Question
A financial advisor recommend we charge for our time in estimating. He knows nothing about cabinet shops in particular--he is with the local SBDC. I thought he was crazy, nobody does that... or do they?
Forum Responses
I tried this once. They ignored the bill I sent and went with someone else. We are not architects. The public just wants an idea of how much it will cost. I found it best to finely hone my listening skills and watch what happens when I start discussing prices in a very general way. That at least weeds out a few that would never pay for custom. The longer I am in negotiations with a client the more specific my language and prices become. I still get burned from time to time but it's less than it used to be. I include a cost for layout in my bidding methods so that when I get a job the layout time is covered.
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.
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
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.
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.
