, however, super important to specify what materials you're using. For example, we're very clear with customers that they're paying extra for things like Truss construction, Advantech subfloor, maybe Premium studs... glued and screwed... etc. They need to know those things so they know what they're buying.
What they don't need to know is that it's going to be 437 studs, 64 boards of subfloor, 8 boxes of nails.... etc.
@Aaron McGinnis I do specify my materials and I also tend to use the higher end materials because I work in a higher price point and it's what I am familiar with. Also. I think Advantech is the bees knees. I get specific about approach only when I think it's relevant.
I do not outline profit and overhead unless it's a commercial job because I agree...people are allergic to me making a profit.
I find it kind of interesting that so many folks view contractors as blue collar help, when in fact, most of us running fairly large businesses in a tightly regulated industry often with CapEx exceeding a couple million bucks. Hell, the vast majority of Lawyers and a good portion of doctors have no where near the operating costs or capital stack that even a middling contractor has.
Thanks again for your sage advice.
@Jeffrey Stasz When I was exploring residential sector, I submitted my bids in detail and no OH/CP. So initially, I visit, then I send out a proposal with 20 line items, they loved it, they could see clearly what they are buying, I wouldn’t go down to spec sheets when I don’t have a contract or a fee for it. My 20 line items specify qty, unit, descriptip, unit price, total. Separated: Labor and Materials. They absolutely loved it. One of the first few lines are pre-construction line items: draft drawings, final drawings and specs, permit processing. etc. Obviously that didn’t work out well, I believe they took that and shopped it around, hehe, but at least they didn’t waste my time.
@Manolo D. - interesting idea, giving a 30,000 ft overview of the job. Did that work out for you long-term?
What we do is bring the client into our office and spend a couple of hours discussing their project - scope, objectives, schedule. I give them a design proposal saying, basically, "We're going to do plans and design work for a project that with this programme (X, Y, Z) with a total budget target of $xxx,xxx, the cost for the design will be $xx,xxx" .... either they sign and give us a payment, or hasta-la-vista, baby.
When we deliver final plans and designs we also deliver a full blown construction budget (5-8 pages of detail). 9 times out of 10, our final budgets match our design engagement proposed budgets.
The downside of this method, for me, is that it relies on my skill and experience as a estimator to be able to accurately hip-shoot a project's budget after a couple of hours of discussion. It's a hard method to pass on to an employee unless that employee happens to either be me, or have a similar level of skill....
@Aaron McGinnis The scenario was only on a residential remodel job, so more or less it’ll not get more than 5ksf. A ground up construction would be a different style of a proposal. However the method could and should work as well, but it might need to have an attached specs on a different attachment. For commercial, our clients usually want just a simple AIA contract for tenant improvements, and we don’t cater commercial ground up. Personally I would start changing the dependency upon yourself for client acquisition, if the business grows larger then obviously it will become a challenge, when I was managing our mother company, i was a one-man show with 300 employees and a bunch of department heads, it became obvious really quick that we needed to restructure and start training, now it can be left alone for 6 months and maintain clockwork.
These folks are asking me to do the design, line item breakdown and spec sheet for free. I have already given them that for the demo and the framing. What I am not willing to do is do that for the trades and the finish items. Is that reasonable?
In my view, demo and simple framing is standardized and prescriptive so it does not take too long to put together a rough outline based on standard assumptions.
But that is NOT true when it comes to finish materials. Every component has about a trillion options with a trillion different price points. And getting all of the details to come together in a harmonious way is super time consuming. Importantly design and spec is a service that I sell to other customers. So I am reluctant to offer that for free.
Finally, this is a pretty small job and I have other bigger jobs that are shovel ready and in more prestigious areas. So I don't see a strong business case for making concessions. It would be great to pick up a new client and there is potential for some pretty big follow on work but I am not sure the juice is going to be worth the squeeze.
Aaron, I am just over in SC so maybe we can get together this year and have a beer and talk shop.
@Jeffrey Stasz Yes, it is standard to charge. You started to accommodate free service to the client and now they are expecting it. Put a plug and be firm. You can give them a proposal to do design, draw, and spec. Simple remodels are much easier, I put in maximum prices per unit on materials and once they go beyond, they pay the diff.
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